British Columbia commercial real estate industry players need to embrace and leverage big data if they want to survive in a more competitive market, according to Altus Group.
Old-school real estate investors and developers – often dismissed as “dinosaurs” – who go on guts and intuition can’t cut it in today’s environment, said Raj Singh, executive vice-president of Altus Group, which has just issued a report on harnessing the power of data.
The commercial real estate industry needs to take a page from the stock market and bond markets, even the residential industry, in compiling and leveraging data, Singh said.
Commercial real estate data can include traffic flows, municipal zoning, leasing and sales information, sustainability issues, mortgage costs, demographic research, vacancy data, and local employment numbers, he explained.
“There is a lack of centralized and standardization in commercial data,” Singh said.
He noted that big institutional investors, such as pension funds, once had less than 10% exposure to commercial real estate, but now holds 15% to 20% in commercial property.
The Altus report, based on a summer survey of more than 300 international commercial real estate executives from firms that have at least $500 million in assets under management, found that 89% of companies have major impediments to collecting and utilizing data to drive asset and investment decision-making.
“Firms that are able to analyze deals more quickly and make better decisions are the ones that are going to outperform their peers,” said Singh. “There’s potentially a very large payback for making an investment in data and technology.”
Even smaller real estate investors need to track and understand data, he said, because they are often competing with large real estate investment trusts and pension funds.
While companies may have a lot of data at their disposal, it often exists in silos and is difficult to share. This creates a lack of transparency and increases the potential for unnecessary risk if decisions are made without having as much information as possible behind them, Singh said.
“There’s a lack of senior executive buy-in and support for investing in data and technology, and also a lack of skill sets in knowing how to use these assets,” said Singh.