Someone asked me to summarize what’s going on in CRE regarding data. While the CRE data conversation has mostly revolved around what CoStar/LoopNet and Xceligent are up to, there’s a lot more going on than that. Yes, I’m talking about big data. But everyone in CRE seems to be thinking small.
Properties and Listings
There’s way too much emphasis on property and listing data. And most of it is “out there” already. You just have to do some work to get it – or pay for it. Except in a few markets, agents complain about the cost and the quality offered by current aggregators. And unless there is more competition, don’t expect pricing to get any better.
If you don’t want to cough up the fees for outsourcing your listing data, you’re going to have to start collecting it yourself. Many brokerages are putting centralized databases in place but fooling around with Access, SQL server or other database applications is not for everyone. Watch for cloud database services customized for CRE data.
I remember talking to a developer 10 years ago who told me over and over again that property and listing data would eventually be commoditized. What brokerages should be focusing on, he said, is comparables. As a source of leads aside (that all important lease expiration date!), of course they’re useful in providing trend information like, for example, comparing asking prices to actual prices. And everyone believes they’re an integral part of valuing properties and an absolute necessity to get your client a good deal.
But these snippets of historical data are only part of the equation. What were the economic conditions at the time of the sale or lease? What are they now? In a world where everything changes so quickly, can past behavior – or prices – continue to be a reliable predictor of the future? (H/T to Decoding the New Consumer Mind) Don’t count on it. In the meantime, while you’re waiting for that lease to expire, build a relationship with the tenant.
I don’t proclaim to be an expert in property valuation but I have seen enough offerings to know that rent rolls, NOI and a lot of other data is required so that buyers can evaluate a property before buying. But as far as I can tell, this is a single dimensional view. What if you could factor in economic trends, tenant company outlooks and other market data?
As it is, I hear agents talk about sector cutbacks and how that might affect those tenants. Or how market conditions could propel owners to sell their buildings, downsize or look for more space. Just think if you could quantify that. Could analyzing stock prices or financial analysts’ forecasts do that? Could scouring Google searches add some insight? Just think how the advice to a client might be different if you had indicators of a sector crash or growth.
If you haven’t figured it out already, the point I’m trying to make is that at the agent and often the brokerage level, data is viewed simplistically. Compare that to what retailers are doing – mashing up real time data from online, brick and mortar sources and social signals. And they’re not just looking at sales data. What are people who didn’t buy searching for? How do they navigate a store? What’s trending on Pinterest? What can they find out about the email recipient who clicked on the email offer? And on and on.
Retail, of course, is different from commercial real estate. The current data sources that commercial real estate uses, its integration and analysis are in their infancy. But you’re starting to see CRM apps which include social activity or collect and display information from around the internet about the contacts in your address book. The financial industry is looking at reducing real estate portfolio risk with rational decision making tools that rely on data from various sources to provide direction.
How more data will affect the commercial real estate industry is anyone’s guess. But if you can use data to determine the viability of leasing, selling or buying, what’s the brokerage’s and agent’s role? That’s why it’s imperative that CRE looks at the bigger data picture. Whoever collects the data, puts it together, builds the algorithms and provides reliable analysis wins. CRE innovators need to start thinking about ways to collect and leverage data instead of spending any more time on improving arguably archaic business processes. If you want the CRE industry to remain relevant, it’s time to start thinking big.