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16 APR 2018

Panelists agree information sharing is key to mitigating risk

At the RICS Summit Series Americas 2018 stop in Miami, real estate thought leaders discussed the real estate market and their strategies for mitigating risk.

In short, they agreed that having high quality data is key, using best practices is essential, sharing knowledge (via RICS) mitigates impact and black swans will continue to swim.

Mark Troen FRICS, Senior Vice-President at Brookwood Group brought up inconsistent data reporting as a risk and pointed out the importance of ensuring we’re measuring the right kinds of information. “What are we measuring,” he asked, “are we measuring the right kinds of information? Are we assessing the risks themselves?”

At each summit in the Summit Series, the panels debated where we are in the investment cycle and whether we’re in a bubble. They’re very difficult to predict and only understood in hindsight. In Miami, the panel agreed that it is essential to collect data by speaking to local experts to piece together a coherent story about the economy.

Each city is unique, so prudent investors make their decisions based on micro-climates rather than macroeconomics. Speaking with developers, brokers and local appraisers is a good way to gather credible data on a specific market. “Every individual market is different and you need to have someone local to understand it,” said Tim Gifford of CBRE. 

The value and reliability of data collected depends on data sources. Relying on the expertise of local appraisers, for example, comes with its own risk when justifying a transaction price.

"We know as appraisers we’re rear-view looking. The biggest problem we have is being somewhat conservative. If I’m only going to pay what the appraiser says, I’m never going to get a deal done. I try to analyze it as best I can and tell a story as best I can and go from there," said Michael Hedden of Houlihan Lokey.

Greg Becker MRICS of Newmark Knight Frank credits the big firms’ ability to reach out and gather accurate information from the market for their ability to maintain growth. He recommends thinking outside the box and using less traditional ways to gather information, like talking to brokers: "We’re only reporting what’s happened in the past so we’re not going to catch the inflection in the market. We need to ask brokers what they see on a day to day basis."

On the topic of black swans, the best way to mitigate against unforeseen events is to ensure you’re acting according to ethical standards and following best practices, says Hedden. “There are bad appraisals in the residential file, but you’ll find that most of those cases, they weren’t RICS members, they weren’t quality appraisers. You had bad actors. If we stand behind our designations and best practices, and banks are very strict, that’s how we get away from any of the bad press in the appraisal community.”