As commercial real estate professionals we are often inclined to love buildings and math. Discussing physical structures allows us to explore and pontificate on buildings systems and materials – concrete, electrical systems, curtain walls and plumbing fixtures – which to use and how use may impact operations or returns. Math makes it all work – yields, returns, income multipliers, waterfalls and splits.

Yet, we are in a business of people and arguably one of the most important terms in our business is “customer”. Often customers are associated with a salesperson, one waited upon at Nordstroms or a Starbucks – the person handed a shopping bag or a latte. Just as in retail, apartment developers, owners and investors must know their customer. Without question, knowing your customer will lead to more predictable returns, steadier cash flow – and our greatest aspiration, the ability to grow cash flow, thereby increasing returns at a higher rate.

Just who is our customer is a greater question – possibly the greatest question. Retail strategists live in a world of demographics and psychographics and ask very bleeding-edge questions such as a customer’s SoMoLo (Social – Mobile – Location – all questions about preferences and behaviors). The purpose is simple, knowing your customer allows you to better sell to them, and paramount to our business, retaining them.

One proxy for “who is our customer” is what they do, and more specifically stated, in what job sector do they work. Like all generalizations, on a case-by-case basis generalization are right as often as they are wrong; however, the use of job sector analysis can offer insights into the interests, desires and behaviors of our customers– and ultimately their renting (and renewing) behavior.

FIRE – Financial Services, Insurance & Real Estate

The FIRE sector is the most traditional of all job sectors and customarily thought of in the parlance of “white collar” jobs. Members of the FIRE sector wear suits (sometimes), have fairly traditional educational backgrounds and work in places where one can expect to see well-appointed elevator lobbies. There is no secret to the FIRE sector.

On the West Coast, many FIRE sector employees commute to work because downtowns in Seattle, LA and in small part, San Francisco, heretofore did not have a lot of residential housing – and many FIRE sector participants work in downtowns. This model is changing and learning the interests and habits of the FIRE sector is a sure-fire way to capture their rental dollars.

STEM – Science, Technology, Engineering & Math

The STEM sector is often one associated with education, and more specifically majors in post-secondary education. Increasingly, industry is thinking of STEM as the “tech” sector. Doing so is a gross generalization, yet helpful in framing a job sector beyond white collar/blue collar. STEM sector participants work at Microsoft, Google, Redfin, Facebook, Saleforce and

Ascribing a company to a sector is simplistic, yet important in learning more about your customer (and their buying/renting decisions). A more complex analysis reveals as many misconceptions as it does insights. Isn’t a retailer? Redfin is a real estate brokerage, right? Are the renting predications of a Colliers real estate broker the same as a Redfin agent?

TAMI – Technology, Advertising, Marketing & Information

TAMI is STEM’s more advanced and specific big sister. The TAMI sector is a very business-centric and industry specific moniker. I owe my introduction to the TAMI sector to one of the sharpest minds in our industry, Jeff Daniels at AIG. The TAMI sector is born out of a marketing campaign in Lower Manhattan, yet is just as applicable in San Francisco’s Silicon Valley, Seattle’s Silicon Canal, Portland’s Silicon Forest or Los Angeles’ Silicon Beach.

My favorite example of TAMI sector behavior is digital marketing firm Smith’s 2012 move from Bellevue (where many of its clients are located), to Seattle’s authentic and patina’d Pioneer Square (where it could best attract and retain talent). TAMI knows what she wants.

TAMI sector employs like to work in neighborhoods like Portland’s Peal District, Santa Monica/Venice in West LA (or DTLA) and NYC’s DUMBO neighborhood. Where they work (and where their executives choose to locate operations) is very instructive in learning how to attract and retain a high-profile and high-paying renter cohort.

Optimizing Returns using a New Paradigm

Our discussion today is too short to direct with specificity how to convert job sector analysis to acquisition/operation/disposition strategy. The point is an introduction into a strategic methodology to address the increasing sophistication and competitiveness of our industry – start with the customer.

Much like retail marketers live in a world of “customer acquisition strategy” – as well as “customer retention strategy” – we must explore investment paradigms to increase investment thesis accuracy, optimization and competitiveness, and thereby returns. Knowing and studying job sectors is a great first step to best form your apartment investment strategies and optimize operations. Anyone up for a SoMoLo analysis? Give me a call.