CRE Appraisals in Focus – Valuations, Refis & the Data Center Boom with Craig Benton of Synovus Financial

The CRE Weekly Digest team is joined by Craig Benton, Director of Valuation Services at Synovus Financial, to unpack the state of commercial real estate from the appraisal and lending POV. The team kicks off with a scorecard on Craig’s 2024 CRE predictions, earning nearly straight A’s for calling sector-specific downturns, rate cuts, and the timing of deal volume recovery and shares where values are rising, stabilizing, or slipping as we head deeper into 2025. The conversation spans tariffs and construction costs, insurance trends, the wave (or lack thereof) of loan maturities, and why grocery-anchored retail remains a safe haven. Craig also dives into the rise of data centers as billion-dollar assets, the training challenges facing the appraisal profession, and how AI is reshaping valuation work. While bullish on CRE overall, Craig is clear-eyed about the long-term uncertainty facing office and weaker malls. It’s a wide-ranging, data-rich look at how valuations are shaping the next phase of the cycle.

01:10 Grading Craig’s 2024 Predictions

03:24 Market Pulse Check

06:02 Inside the Appraisal Process

10:28 Career Path & Appraisal Challenges

14:16 Refis, Distress & the “Maturity Tsunami” That Never Came

19:00 Asset Class Outlook: Retail resilience, multifamily shifts & the data center boom

27:36 AI in Appraisals & What Market Value Really Means

Have questions for the pod team? Send them to Podcast@LightBoxRE.com.

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 63: CRE Appraisals in Focus – Valuations, Refis & the Data Center Boom with Craig Benton of Synovus Financial

September 12, 2025

Martha Coacher: This is the CRE Weekly Digest by LightBox, a firm transforming the commercial real estate landscape by connecting every step of the CRE process with comprehensive tools and data. I'm Martha Coacher with Manus Clancy and Dianne Crocker. Today we're gonna be diving into the world of lending and commercial appraisals.

To help us, we have Craig Benton, the Senior Director of Valuation and Environmental Services at Synovus Bank. A $62 billion regional institution headquartered in Columbus, Georgia. Craig was previously a fee appraiser with Benton Advisory Group as an owner and CBRE as a vice president. He has served on multiple counselors of Real Estate and Appraisal Institute chapter committees and was the president of the Atlanta Chapter of the Appraisal Institute.

Craig also has the distinction of being honored with the 2024 LightBox PRISM Industry Influencer Award. Craig, we're happy you're here. Welcome. 

Craig Benton: Thank you. Glad to be here. 

Martha Coacher: Craig, we're gonna start with the lay of the land and get broad market context. But before we do that, you gave us your hot takes for 20, 24, about a year and a half ago, and we saved the tape and we've graded every call.

So those predictions that you gave us for our prediction report, Dianne's actually gonna help give us the full breakdown on how you did. 

Dianne Crocker: You gave us four predictions. First up, you predicted that in 2024 there would not be a real estate led recession and that value drops would be sector specific. With office taking the brunt, that one was pretty spot on.

I have to say, there was no official 2024 recession. Office clearly took the hardest hit while retail and parts of industrial and multifamily held steady and even improved. Prediction number two. Interest rates. You predicted, Craig, that the Fed would stay put until mid 2024 and then cut rates, so you nailed the direction.

Your timing was a little off. Those first cuts came in September and November, not mid-year. Number three was you predicted that deals would unlock once borrowing costs got down around 6%. So permanent loans were indeed pricing in the high fives to 6%. Sure enough deal volume picked up. So even if foot was still below, uh, long run norms, that one was spot on.

And then third, you said a slowdown in residential would spill over into commercial real estate, so that one checked out too. 2024 existing home sales were the lowest since they were in the mid nineties. And the drag certainly showed up in terms of muted CRE volumes before things improved later on. So all in all, Craig, pretty solid track record.

We're gonna give you an A minus or a b plus. I think the only real mess was on the timing of the interest rate cuts, but directionally you had it right, so feather for your cap. 

Manus Clancy: Thank you. You guys are tough graders. If I got one wrong, I'd want that solid A, I'm not sure that I can, uh. We can go with that, especially with all the great inflation of the last two decades.

I think Craig gets a, a solid a for that, uh, that run for me. I appreciate that, Manis. Thank you. 

Dianne Crocker: We're in the third quarter of 2025. So Craig, let's start with your macro view. Where are you seeing improvement in the market this year? Where are things deteriorating? What's essentially holding steady? What do you think?

Craig Benton: Well, I think that there's a lot more properties on the market. We have a lot more transactional data now than we had last time we talked. For sure. We're seeing, in my opinion, some of that is based on capitulation because values are steadily rising in some markets, but they're also stable in a lot of markets as well.

And we have some markets that are declining, uh, in value on an aggregate basis. When I do some macro level analysis, I'm seeing some declining sale prices. So I say value, I mean sale price, but that's gonna lead to value potentially in some of those markets as well. We are definitely very active doing a lot of lending.

Lot of new loans. Uh, right now we're seeing a lot of refinance transactions as well. When you're talking about it on that level, you know, economically, we, we seem to be doing pretty well. I know we're gonna get into real estate specific a little bit later, so I didn't wanna necessarily talk about that at this level right now, but, uh, that is, that's what I'm thinking right now.

That's what I'm seeing. 

Dianne Crocker: We'll drill into valuations and get your thoughts by asset class in a bit. But before we move on, tariffs have obviously been a major theme this year, so we're curious, you know, where do you see them taking the broader market? Where do tariffs kind of start to surface in the world of appraisals?

Craig Benton: Well, it's, it's gonna be related to the cost of, of construction and the value of an existing property isn't necessarily going to change due to tariffs, but the cost of construction materials will certainly have an effect on that. Wages has an effect on that as well. Eventually, that has to lead to higher rents in order to justify the returns on the real estate, which would tend to get into the sale prices and therefore, eventually, potentially affect the value as well, you know, on a day-to-day basis with the.

Increases due to inflation that we had in 22 and 23. The tariff impacts to me, I think are gonna be much smaller and much more targeted. Trump is already talking about not having tariffs on certain construction materials and things in order to keep that, that flowing steel and some other things. Um, is my understanding as far as whether we're seeing it in construction yet, I.

Specifically seeing higher construction budgets related to tariffs. I did see lots of that during the inflation run up over the last few years. Lumber price, deal prices, labor prices, all of that was on the increase. I did have an interesting, funny side note. I get close from a, a tailor and he did have a tariff charge on my latest bill because my clothes are made in China.

So, you know, he's the representative, but they're made in China. So I had a tariff charge on my, on my most recent bill from him. I didn't give him any, any guff over, I just paid the bill and moved on. But I did think that was kind of funny. That's kind of my thought on, on that. I, I, again, I haven't, haven't had any impact that we've seen specifically.

And by the way, that's my opinion. I'm not, I'm not quoting anything from Sonovas Bank. I haven't seen our numbers specifically for, from internal, our internal, uh, market intelligence folks. 

Manus Clancy: So Craig, I'm curious about the process a little bit. Over the last three or four years, appraisers and appraisal reviewers have had a lot of curve balls thrown at them.

Labor shortages, which push up costs, runaway insurance costs at various points. I'm not sure we're, we're out of the woods there. A dearth of transactions at various points, especially for the office segment. And now we're talking about tariffs and not really knowing how that's gonna impact costs on the way in.

Tell us about the process. Tell us, when you're looking at an appraisal, how do you know, or how do you get a sense that the appraiser or you as a reviewer are. Taking all these things into consideration and really keeping the bank from taking unnecessary risk. 

Craig Benton: One of the key issues for a construction appraisal, for proposed property, of course, is a budget from the developer.

That's gonna be a very recent cost estimate, generally speaking, with the most recent cost built in for both materials and for labor. That is certainly a key factor that we look at. We have other market information like Marshall Evaluation Service and things that provide cost, manual numbers and things that we can kind of bounce that off of.

But seeing actual construction budgets certainly helps from that perspective. And we wanna make sure we have that and that we're looking at that. And then when we read the appraisal, we're, we're looking at what has the appraisal done, how they analyze those various. Data sources and pieces of information to determine what they think is the most reasonable for use in the appraisal.

You mentioned insurance costs. We've been monitoring that really closely. That is moderated quite a bit. I've seen in information recently that the increase in insurance has almost stabilized to the point where it's just kind of tracking with inflation at this point and not really going up a lot. I inquired amongst.

My lenders and my credit risk team about that. When we were talking about insurance increases a good bit last year and they said that, you know, their borrowers were re-trading annually. They were re-trading their policies almost annually to try to keep it under control because they've didn't absorb 20% increases and things like that either.

So they were actively re-trading those things. And I think the numbers that I've seen recently are sort of. Reflecting some of that with the stability that we're seeing higher than it was before, but not continuing to increase like it was for sure. So those are all things that we're considering in the appraisal and looking at, you know, historical information about insurance costs is not really relevant anymore, although it's a index that we can reference off of, but it's not, you know, the number isn't really appropriate anymore.

And what about sales comps? There's lots of transactional data out there now. We're seeing lots of sale comps even in the office market because people are buying the office. Finally, you know, we have, like I talked about earlier, the capitulation in office. People are just finally throwing in the towel and saying, you know, I gotta get out.

Or I got investors that want their money back and, and things like that. I think, and we'll talk about this a little later, the office market is improving, so some of those properties are being sold and people are betting on on some value add over the next few years. 

Martha Coacher: Craig, let's rewind the tape a little more and go back in time.

You've been an appraiser for some time, both in valuation and environmental risk. Uh, let us know how you got into this. 

Craig Benton: I come from a family of appraisers and uh, my story is a little bit somewhat unique. There are a lot of father, son and father, daughter, mother, daughter, mother, son relationships in the appraisal industry out there.

But my grandfather was an appraiser. My father was an appraiser. My mother was an appraiser, my brother was an appraiser, and I had no interest in being an appraiser at all. Okay. My brother actually was. Aerospace engineer before he became an appraiser. That's what I wanted to do. However, there's a lot of math and a lot of variables and things that are in, in engineering that were kind of tough for me, and, and I was quickly, uh, led a different direction after I took some engineering classes in college.

So ultimately my plan was to do something else. When I got out of college, I started working for my dad as an appraiser or, you know, doing research and things. And honestly, within about a week I said, you know, I think this is what I want to do for the rest of my life. And, you know, that was 32 and a half years ago.

So I think I've figured out that that's what I wanted to do. I loved it. I enjoyed every bit of it. I think my dad had an ulterior motive and knew that, that it's just in my blood and if I get him exposed to it, he'll just take to it and he'll go with it from there and do it. And boy was he right. 

Dianne Crocker: So being an appraiser was maybe a, uh, a foregone conclusion for you, Craig, and it's worked out pretty well given that you won the Prism Industry Influencer Award.

I know that you're out and about talking to a lot of folks in the industry, and as we just talked about, there was a real lack of sales comps a few years ago, and that was a real challenge for appraisers. I wonder what you would. Say now that some of the greatest challenges are that are facing appraisers, 

Craig Benton: we can talk about a good bit of that.

I think that, uh, with the data being, with there being more sales out there, now the data is a little bit better and we're seeing better information, more of it, uh, there's more transparency in the process. I think there was a lot of confidential transactions and NDAs being signed a few years back about anything that was coming out because nobody wanted anybody to know what was going on.

And we're back to a more normal environment where we're just, you know, sale comp data's available and it's, and it's out there and people can get it more easily as far as, you know. Appraisers specifically, you know, mentioning that. So I polled several of my appraisers over the last few days to collect some of this information.

I wanted to see if what they had to say tracked with, with what, what I was thinking and having said what I just said about, about being an appraiser and how it's been a great career and I've loved it. The, the flip side to that is in the appraisal world, when you're writing appraisals, the challenges are, are low fees because there's a lot of competition, shorter turn times, everybody wants things done faster and faster.

A lack of training for the next generation. That's not unique to our industry specifically, that's out there, all over the place, but everybody's working from home. Okay. I worked from home, but I've been at the bank for 17 years. I know the bank's culture. I know the lenders. I know everybody because I worked in the office.

Our new hires are, are, are very likely to be office job only. They're not gonna be allowed to work from home. They're gonna have to go in and learn this, and that's the only way you're gonna learn that culture and, and get that conversation. The joke I make is every conversation that you have with somebody when you work from home is deliberate.

Nobody runs into anybody at the coffee machine or at the water cooler, or in the elevator, or in the parking deck or in the lobby. None of that happens. It's called deliberate if you have that contact at all. And that's not a good environment for a younger generation that's trying to be, trying to learn a culture and get, and, and learn how to interact with other business people and, and, and so forth.

They, they need to be in the office and have that, and that's a lot of how, how appraisal training happens. Uh, my, my brother trained me and, and you know, we went on inspections together and had lunch together and had meetings in the, in the office and did other things. And it made it a lot easier for me to learn how to do that.

It's really hard to do that when you're remote, like, like we are. Uh, and I think that's a big problem for, for our industry. And again, not just our industry. That's every industry that's out there. 

Manus Clancy: I wanna pull the lens back a little bit, Craig. Talk about something that some of our prior podcasts had mentioned.

It kind of ties into the labor market a little bit. We had prior podcasts talk about what would be the canary in the coal mine for them in terms of valuations. And for both of them it was the labor market softening. And what we've seen over the summer is some bad jobs. Numbers we saw for the first time in many years is more.

Job applicants than there are jobs Right now. People are starting to talk about perhaps a, a jobs led recession. Is that something that's concerning you at that point as you are sizing up new properties and new appraisals coming in? 

Craig Benton: Not really. Uh, it's part of the data that's in the appraisal is, you know, employment in an area by, you know, usually by listed by sector, the largest employees are there, things of that nature.

So that, that all goes back to demand and it's demand for space. Right. You know, we'll talk about this a little bit later, but, you know, retail seems to be doing pretty well still. And, and so it's kind like, well that's about demand for space too. And if people aren't working, they're not buying stuff. Right.

And, and so. The real estate sectors that are out there that I'm seeing and our, and our borrowers and, and buyers and sellers seem to be betting on that. If there's anything that comes along, it's gonna be short term. And I think some of that might very well be due to the fact that maybe we've kept rates too high for just a little bit too long, and the Fed is starting to think it's time to break loose on that a little bit and get the economy going again before we slow down too much.

I'm not as concerned. About that in the long run. I'm gonna go back to what I said before about we're not gonna have a real estate led recession. I think if we have any kind of a slow down here that it's not gonna be long if we have one at all. 

Dianne Crocker: I wanna get your thoughts before we move into your asset class perspective.

Just let's talk for a bit about maturities, about distress. You know, we've been talking for years about this wave of loan maturities that would hit and this tsunami of distress, and obviously it hasn't exactly hit the market and the way that many predicted. So from your seat, how much refi activity are you seeing?

Is it picking up, is it still muted? And what are your thoughts on distress? 

Craig Benton: There was like a one and a half trillion dollar number that kept getting thrown around, or maybe it was even higher, two or 3 trillion of this, this wave of refis that was gonna roll in. Right. And, and I, I predicted, I didn't think that was gonna happen because we kept talking about it and it never really happened.

And I don't, and it didn't, you know, we're, we're not seeing that, that wave, that, that was out there. So we're doing significant refi activity. Some of our appraisers are very busy. Um, they're, they're quoting three week turn times with higher fees because they're, because of this refi activity that's out there.

To be honest, I'm not sure why. Refin only, that's an interest rate thing, and that hasn't happened yet. So I'm not sure if it's just a, a maturities are coming and they have no choice or what have you. But what we're definitely seeing a lot of that our lenders are very busy. We saw growth in our, in the last quarter in our CRE portfolio net growth for the first time in over a year, they've been, uh, stable to shrinking a little bit in our CRE portfolio.

So we're actually seeing some growth in that portfolio and we're planning for growth in the third and fourth quarter as well in our, uh, in our department to, to be getting even busier than we are. So it's definitely a lot. Uh, I say picking up, I, I'm not sure that it's picking up at an accelerating rate, but it's definitely picking up from where it was, where it has been.

And my, my, my team is busier, um, and so forth. So we're seeing a lot of that. 

Manus Clancy: So Craig, clearly you're a glass half full guy. You like the appraisal business. You didn't see the wave of maturities being kind of a catastrophic period for the C markets. And you said a moment ago you didn't see. This country being hit with a CRE LED recession.

What makes you optimistic about the CRE market? What keeps you from kind of joining the sometimes outsized crowds of people saying the end is near and, and, and we're gonna have this wave of, of, uh, distress over maturities? What, what makes you bullish? 

Craig Benton: Well, if you always predict that the market's gonna fall apart, eventually there's gonna be a problem.

And you'll be, you'll say, oh, see, I was right. And you know, I've been predicting it for 20 years and I was finally right. I look at it from the opposite perspective, in my opinion. And that is that that real estate moves slowly. Leases are long-term and without major catastrophic events like COVID. There isn't really any reason why anything should really be a problem on a day-to-day basis or, or just fall apart overnight.

Office fell apart because everybody had to go home. But as I pointed out, retail survived and, and did fine and industrial did okay. And, and, and, you know, hotels suffered for a bit, but, but then they got back, right back. I mean, they literally came right back. As soon as people were allowed to travel again, they, the hotels popped right back into, into stability and, and increasing a DR and everything else.

So there was a short term hit on that. But, you know, we, we as a bank absorbed it and. And we made adjustments in our, our, uh, loan documents and other things and, and moved on and, and we've, we've put that behind us and we're going forward with it. So I just don't see this massive overall, you know, problem that's gonna be coming along in, in, in CRE in my opinion.

We, we don't seem to be overextended. We don't seem to have too much of any particular asset class from what I'm seeing. Uh, we hear about that sometimes as well. Do banks have more CRE than ever on our books? Sure. But the population keeps growing and we keep building new buildings and somebody's doing construction loans on that, and that's banks.

So we have more than we've had. And, and a lot of that's multifamily. You know, we talk about that a little bit. A lot of that's multifamily. Some, some of us, some banks are pulling back from that at this point. You know, we have a 

Manus Clancy: thesis here. We, we tend to be bullish like you are on CRE. And one of our reasons for bullishness is our belief that there's been much greater discipline on the lending side.

In terms of leverage, in terms of proceeds, kind of they go hand in hand. Then perhaps what you saw in 2006 and 2007, we've really seen a decade worth of discipline holding firm at the banks. Would you agree with that thesis that there's been much more discipline than prior to past downturns? Absolutely.

Craig Benton: I, I would agree with that completely. I've seen conservative LTVs on our side, uh, loan to cost in our, in our loan documents. The ones that I've seen over the years. A lot of that is in multifamily, you know, where, where the rate, the, the LTV is definitely lower than typical. Uh, but I'm seeing a lot more, a lot of that, uh, that I hadn't seen, like you said, prior to, to COVID, you know, we were a little bit looser with that, uh, on a regular basis.

And we, we've all been a lot better about it this time around. 

Dianne Crocker: So Craig, the last time we spoke, as I recall, you were very bullish on grocery anchored retail. I'm wondering if you still view that as a safe haven and what are your thoughts on some other major asset classes like multifamily? 

Craig Benton: Yeah, so on retail, I, I remain bullish on, on grocery anchored retail.

And, and once again, my, my comment to that is that people shop at the grocery store a couple of times a week, two, three times a week. I mean, I know I do that, A lot of people do that. I don't even have many kids and I do that. Okay. You know, if I had kids, I'd be there probably every day, right? And. On top of that, even if you're having groceries delivered, they're still generally shopping at the store that's right down the street from where you live.

'cause they don't wanna bring that stuff too far, you know, before they bring it to your house. So grocery anchored retail is good and stable. It's, it's, it's in your neighborhood, it's, it's things that you need. Having said that, the tenants that are in there probably need to be more service oriented and things like that as well, you know, and, and we're seeing dry cleaners and, and you know, pizza, pizza places and eyeglass places and, you know, little restaurants and things that are serving your local market seem to be doing well.

Actually, I read a, a, an article recently, I won't quote the source, but it says that retail REITs focused on grocery service oriented and value oriented properties continue to gain ground. So that, that tracks exactly with what I'm thinking is that those are doing well and they're doing fine and, and, you know, are, are malls having an issue?

Yes. Malls have always seemed to have an issue though. Seems like that never seems to be a great thing to do. At least not if it's, if it is, is not that, that part of the cycle isn't very long and then it's back to malls being a problem again. But retail, uh, focused on grocery always seems to be doing well and, and I I continue to remain bullish on that.

Absolutely. In the multifamily. Uh, appraisals that we're seeing, we're seeing, um, rent that is stable not really being increased much anymore. Certainly not at the rates that it was with expenses climbing a little bit. So we're seeing a little bit of erosion in value on some of our properties on reappraisal that we've had, you know, the last three years.

You know, we had properties appraised in 21, 22, 23, and as we're seeing those, those properties come through for their updated appraisals, we're seeing a little bit of value erosion in some of those situations. However, our LTVs were strong when we did 'em. We're conservative when we did them. And so it's really not becoming an issue from a stress testing perspective because as we look at these properties, we go, well, we're still well within the supervisory, you know, limits that we have, and so we're fine.

But I just wanted to point that out. We're definitely seeing some, some of that in certain markets. We're definitely seeing some erosion in, uh, multifamily. Property value. 

Dianne Crocker: Interesting. And the one asset class that you have not mentioned yet today, Craig, which is a big headline maker, are data centers. So I'm wondering if you're doing much work in them, how might they be different than other types of development or other types of projects that you work on?

Craig Benton: Yeah, we've, we've read a lot of appraisals on data centers. Those properties are generally a participation syndication type scenario because the values are just so high that, that one bank just can't handle the loan by itself on these types of properties. We've seen appraisals of, of $1.5 billion values of, of a data center.

And, and, you know, there's no bank that can do a loan, a single bank that can do a loan on a property like that. So we're doing a lot of participations in, uh, uh, those kinds of property types. Those are very interesting. Uh, property types. I've, I've been familiar with data centers for a long. Time with ai, uh, data centers are becoming more and more prevalent.

It's not just, you know, an Amazon data center, it's, it's, you know, for other uses as well. Third party people renting the space in the data centers and so forth. We're, we're seeing a lot of that. It's definitely getting a lot of attention at the federal, uh, regulatory level as well because of the dollars that are involved in, in these transactions.

And, uh, those, those loans are certainly being looked at. The concepts right now are turning into, it's almost like a business valuation when you look at it versus the straight up real. State type situation. And there's, there's arguments that go both ways on that. And I'm not gonna come down one side or the other on whether it's a business valuation or a real estate valuation.

I'm simply gonna say we're seeing a lot of those appraisals and we're seeing both of those methodologies and, and conversations in the appraisals. Um, it is definitely a, a. An asset class that is growing and the dollar volume is just, is huge. You know, when, when you look at doing one of those, you know, that could, you know, that could be portfolio for three years.

I mean, they wouldn't have to make another loan, you know, with, with that volume that they could be doing on that. The other thing is the size of the properties, the, they become obsolete, I don't wanna say very quickly, but they come ob they become obsolete somewhat quickly with, with the size of the property and the power demands that are needed and so forth.

So they're bu they're building bigger. Larger and larger buildings when they're doing it, which is demanding more and more power. Do, do you have enough power to serve the property or the demands that you're gonna have for it? And that's really becoming a, a bigger issue, uh, than anything else. And, and you know, for example, the, the meta AI property that's being built west of Vicksburg is gonna be 4 million square feet.

It's a thousand permanent jobs, 500 off and on type jobs, but it's 5,000 employees that are gonna have to come in to build that property over the next several years, uh, as it's doing that. So, you know, you look at the, what it takes to do something like that, and then those 5,000 jobs leave. And the housing for those 5,000 jobs lead.

But you know, you build a man camp to, to have the employees there and then that leaves, and so you have a building that's left behind, but you don't have a lot of job generation, but you have a lot of power usage and that kind of a thing. And so that's becoming an interesting conversation. When we talk about that, we talk about power demand, and what does that lead to for the power?

When we're talking in the United States about green power and other things, you can't just build a a coal plant, you know, it'd take you 25 years to get the permits to do that. So you have to think about how we're gonna be looking at that. And some of the things that I've seen are pretty interesting about how they're planning on powering these things in the long run.

Dianne Crocker: All right. So Craig, we're hearing a lot of bullishness from you. Um, we are also glass half full people, as Manis mentioned, but I'm wondering, is there any asset class in commercial real estate now that you're less bullish on? 

Craig Benton: Well, certainly we've, we've talked about office and I'm, I'm still struggling a little bit with office, with the population growth trends in the United States and the number of people that would be in an office over the next, to be silly, over the next 75 years, the US population is expected to grow by 8 million people, which means about two to 3 million of those people would need office jobs.

So that means that we have all the office space we could ever stand right now. I would never need to build another square foot of office and we could house all of those people. Now, that's obviously not gonna happen. And please, if there's somebody from an office rate listening, you can just don't, don't send this to anybody that works for you.

'cause you don't, they don't need to hear that. 'cause that's not how it'll be. We have office space that becomes obsolete and we build new buildings and things like that. But I will note that behind Manus is the, uh, empire State Building built in 1931 and it's still occupied today. So, you know, even old buildings can, can still be reused.

And, and, and that concerns me a little bit in the long run because. We are figuring out ways to not have to be in the office, you know? Okay, so a dovetail on that. Right now, you rent an office 24 hours a day, seven days a week, but you only use it. Five days a week for eight to nine hours a day. If you're in the office every day, and I'm talking about your, your company, or you, however you wanna look at that.

Right. Well, now we do three days a week in the office and we don't go in Monday and Friday. So now we now three sevenths of the days that we could use the office. We use it, but we pay for power and, and, you know, air conditioning and heating and, and cleaning services and all that for all of that time.

And we don't use it. When are we gonna get down to two days a week or, or one day a week. And now we're renting the office for one day a week. When does that get to the rent? When does that get to the point where the customer starts saying, Hey, you know, I really don't wanna pay you that much in rent 'cause I barely use the space, but I need it.

And then we get back to, does, does WeWork end up being, you know, the model for, for office space in the long run, you know, for everything? Does anybody have any actual offices at all? I would think. For security purposes and, and documentation. You know, you, you, you have to have something like that where you have, it's your space only.

You can't have, you know, space for everybody. I don't think it becomes ever fully remote for, for some people they, you know, they have to have a place to go where they can store things and, and have secure document storage and that kind of a thing. I suppose maybe you do all that electronically. I don't know.

We're getting into some. Definitely some unusual thought processes, but for me, the future of office is definitely cloudy for the long term. And, you know, we know office, we know the larger markets like New York and Chicago and la. Those areas really suffered badly when people went home and all those ancillary businesses suffered because there was nobody there during the day to eat lunch and take the cabs and all those kinds of things.

They, they, they were hurt bad. We mentioned, uh, B and C class malls. Those have always been a problem and priced right. They work okay, but. I don't know. I can't tell you the last time I've been to a mall and, um, I go near the mall to the Costco, but I don't go in the mall. 

Dianne Crocker: That's interesting. Certainly the, the future of office, there's a lot to unravel there.

We talked extensively about data centers, which brings to mind artificial intelligence. You know, everyone, no matter what sector of the industry they're in, is. Wondering about AI and what its greatest applications are, and certainly the aggregation of data is at the heart of the valuation industry. So I'm wondering where are you seeing AI being put to good use with appraisals?

In what ways maybe are you seeing that it could be misused? 

Craig Benton: Yeah, absolutely. Um, uh, I have some really good information about that and some thoughts about that. So. I heard a presentation, um, almost a year ago in New York. I was in New York at a councilors of real estate meeting, and we had a presentation on ai.

Um, I was actually on the panel to talk about it a little bit, and one of the folks in the audience stood up and he said, yeah, I had this AI thing that I did. I asked it a question. He said, it took me about a day to put the question together the way that I wanted it to be. And it was a very detailed question about a property, and he wanted all kinds of information, zoning and, and highest and best use analysis and what's, you know, what are the, what are the legally.

Permissible uses and who are the potential investors, and write me some investor letters and gimme some information about the market and all of this. And he said, I put the question into AI and I went to lunch and I came back 45 minutes later and I had 300 pages of material to go through. And he said, it took me about two days to go through all the material and figure out what was good and bad.

He goes, but that would've taken me a couple of weeks to put that together probably. And so, you know. That made it much more efficient for him to get that information together and get it ready to go, and it was a great use of it. And so he spent his time, his expertise, and his professionalism, making sure what he had gotten was correct, instead of just doing research and finding that information.

Now, does that replace him? No. But does that replace somebody on his staff that might have been doing research full-time for him? Yeah. That, that, that might have replaced that person or certainly made that person's job more efficient. One of the things that was quoted at the LightBox conference on a, when we, when we talked about AI a couple years back, was, you won't be replaced by ai.

You'll be replaced by somebody using ai. Right. And, and so I. I'm starting to use it. Uh, I know my appraisers are using it to gather information. ISAI, uh, last year gave me a market analysis for apartments in the Buckhead submarket of Atlanta, Georgia. And in about 30 seconds, I got four pages of information.

I was using the old version of chat, GPT, so the data was outdated because it wasn't, it hadn't been updated with the more recent information, but it was there. Everything that it said was correct based on the date that that database ended, which was a year prior to the information that I had. So it was, I checked it all and it was up to date.

I think appraisers are using it in a lot of ways for that information. Appraisers are starting to use it to analyze the comps. To find trends that are not as obvious maybe as they were before. And I'm, I'm good with that. As long as you explain what you've done and, and how it worked and, and do you think it's correct?

Because I still want you to sit on the curb and look at the building and tell me if you think that value makes sense. I don't want the computer to tell me I'm providing, I'm paying an appraiser for their opinion of value, not the computer's opinion of value. So I need to understand that there's a human involved that thought about it and said, yeah, it's a tool like everything else.

Now, how can it be misused? Well. You could have it, do all of those things and then not check any of it and send me what you, whatever you get out of it. A great example of of of that was a friend who's a professor at a college and he was preparing his lesson plan and said, Hey, give me three case studies on this topic.

And, and it wrote three case studies for him and he looked at it and they were all made up. None of them were real. And he said, well, I'm glad I checked because if I brought that to my class, you know, I'd have looked pretty bad because none of this information is real. It's all fake. So, you know, that's a challenge.

Uh, fortunately real estate, it's easy to prove things. You can kind of check it, but check it yourself and go back and say, yeah, that did happen and this did happen, and so forth. So it's not, not too hard to do that. We are looking at ways to try to help it with our review process, we're looking at ways to use it to try to transfer information out of appraisals and into our loan.

Systems at the bank so we get updated value and other information into our systems more easily. Certainly those are all ways that we, we will be able to use it and uh, and be more efficient as we go forward. For sure. 

Dianne Crocker: Exciting you. Um, you brought to mind, I was at the Appraisal Institute in New England and we were talking about AI and it became a very spirited discussion, and you just reminded me that there were folks in the room who had clients who were prohibiting them from using AI on their appraisals.

And I remember one gentleman standing up and, and he likened it to someone telling them back in the seventies or eighties that they couldn't use a calculator. 

Craig Benton: That's right. I, I've, I've heard that too. I, I sit around with. Several other chief appraisers at some meetings, and we talk about these things and some banks do prohibit that, that's from their legal department.

You know, I asked my legal department about it, and they didn't have any particular restrictions, so I said, okay, just for appraisers, tell me where you're using it so that I can be aware of it and make sure I'm okay with, with what you're doing. And so far, I haven't seen anything that's been a problem.

That's an interesting comment to be prohibited from using something like that. Again, I, I'm gonna say just make sure that what it's telling you is right. Don't just don't just accept it, you know, for where it is. 

Martha Coacher: Craig, give us one thing from an appraiser's perspective that you think people in the industry might be surprised to hear.

It could be anything that you think is obvious in valuation work, but may not be on the radar for owners, investors, or even lenders. 

Craig Benton: One of the things that we talk about in our industry amongst my team members and and my peers, is market value and, and what that means, the definition of market value. So market value has five components, uh, and they're very specific.

One of the most important components is that market value assumes a property is going to sell. And so generally speaking, what that means is that's gonna have an impact on other aspects of expenses like insurance or taxes could change based on the value of the property when it changes hands. Generally speaking, taxes are a big number, um, that can have a significant change.

And when we are looking at properties that are being operated and are going to continue to be operated or owned by the same person, they always question, well, why did the taxes go up so much? That's not what we have in there for taxes. And we have to say, well, the property had to sell in order for us to value it, and that's gonna change the taxes.

And so we consider that in, in the appraisal for sure. We talk about motivated buyers and sellers transactions in cash and US dollars, and then in the United States, for example, things like that. And that matters too, because if you're not operating the property at its highest and best use, but you're operating it for what you do, that's fine, but that really leads to more of an investment value than a market value.

And so sometimes what someone thinks a property is worth is based on what they're doing with the property, but it may be worth quite a bit more or less, depending on what the market value is or what the market might pay for that particular property. Definitely something that our folks struggle with sometimes with that particular question.

And I say our folks, I'm, I'm talking about, you know, borrowers and, and lenders and things sometimes are not as familiar with that phrase as they should be. And so it can cause some consternation on the other end of the process when we're having to explain, well, this is why we had to do that. And instruction loans.

It can be particularly hairy because the real estate taxes are very low. You know, for the first year or two after a property is built, before it gets reassessed, and so they're looking at, Hey, I'm gonna sell it and my taxes are gonna be a hundred thousand, and the appraisal comes back and they're 450,000.

And they go, wait a minute, what happened? I said, well, the property had to sell, you know, and so it increased the tax number and, and, and so we've had a lot of challenges with that, 

Martha Coacher: Craig. This was a really good conversation. Thank you for joining us, and thanks to our production team of Alyssa Lewis and Josh Bruyning.

For more from LightBox, subscribe to the CRE Weekly Digest wherever you listen. As our team share CRE news and data in context each week, subscribe and share this episode with your colleagues in commercial real estate and send your comments to podcast@LightBoxre.com. Thank you for listening and have a great week.

Manus Clancy: Let's go.