Market Fragmentation

In commercial real estate, the biggest mistakes you can make is oversimplifying and bundling nuances into one category.

This is the largest asset class in the world—and one of the most fragmented. The better you understand the fragmentation in the market the more opportunities you will find.

Because in fragmented markets, information becomes a competitive advantage. Research, local insight, and knowing what others overlook—that’s where the edge is.

The idea that a marketplace can be divided into multiple micro markets, with each consisting of unique customers with distinct preferences. This is market fragmentation. The macro market is not binary it is made of multiple macro nuanced markets.

But too often, people take shortcuts. They bundle everything into one headline or one narrative:

“Office is dead.”
“Multifamily is overheated.”
“Retail is dead”

Not so fast.

Yes the overall occupancy in office is low. Post-Covid and the rise of WFH the office won’t be the same. But it didn’t disappear.

Multifamily? Don’t lump new development with value-add. And don’t assume all markets look the same. Some are drowning in supply and others can’t build fast enough. Rent growth, occupancy, and construction activity vary wildly. The generalizations are lazy.

The market isn’t one story. It’s thousands. Fragmentation means the next big opportunity is probably hiding in the nuance—behind data most people haven’t looked at yet.

So here’s the zag: Don’t follow the narrative. Don’t follow the headlines. Jump into the data. Understand the nuances, find the competitive edge. The same is true when it comes to operations.

There is so much attention on revenue management, marketing and other items on the income side of the business. If you take a peak you will know there are huge opportunities on the expense side. Particularly with maintenance. It is the far majority of all expenses and it gets next to zero attention.

Another way to say this is the riches are in the niches.

And remember—your next great deal might begin with information you don’t even have… yet. While most are zigging look to zag. Find you riches in the zag niches.