Commercial real estate is one of the only remaining industries that still operates in an old-fashioned way, making it ripe for disruption by those who are willing to think creatively and apply advancements in big data analysis to this field.
Arash Barati, who was previously with Drake Real Estate Partners in New York, has successfully achieved just that – collecting primary and secondary data using statistical techniques and applying them to complex models in order to gain an edge for his firm in the hypercompetitive real estate private equity world. These tools allow Arash to identify significant opportunities for his companies to capitalize on, which put Drake in a leading position with a stellar track record amongst its peers.
Over the years, Arash has been compiling leading economic indicators and demographic data to refine his models which are used by the firm to lead investment strategies. Tracking such things as company relocations, labor mobility, population projections, and migration patterns and applying them to economic models that try to predict the impact on the commercial real estate sector, has allowed them to identify supply and demand imbalances to opportunistically get ahead of the market. He is amongst a small group of real estate professionals in the commercial real estate private equity world who have been able to implement such rigorous quantitative strategies for finding opportunities.
Drake is a real estate private equity fund manager with a focus on secondary and tertiary CRE markets such as Charlotte, Salt Lake City, Reno, and Phoenix. It has a diversified portfolio of holdings including office, multifamily, industrial, hotel, and senior housing properties. Arash helped shift the allocations at a critical time more heavily towards multifamily and industrial assets, which ended up performing well and demonstrated their resiliency throughout the pandemic.
He recently led an effort to study the potential impacts of the COVID-19 pandemic on the housing market, predicting that there would be a dramatic change in housing demand and migration patterns. Arash notes “COVID altered housing preferences by pushing demand away from urban centers to suburban locations with better climates such as the sun-belt states. Nationally, rents have increased by a staggering 12.4% year over year”.
The impacts of the pandemic-induced recession on the housing market were vastly different from historical norms. Economic recessions usually hit the residential market extremely hard, but Arash’s research accurately predicted the opposite would occur this time around. “With higher-income households maintaining their employment status and benefiting from low mortgage rates, there would be upward pressure on housing prices. This, in turn, would decrease affordability and push more people into the rental sector, accelerating multifamily demand”, Arash recalls explaining to Drake’s senior management team at the time. Given the shorter lease duration for these assets and the inflationary environment, rents and values have substantially escalated over the last year. Drake’s stepped-up allocation to the sector due to Arash’s efforts have been vital for the fund’s outperformance throughout the pandemic
