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The Commercial Real Estate (CRE) sector is estimated to be worth $24 trillion. Yet, according to a report by McKinsey, decisions continue to be largely based on intuition, traditional and retrospective data – the sector remains unwilling to depart from its preference for spreadsheets.
With increasing market competition and the sudden global economic ripples that have been brought by COVID-19, property owners and investors need to find new ways to stay competitive. In this regard, non-traditional and unconventional variables are becoming increasingly relevant to predict location specific outcomes.
According to CBRE Managing Director Brian Jennings, “technology has evolved exponentially and plays a critical role in both the monitoring and improvement of the building systems performance.” However and in contrast, KPMG’s 2018 Global Proptech Report showed that 66% of real estate decision-makers have not implemented digital and technological innovation or strategy at their firms. On another account from a 2019 report from Altus Group, these firms are opting to rather use spreadsheets as their primary tool for reporting.
Kevin Danehy, the global head of corporate development and executive vice president with Brookfield Properties, said that he’s recognised the capacity of improvements that can be made, noting that Brookfield’s technology and infrastructure has historically been decentralized and fragmented. “Although we have massive amounts of data,” Danehy said, “a lot of it has been captured in Excel spreadsheets and different accounting systems all over the world.” Brookfield’s North American office building portfolio alone had 22 different accounting systems in place in 2018.
Industry experts say that even if you have the best data in the world, a decision-maker needs to be able to dive into that information, understand it inside and out, and interact with it in a meaningful way. So you really need to be able to pair the data science with the data visualization to be able to drive meaningful outcomes.
According to Mr Danehy, a 10-percent increase in data use can result in an increase of more than $65 million in net income for a typical Fortune 1000 company. Additionally, retailers who leverage the full potential of big-data analytics can optimize their operating margins by approximately 60-percent.
1. Realtime Cloud Visualization
Asset digitization enables platform access for real-time data visualizations in the cloud, with these data insights offering great value to off-site consumers. For example, building engineers and other management personnel can access real-time alerts and visualizations of building assets from any location.
2. Energy Efficiency
Big Data and IOT Technologies allow for real time energy reporting and monitoring. It allows asset managers to go beyond the main meter to provide real-time granular insights on individual tenant spaces and critical assets, allowing them to recognize inefficiencies.
3. Going beyond Traditional Data
“It’s not just about when [a property] is built; is it made out of wood; how many stories is it; how many bedrooms and bathrooms does it have,” said Zach Aarons, co-founder and partner of MetaProp, a venture capital company in New York City focused on real estate technology. “Now there’s 200 other data points” to potentially parse.
According to Zillow data, in Boston, homes within a quarter of a mile of a Starbucks experienced valuation increases worth 171-percent between 1997 and 2014. Set against the backdrop of house price rises and falls during that time period—including the great recession—these properties are still worth 45-percent more than homes that aren’t as close to a Starbucks.
Similarly, apartments in Seattle within a mile of specialty grocery chains, such as Whole Foods and Trader Joe’s, appreciated faster in value than those outside of that radius.
With access to more data than ever before, real estate managers, owners and brokers are discovering that big data is a key to unlocking key metrics of success and valuation to make decisions about property investments.
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