WS1865 How Real Estate has Evolved Since 1984 | Bob Knakal

In this podcast episode, Knakal, a highly experienced commercial real estate professional, discusses the impact of technology on the industry. With a career spanning over 40 years, Bob has witnessed significant changes in the real estate landscape since he started in 1984. He highlights that while technology has improved efficiency and productivity, it hasn't necessarily resulted in a substantial increase in sales or transactions.

Bob emphasizes that the real estate business is ultimately an information and relationship-driven industry. While technology plays a crucial role, it is only effective when high-quality and reliable data is inputted into the various technological platforms. He stresses the importance of accurate and verified data, which his team at JLL focuses on by self-producing their own data sets rather than relying on third-party aggregators.

Looking ahead, Bob anticipates that the next five years will bring even more significant changes to the industry, particularly with the advancements in artificial intelligence (AI) and other technologies. He mentions that AI can enhance processes and make them more efficient, but data collection should still be done by practitioners to ensure accuracy.

Bob also shares some of the technologies currently being utilized by his team, such as the CRM systems Snapforce and RealNex. These systems help track and manage communication with clients, improving overall efficiency and effectiveness.  Overall, Bob's insights shed light on the evolution of technology in the real estate industry and provide valuable advice for navigating the current market challenges and opportunities. 

To connect with Bob and learn more about his insights and expertise, email him directly at bob.knakal@jll.com. You can also connect with him on LinkedIn to stay updated on his latest industry insights and engage in meaningful discussions. Don't miss out on the opportunity to connect with a seasoned professional in the real estate industry!

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Transcript

1865 Transcript

Guest: [00:00:00] when it comes to to real estate, I think it's important to always remember that it's really not the real estate business. It's the information and relationship business and information is, is critically important. I think technology. is important, but only to the extent that you can put high quality, high integrity data into these different technology platforms.

Whitney: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, our guest is Bob Knackle. Bob, he started in commercial real estate in 1984 at C. B. Richard Ellis at that place. He met Paul Massey and they both left in 88 to form Massey Knackle Realty Services. From 88 to 2014, they closed over 6,000 transactions worth over $23 billion.

Bob is personally responsible for the sale of over [00:01:00] 2000 buildings and over eight which totaled over $18 billion in transactions and it's a record for a single broker in New York City. So Bob has been in this business almost longer than I have been alive. As there's a great conversation, you know, we're gonna dive into.

Man, how tech has changed over the last 40 years in this industry, how that's helped their business. And we're going to have another segment where we're also going to jump into strategies of how they grew that company quickly in some key things, I think behind that that helped them to do that well, that man, all of us should be thinking about.

Bob, welcome to the show. Honored to meet you and have you on what I've read and listened about you. I've just I'm honored to have you. I know the listeners are going to learn a lot over the next couple of days with you. Welcome 

Guest: again. Well, Whitney, great to be with you. Thanks so much for having me on.

Whitney: Yeah, I know. It's my pleasure. And I mean, I'm so looking forward to diving in a lot changed in the real estate industry since since you started in this [00:02:00] business, right? And I want to hear your perspective on a number of things. And we're going to get into that. So listeners know over a segment of two days here, like I mentioned, just so they know, you know, thanks again, Bob, for your time.

And you're being very generous in that. So A lot's changed, right? Let's dive into some of the tech that you've seen maybe change since I know you mentioned before you started in 1984 in this industry, some things you've seen that's changed, but ultimately maybe the technology things that you see that's going to change our industry and commercial real estate, you know, moving 

Guest: forward as well.

Yeah, there's been a world of change. A world of change, Whitney. I mean, in, in 84, when I started, I didn't have a computer on my desk. There was no fax machine. I didn't have a cell phone. You wanted to send a letter to somebody, you hand wrote it, handed it to a secretary who typed it up, and it was a very, very different world.

We carried around a roll of quarters in our pocket. And if somebody didn't show up for a meeting, you went down to the corner to the pay phone and tried calling them [00:03:00] very, very inefficient in those days. If you were in the office, you were working. And if you were out of the office, you were not working.

And the world has changed so dramatically over the last 40 years. You know, it's very interesting technology. Has increased the speed with which things can get done, the reach that you have, it's changed so many things. But interestingly in New York city, there were more properties sold in the eighties than in the nineties, more in the nineties than the noughts and more in the noughts than last decade.

So it hasn't really increased the amount of commerce that's being done. It's just empowered a. A smaller group of people to accomplish more. And that's the big impact that technology has had on the world so far is that I think it is really created tremendous leverage and horsepower for a smaller arena of folks to get a lot done, though.

There isn't more commerce being done [00:04:00] because of that. And as much as Technology has changed the real estate brokerage business over the last 40 years. I think the relative change over the next five years is going to be dramatically more than we've seen over the past 40 based upon what's happening with AI and other technological advances.

It's really going to change the world. 

Whitney: That's incredible. I think it's so interesting that you say. You know, it's like all the advancements that we've had have not increased the number of sales, right? Or transactions is what you're saying, right? 

Guest: Yeah. Well, technology doesn't impact. Discretionary seller.

People have always sold for four reasons that were non discretionary. You know, the old reliable death, divorce, taxes, partnership disputes, things like that. That you you have to sell. But then there are also discretionary sellers that will sell based on tax incentives. If you [00:05:00] look in New York four of the No, Top five years in terms of building sales volume were catalyzed by tax law changes.

Either people selling to beat increases in taxes or selling right after tax rates went down to take advantage of that. That implied increase in value. So, the reasons for selling are not necessarily tied to how easy or advanced technology is to make things happen. 

Whitney: Yeah. Wow. You know, what about you know, when technology has been improved, we'll say over the last, you know, 40 years you know, how did you maybe implement that?

Maybe give us a couple of tips on how you implemented that effectively across the team. Right. And then we'll move into maybe some new technologies that you see coming or how that's, you know, you're, you're planning there to improve in those ways, but maybe, you know, as there have been some systems that you've found to say, you know what, this really helped our team to take in the, this type of technology as 

Guest: it advanced.

You know, I think what I've [00:06:00] learned over the years is that the folks who are early adopters of new technology tend to be the winners. I have to admit that when email came out, I was really slow to get on board. I'm like a message over your computer. You got to be kidding me. Who the heck is going to do that and very slow to pick that up.

And, you know, I, I held on to my flip phone for far longer than I should have. But you know, now I've kind of changed my perspective on technology. I'm, I'm trying to embrace it and I'm probably the least technologically savvy person that you'll meet. I'm happy. My cell phone goes on in the morning.

But I'm actually. You know, coming out with a New York City land index, which is going to look at land values going all the way back to 1984. We're taking that data set and applying an AI application to it where we're comparing fluctuations in land value to macroeconomic metrics, interest [00:07:00] 500, Dow Jones, global Price of gold, consumer sentiment in addition to all the, the, the logical things that impact land values in each product sector, like rents and occupancies and things like that.

So, you know, I'm trying to utilize AI to come up with some predictive measures based upon the data sets that we've created. So 

Whitney: what I hear is that what you're saying is that almost anybody else in this business have have no excuse for not being up on technology when you you are in real estate almost not not long after I was born.

So I should I should be up on technology, right? I should have no excuse. 

Guest: I think it's important. I think it's important. Again, early adopters tend to be the winners in these things. 

Whitney: What's some technology right now outside of that, the, what you just talked about that you're creating, which is very impressive any other tech that you all are using now that you found to be just crucial you know, to improving the day to day business or [00:08:00] operations or buying, selling commercial real estate.

No, I, I 

Guest: think that when it comes to to real estate, I think it's important to always remember that it's really not the real estate business. It's the information and relationship business and information is, is critically important. I think technology. is important, but only to the extent that you can put high quality, high integrity data into these different technology platforms.

And so we focus really, really significantly on making sure that our data is accurate. We self produce all of our data sets. We don't rely on third party aggregators. We, we are, are not. Enthusiastic about the quality of those data sets. So, you know, we like to produce our own, but it's it's increasing quality of your data, verifying information making sure that data is analyzed in a [00:09:00] consistent way.

So that because actually the interesting thing about information is that. If I tell you last year there was 26. 3 billion in sales volume in New York City, that doesn't really tell you anything unless you know what it was the year before that and what it was at the peak of the market and what it was at the bottom of the market.

So information becomes statistically significant on a relative basis, not an absolute basis. What direction is the market heading in? And what's the magnitude of that change in direction if I tell you that the volume of sales is down 52 percent from last year. That's very impactful and informative to you.

If I tell you that we're X percent below the peak, but we're Y percent above the trough. That's instructional. That's informational. That gives you a sense of what's happening in the market. And so we always try [00:10:00] to look at the market very statistically. To provide our clients with insights into what's really happening out 

Whitney: there.

Love that. That's very helpful. I just to think through, right. As we look for data, I agree completely. It's an information business and a people business, right? But man, it is so much information driven. And what I often say on the show is you know, cause everybody says, why don't I have a crystal ball, Whitney?

And I'm like, well, I understand, but. What you believe, you know, affects what you do, right? You know, whether you know, and, and what you believe comes from the information that you get.

Guest: History often repeats itself, you know, they say it, it doesn't, it's not exactly a repetition, but it rhymes. And so you, you need to look at how the market has performed at other times, similar to what you're going through now. And it does provide some insight into how the market may. May move forward. Yeah, 

Whitney: no [00:11:00] doubt about it.

Bob, any any advancements in tech that you see coming? Are they like maybe you all are trying to adopt right now or maybe it's a I or maybe it's something else that I don't haven't heard of yet that that you see helping, you know, push this data collection or analysis, you know, in a Faster or more accurate way.

Yeah. Well, I 

Guest: think what I've seen so far, and unfortunately, you know, I've worked with Rod Santomasimo at the Mossimo group for about 12 years now. He's my broker coach. Rod is probably the, the leading authority on AI and how it's going to impact the real estate business. And it seems like many of the applications have to do with.

Making processes much more efficient. It's not really in the data collection. I think the data collection has to be done by by practitioners, by the producers that are actually doing the transactions. But once you have the data sets, once you've collected the information and information is accurate.

There are a number of things you can do to be more [00:12:00] effective with the way you prospect, the way you reach out to people, the way you leave messages, you know, market presence in terms of making your, your phone calls, your email blasts, your text messages, your hard mailing all of these processes are very labor intensive and technology can help make those those initiatives more effective.

Much easier to do much more impactful and will allow you to leverage your time a lot 

Whitney: more. What are you all using as far as CRM or I'm sure you're using something like that to help you track what you were just talking about, right? The calls or the text messages, the follow ups, things like that.

Guest: Yeah, well, we have an internal CRM here at JLL called CapForce which is used. We also use a RealNex product which has been fantastic for us. So we're logging all that information from every contact with an owner. We're logging it into the system and trying to utilize that data as effectively as possible.[00:13:00] 

What, 

Whitney: Changing gears just a little bit, the last few minutes of this segment, Bob, what would you say is a, is a challenge right now in JLL or, or maybe just for in the current market or, and we'll talk about maybe current market, you know, and some things you think about in the next segment, but.

But like maybe any challenges right now, or maybe even around technology that you are experiencing as we 

Guest: speak, I don't speak on behalf of JLL and what's happening company wide, but I can tell you generally in the marketplace. Biggest challenge today is the fact that we've had downward pressure exerted on property values based on the very rapid and massive interest rate increases.

Whenever you have something that exerts downward pressure on value it takes a while before the market gets acclimated to the new reality. And you have to go through what we refer to as the capitulation phase, where people realize, Hey, yeah, my property value is down X percent. And I, there's pent up [00:14:00] demand to sell, and I'm just going to have to pull the trigger at this new price.

And I don't think that we are quite into the capitulation phase yet. If you look at the Manhattan market as a microcosm of New York City for transactions over 10 million in Manhattan, we've seen 42 in the first quarter, 43 in the second quarter. Second quarter 84 in the third quarter. We thought that that doubling of activity in the third quarter might have been an indicator we were hitting that capitulation phase, but I believe the fourth quarter numbers are not going to be good.

And I always say with quarterly data, you really need to see two or three quarters before you call a trend. So the third quarter numbers could just be an aberration but we need to get to the capitulation phase and that's really the biggest challenge for the market is to unfreeze some of the stuff that's going on.

Lenders are trying to figure out what to do. They're being relatively [00:15:00] covert with the, the activities that they're taking because they don't want to be scrutinized too much. So, you know, the market's trying to feel its way. Figure out where it's headed. And I think that's really the biggest challenge today is that there there are very tangible and profound implications being felt by the real estate market based on how quickly and how massively rates have increased.

In an unprecedented way. And so, dealing with a number of tangential things that have happened because of that is what we're going through now. Yeah. So 

Whitney: it's, it's kind of the, the sellers coming to grips with, man, I missed the prime time to sell. Right. Every 

Guest: meeting that we have with potential sellers.

We start out saying two things. One don't sell today if you don't have to, or don't have a very compelling strategic reason to do so. And number two, we know you had higher [00:16:00] bids. Years ago or sometime in the, in the, in the past. Unfortunately, we don't have a time machine. If we get one, we'll let you know, but you have to deal with the reality and whatever bids you had in the past, whatever conversations you had in the past are completely irrelevant.

Wipe them out of your memory. We're in a new reality. You have to deal with the reality we're in today. We can't go back in time. Yeah. 

Whitney: Great advice. Just to get that out there right away with that seller, right? But what, what are, you mentioned, unless there's a strategic reason maybe to sell, what are maybe some good reasons that you've seen sellers actually sell today?

Guest: Well, there are portfolio reallocation motivation. So if someone is too heavily invested in one particular product type sector, maybe they want to diversify into another one. Maybe they want to diversify geographically. Maybe they need to sell to raise capital for the cash in refi. That they have to do on the [00:17:00] property.

They really wanna own long-term. So there, there are a number of reasons why people may choose to sell today that are not forced sellers. They are discretionary, but there are strategic reasons that are compelling today. And I think everybody's looking at their portfolio and kind of figuring out which of the, which of the assets I really wanna own long-term which are the ones I could potentially monetize today.

But a lot of it is is being very thoughtful trying to look at skating to where the puck is going, not where it is. And so, you know, a lot of folks are really taking a deep breath, taking a look at the portfolio and figuring out what's best for them for the long term. 

Whitney: You know, now that I was thinking about, you know, you started in 84, I mean, you've seen many cycles, right.

And you've had to deal with sellers and buyers through so many cycles and many operators, no doubt about it. You know, what would you say are some you know, some ways or [00:18:00] reasons that the ones who have survived consistently, why did they survive, you know, through many downturns or maybe some consistent things are like, man, I've seen this happen so many times.

These people didn't make it because of this. And these did. 

Guest: Well, I think leverage has a lot to do with that folks who overlay, you know, leverage is potentially a great thing, but it's also potentially a very risky thing. I always say nobody ever got foreclosed on that that didn't have a mortgage on their property.

So the folks who have remained relatively lowly leveraged. Have done very well. But, you know, we're, we're in really uncharted territory now with the, the, the, the massive fluctuation in interest rates in such a short period of time has created you know, issues for folks. And you know, only 20 percent of our economy.

Everybody says, well, the economy seems to be doing pretty well. Well, yeah, the broader economy is doing well. Only 20 percent of our economy is actually highly correlated to interest [00:19:00] rates. You know, if you look at the government. And healthcare that makes up 35 percent of our economy, and I haven't heard anybody say, well, I, I'm supposed to get open heart surgery, but I'm going to wait until interest rates come down before I go into the knife.

Right? So, clearly the broader economy is is chugging along. But. Real estate, which is very, very highly correlated to fluctuation in interest rates. You know, is is dealing with a very profound issue today. 

Whitney: Yeah. No. So it sounds like, I mean, by having too high of leverage, I mean, it has been the common factor that's brought so many people down through different cycles over the years.

Yeah, 

Guest: I think so. I think the folks who have remained very conservatively leveraged have tended to to do do the best. 

Whitney: Yeah. Wow. That's, it's so interesting to think through that. What any, any thoughts on like [00:20:00] buying criteria right now for operators that they should be considering the, I mean, cause we're all trying to buy, right.

But man, I think all of us were like we may, may wait a little bit, but we still want 

Guest: to buy if we can. Yeah. One of, one of the interesting thing, you know, we deal with, with the three main buckets of, of potential buyers, people who are. Uber wealthy that have been around for a long time will continue to be around for a long time.

Overwhelmingly, those folks are saying, yeah, it sounds like a really good deal, Bob, but it's going to be cheaper in a couple of months. And then you have the folks who are very bullish on the future of New York. But they don't have their own money and can't raise it. And then you have the folks who were just very pessimistic about New York and they're buying all around the country and, and are not looking at, at buying in New York to the, the uber wealthy folks, what I've been saying is, look, we have several asset classes where you can buy property for the same price per square [00:21:00] foot.

That those buildings were selling for 20 or 25 years ago. This is the buying opportunity of a lifetime. You know, buy, buy when nobody wants to buy, sell when everybody wants to buy. And I think if you look at the GFC, for instance you know, in New York City, Value bottomed out in the second half of 2010, but all the people that bought property in 2009 are so happy that they bought at the 2009 price.

You can't time the market perfectly, and you'll only know that we're past the bottom, probably six to nine months past the bottom, and then you've lost the opportunity already. I think people are going to be saying, Oh. Four or five years from now, they're going to say, what the heck was I thinking in 2023, 2024?

I should have bought everything in sight. And I really think it is a great buying opportunity. That sounds self serving because I'm a, an intermediary that makes money when people buy and [00:22:00] sell, but I really believe it. You know, you, you have office buildings trading at 300 a foot. They were trading at 300 a foot 20 years ago.

And you know, I think if you look even in some multifamily buildings trading for 200, 250 a foot that that's unheard of. But I think it is a tremendous buying opportunity. You just you have to have capital and you have to have courage. And if you have capital and courage, I think you can make some outstanding buys today.

I love that 

Whitney: you have to have capital and courage. Yeah, no doubt in this business. You need both of those things to say the least love that. Just talking through the different buyers. And so the listener can make the, Hey, what are they? Right. As they, they come into this market and, and I think it's, it's wise to, to look back through different cycles and especially listeners who have been around a while, you know, or been in the business a while and they think, yep, that's right, Bob.

I. Wish I had bought, you know, during 2009 or 10, right. When everybody was 

Guest: [00:23:00] scared. Yeah, Whitney, the best buying opportunity I ever saw was during the S& L crisis in the early 90s. Very few people had capital property values were really, really depressed and people were scared, and people didn't pull the trigger, but by the mid 90s, everybody's saying, oh gosh, I should have bought everything in sight back then.

I think that this buying opportunity rivals that buying opportunity. And I think you're going to see the folks who are, are being aggressive and it's only a very narrow slice of the market today, but there are some people being very aggressive out there. I think you're going to see fortunes made by people who are, are bullish on investing today.

Whitney: Bob, it's a great place to end this segment. And so, man, grateful for your insight and just being willing to share from your years for 40 years of experience. And so I want the listeners to know Bob's going to be around for another segment tomorrow. We're going to dive into some specific things that have helped him and some [00:24:00] strategies to grow quickly and at scale.

I'm looking forward to that, Bob, Bob, before we go, how can the listeners get in touch with you and learn more about you? Yeah, 

Guest: Whitney, best way to get in touch with me, just email me directly at JLL it, the email address is bob. knakl at JLL. com, knakl is K N A K A L, so bob. knakl at JLL. com. Or you can follow me on social media and DM me I'm on LinkedIn Twitter, Instagram a bunch of others, you can put my name and you'll, you'll find me out there, but always happy to interact with you.