Location, Location, Location? A consumer survey says differently.
What are the three most important things in real estate? Location, location, location. At least that’s how the common saying goes. But after working in commercial real estate for nearly a decade I’ve noticed that this saying doesn’t always mesh with what tenant’s tell me is important.
So I decided to test it.
First, a note: I was a math major in college, but that was a decade ago and my skills have atrophied. I haven’t done any serious math, nor practiced statistics, sampling, polling, etc seriously for a long time. And I also have a newborn, so my IQ has gone down about 20 points. So, if you know about this stuff and see something seriously wrong, or just want to add something, please comment.
So here’s what I did. I signed up for Google Consumer Surveys and created a survey that asked what the most important thing is when evaluating a rental space. The questions were as follows:
- Question 1. How likely are you to rent an office or retail space in the next year? This was a screening question. Only respondents that answered 100% likely or very likely were allowed to complete the survey.
- Question 2. Will you be looking for an office or retail space? I included this to get a breakdown by property type.
- Question 3. What is most important for you when evaluating space? The choices included: Location, Rental Rate, Landlord Reputation, The site’s architecture and design, and Quality of Co-Tenants.
I set up the survey to collect 600 responses. Then clicked publish and let it fly.
(A note: Google Consumer survey’s are super easy to do and relatively inexpensive — mine cost ~$3/respondent. So, er, +1 to Google.)
According to the survey respondents, Location was the clear winner (36.8%), followed by Rental Rate (24.5%), Landlord Reputation (13.7%), Sites Architecture and Design (12.6%), and finally Quality of co-tenants (12.4).
Some interesting differences appear when you dive into the cross-tab for Office verses Retail space-seekers (see below).
- Location is still most important, but surprisingly more important for office space seekers. Office respondents chose Location as the most important criteria by roughly 4-points more than retail respondents (40.8% vs 36.4%). Grant, the results are within the margin of error, but I still would have expected that Location would have measured more important to Retail than Office space seekers.
- Rental rate is important, but should it be as important as measured in the survey? Rental rates are second in terms of important, and I get this: you can’t pay more than you can afford. But rents about twice as important as things like site design and co-tenants according to respondents. In my experience, the rental rates are fairly consistent within a given area and property class. Eg, class “B” office space in the downtown corridor is going to run you $20 psf with maybe a buck or two variation among individual buildings. In hindsight, I think I should have labeled this variable something along the lines of “The Leasing Package” in order to try to capture the various factors that go into a lease besides rent — such as leasing concessions (tenant improvement allowance/free rent), term, etc — but was afraid the variable may have been misunderstood. (For better or worse, Google’s surveys have character limitations for all the fields).
In hindsight, I wish I could have asked respondents to rank the importance of the different attributes. Or even better, set up the survey as a choice-based conjoint survey to do some sweet conjoint analysis by asking respondents to evaluate different real estate site profiles. But alas, Google Consumer Surveys don’t have that functionality.
As an exercise in basic marketing research this study did offer some interesting ideas. For instance, focus on location and rental rates. Also, don’t worry too much about landlord reputation in marketing materials — a helpful lesson when you’re creating, say, a display ad and have limited space to get your message across (eg, you can forgo the company logo if you need the space).
Anyhow, back to work. Let me know if you have any ideas or thoughts.