EXPERT INSIGHTS:STEVEN SCHWARZ ON THE ART OF DATA ANALYSIS & THE STRENGTH OF ARIZONA CRE

Data plays an increasingly large role in the world of commercial real estate (CRE) as more segments of the industry become digitized. Steven Schwarz, founding partner of real estate investment and services firm ViaWest told us why Arizona is better-suited than other markets for an economic recovery and how data analysis in CRE became an art.

Steven has over 25 years of experience in the industry, specializing in industrial and office properties. He was also on the National Board of Directors of NAIOP and served as chairman of the organization’s Arizona chapter.

Q: Could you start by telling us a little bit about your background and why you chose a career in commercial real estate?

After college, I worked for SunTrust banks in their management training program and did a rotation in the Real Estate Finance division. I enjoyed it and as a result joined the group, but, after a couple of years, I realized that the developer/owner side was much more intriguing to me than the lending side. So, I moved to Phoenix and joined The Hewson Company and ended up working on some amazing developments.

After 8 years there, I joined the Plaza Company for a short time, before co-founding ViaWest in 2003. We have built ViaWest into a regional player in the Southwest U.S. focused primarily on industrial and office but also historically active in multifamily and retail. We currently manage over 6 million square feet of properties and have one million square feet of industrial space in development.

Q: Considering the COVID-19 outbreak, what are your thoughts on the CRE market in the US today in terms of trends and challenges?

Obviously, retail and hotel are extremely challenging right now. Fortunately, we are not currently active in either. Office will go through some pains over the next 12-24 months in most markets due to remote working and a softer economy. However, we are pretty confident that remote working will not be as significant of an issue 2-3 years from now. It is one thing when companies have no choice and are looking to save expenses and not hiring. It is a different story when companies are hiring, training and trying to get their employees to understand their corporate culture.

Flex working, some remote working, and hoteling will be part of our future, but most companies will revert back to office space as productivity slips over time. For all the reasons industrial was hot prior to COVID plus the onshoring of manufacturing, increased inventories due to supply chain issues, and the accelerated growth of e-commerce, industrial is simply a great asset class for the future. Multifamily may take a small hit due to unemployment which will likely cause a bit of softening in Class A and B rents and values for the next 12 months or so.

Q: What differentiates the commercial real estate market in Arizona from other major markets in the United States?

Arizona is in an extremely positive position compared to most of the major markets in the U.S. Prior to the coronavirus, we were a leading population and job growth market due to being a relatively affordable and excellent place to live, having a diversified economy and a business-friendly environment. For all these reasons, plus a lack of density, non-reliance on public transportation, and proximity to California, Washington and Oregon which are dissimilar to us, people and companies are already moving here. We expect Phoenix to lead the post-COVID economic recovery with industrial and multifamily leading the charge. Even office should hold up relatively well.

Q: How have you seen the industry evolve in the past years you’ve been involved in it?

The industry is totally different than it was when I entered it in 1993.  Information then was very localized and having it was a huge strategic advantage. Technology was hardly utilized. Equity and debt were generally available only for those that had a real track record. Now, with everyone having the same ability to get information, the art is synthesizing it and identifying where the market is going. Along with that, providing high-quality service and precise execution are of even more importance in today’s world.

Q: Where do you see it going in the future?

I see a lot of the work being streamlined by technology. For example, our company invested in CommLoan which is a commercial mortgage technology platform similar to Priceline but for obtaining a commercial real estate loan rather than a flight or rental car. It is faster, easier, less expensive, and generates a more competitive environment than a traditional mortgage broker process. The various asset classes will all evolve in their own ways as a result of technology and societal shifts. Understanding these and preparing for them will separate the successful from the less successful.

Q: Are there any lessons from the past few years that you would impart as an absolute must for those looking to get into the CRE industry?

I think the “absolute must” has been consistent for a while. In the initial stages, be focused on knowledge and perfecting your craft and less focused on compensation and titles. Take on responsibility, be amazing at it, and become indispensable to the organization, from there the rest will come. Nothing is too big or too small for someone early in his/her career to work on.

Q: What is your general assessment for the commercial real estate market in 2020? Have you spotted some interesting market trends, especially considering the current pandemic?

The 2020 market will be looked back upon by most as a lost year although for ViaWest it will end up being a good year. We had a number of great sales pre and post COVID and amazing leasing in the first three months of the year. However, for most, there have been few leases and very little buy/sell activity.  We are focused on a few things on the investment/development front that we think will prepare us well for the balance of this year and the next couple of years:

• We are buying land positions for industrial development (some with current income).
• We are putting together a fund with private money to buy industrial and multifamily assets as prices dip a touch over the next 12 months.
• We are acquiring distressed office deals as they come to market.

Q: How has the evolution of online marketing impacted the commercial real estate industry?

Without question, online marketing has been a positive addition to our company and our properties. In a fast-moving environment in which our strategies may shift quickly, we are able to reach our target markets expeditiously. It is less expensive which enables us to do more direct, frequent marketing.

Q: Any other insights that you’d like to share?

Our industry had a great run over the last seven to ten years and everyone was concerned about when the recession would hit. It has been “two years out” every year for the last four years. And then, all of a sudden, it hit us in a week. Fortunately, our industry behaved pretty well for the years prior to COVID with supply and demand staying relatively in check in the markets in which we are active and with capital being relatively disciplined. We will weather this storm and move past it much as we have for all the prior recessions.