Data is a language.

Understanding and interpreting it is about better decisions and building your portfolio with intelligent data management and analytics. Without organized data and analysis, making decisions is like shooting an air rifle in the dark at 30 meters distance – you’re unlikely to hit your target.

You may be able to push through and drive a profit. But to reliably increase your alpha (your return above market), we need to pull together our data from various systems – each speaking a different language – to maximize the NOI-generating potential of your portfolio.

Let’s look at 7 of the best ways to leverage data as a commercial real estate operator or investor, to take your assets to the next level of ROI.

In this article, we’ll explore how data can support your operations at each phase of the investment lifecycle. These are concepts that every operator must apply in running a commercial real estate investment, development, or asset management firm to keep the deals and revenue flowing.

1. Finding and vetting opportunities with CRE tech

Value-add opportunities are the heart of any CRE endeavor. Whether it be undeveloped land, infill, or redevelopment, we need to find properties that have the potential to yield a strong cash flow during operations and a sizeable profit at resale or exchange.

With the many CRE tech solutions available to us, we can analyze public data more efficiently to identify the best markets, subdivisions, and assets for investment and development.

How do you see the opportunities and conduct due diligence?

We use technology to find data and identify hot markets. Using census and cell phone records, we can generate heat maps of population and development. Then we can overlay that information with economic, crime, social, and weather data to see patterns that indicate opportunity.

To find acquisition opportunities, we extract property and owner information from public and private sources and organize and connect that data for our due diligence and acquisition teams.

The second thing is processing the data. Standardized tools and systems lead to more comprehensive data and thorough analysis. Additionally, analysts cost money and need time to prepare reports, but technology improves how you explore, vet, and secure opportunities.

In the process, we expedite our due diligence, enhance decision-making capability, and accelerate the acquisition of assets with the most upside potential and least exposure.

2. Understanding and attracting investors and tenants – optimizing your marketing

How do you know who to target with your marketing messages?

By observing trends in the marketplace and analyzing data concerning investor and user characteristics and behavior (demographics, psychographics, lifestyle, etc.), we can develop an ideal prospect persona that outlines their attributes, needs, and desires.

Organized data helps us understand what questions our prospects are asking, their problems, and how they prefer to communicate. 

With this data-derived knowledge in hand, we build data-driven campaigns that are effective in delivering a relevant and motivating message to our audiences while also building rapport and driving action.

Once we’ve identified and studied our ideal prospects, we can delve into public and private data sources to find contact information and build our database of potential investors and tenants. 

To organize and make the information actionable, we leverage CRM (customer relationship management) platforms to facilitate the acquisition and nurturing of leads that respond to our marketing.

3. Securing capital with compelling pitches

Now that you have the opportunity and made the connection, how do you seal the deal and get your project off the ground?

Drumroll… Data, of course!

Investors demand proof.

Evidence that highlights your organization’s accomplishments and core competencies, backed by objective market data, shows your project’s viability and goes far in establishing the credibility to raise large sums.

Many tools and platforms are available to collect, organize, and analyze data and then generate intelligent reports that capture investors’ attention and convince them of the upside and manageable risk.

Presenting coherent data differentiates you as an alpha operator – among the thousands competing for capital in our market – as it shows thorough due diligence and keen utilization of innovative technologies.

Cohesive and accessible data provides transparency to investors and other stakeholders by offering an objective information source to verify your claims.

4. Implementing CRE tech to improve communications between systems and teams

Cloud-based data platforms allow us to improve the collaboration and communication between the various internal and external teams (finance, operations, property and lease management, marketing, research, etc.) involved in the acquisition and management process, leading to better decisions and execution.

CRE tech lets you outpace the competition, particularly when you leverage predictive analytics and automated alerts regarding emerging ideal opportunities in the markets you’re watching.

By introducing a data management and analytics platform, you can centralize all the data across your portfolio and management teams, eliminating the traditional silos that compartmentalize information and slow workflows.

With all your data in one place, your team can access information more quickly and securely, enhancing situational awareness, limiting exposure, and enabling faster response to evolving economic conditions.

5. Actionable data in CRE for high-quality decision-making

Data is good, but knowledge is better.

Thanks to AI and machine learning advancements, we now collect and analyze data in real-time and seamlessly extrapolate the raw data into actionable intel.

The process of analyzing and generating reports is simply a matter of selecting the data we want to examine, applying various criteria, and automatically generating a vital visual representation of the information. This promotes deeper insight, faster decision-making, and smart prioritization of activities.

Visualization is crucial as it allows us to effectively identify and interpret trends, patterns, and relationships that are difficult to relate and understand solely by words and numbers.

It also drives our understanding of how key metrics relate to specified thresholds and helps us compare our performance to strategic projections, goals, and benchmarks – relevant insights to leverage for more compelling investor pitches.

6. Simplifying property management

When trying to grow our portfolios and optimize performance, simplicity is as good as gold.

It not only enables our teams to act more efficiently but also reduces management expenses and improves satisfaction for internal and external stakeholders, including staff, tenants, and watchful investors.

Additionally, data management systems unify our outward-facing teams and streamline the nurturing of tenant and investor relationships by providing us with the data and tools to automate outreach, lead generation, follow-up, and ongoing communication.

Emerging AI and CRE tech platforms reduce manual data collection and analysis and provide frontline management with instantaneous and actionable knowledge – crucial in adapting and responding to highly dynamic conditions in the post-pandemic environment.

7. Measuring, optimizing, and documenting performance with CRE data

Are you effectively measuring performance in your organization? 

When our data is trapped in isolated systems across our organization, it’s difficult or impossible to conveniently and effectively gather and evaluate that information. 

As noted before, centralizing your data is an essential strategy to document your performance and support your case with investors, improving your chances of funding the next project.

With scalable data management systems, you can simultaneously monitor results at a macro and micro level. Also, these instruments let you closely watch cash flow, occupancy, operational and maintenance expenses, capital expenditures, rent rolls, and, most importantly, NOI. 

Additionally, a centralized platform lightens the load on your CFO and frees executive management to focus on strategy rather than analysis.

If your enterprise is pursuing ESG initiatives – which it should – tracking energy efficiency savings, payback period, and increased demand demonstrates to sustainability-conscious investors your commitment and success in applying ESG principles. 

When we’re mindful of the social impact of our developments and have diligently collected data demonstrating our positive effect on the local community, we’re refining our brand positions and building goodwill with conscientious investors and local regulatory entities. 

Max your NOI and build momentum

Regardless of the size or makeup of your portfolio, leveraging any mix of these strategies will improve the quality of your enterprise-level decision-making. 

The results are high-quality investment opportunities, greater access to funding (with more favorable terms), and efficient operations that enhance your upside and lead to optimal satisfaction among all your stakeholders – capital partners and users alike.

CRE tech solutions for these strategies simplify the planning and implementation process without causing you undue frustration or unwarranted expense. 

To scale faster, partner with experts in tech and data analytics that will expand your mastermind group, unlock the potential of your assets and capital, and maximize your alpha.

Being different is the largest determinant of success.

There are minimal barriers to entry to become a commercial real estate operator. Some startup cash and a smart strategy go a long way.

The lack of barriers creates a crowd of owners and operators, all competing to raise outside capital from a small number of equity sponsors.

This fierce competition makes it a challenge for individual operators to stand out, which is why many fail to secure an investment.

To become successful in raising capital, operators need an imaginative approach to catch the attention of investors and equity sponsors.

Let’s explore the three critical questions every commercial real estate owner or operator should ask to discover their unique value proposition.

#1 – How Do We Differentiate Ourselves to Equity Sources?

“We performed better than anybody else” is NOT the response that will set you apart from your competition as a commercial real estate operator.

When approached by operators, investors look at the people, not just the numbers.

Prospective investors ask a series of questions to assess the competitive advantage of an operator:

Are the owners looking at properties differently? Looking at horizons from an informed perspective? Utilizing different datasets? Employing resident engagement strategies? Leveraging innovative technology?

Investors want to know what distinctive edge your firm has that no one else can duplicate.

If you’re struggling to attract investors, clarify and simplify your story, unique vision, and how you intend to execute your plan.

As opposed to just numbers and alpha, having a clear vision will give investors the confidence to trust and invest in you.

#2 – How Do We Create Enterprise Value?

The value of the assets you manage is not the same as your company’s value as a whole, aka, ‘enterprise value.’ 

Too often, operators assume the value of the properties they own and manage is the only priority, whereas enterprise value is more important to investors. 

With rental growth predicted to decrease and operating costs expected to rise due to COVID-19 compliance regulations, enterprise value has become the leading metric used by equity sources when comparing sponsors. 

Yet, too few operators are conscientious about creating a business around owning their real estate. In a recent study by Deloitte, just 48% of the top commercial real estate executives surveyed indicated their firms had an action plan for maintaining operational and financial resilience for the years to come. 

There are numerous ways to create enterprise value, from reorganizing your company structure, to systematizing your current data processes, and implementing the latest tech.

As a commercial real estate operator, you must determine which strategies are best suited to your goals. Ensure you include these approaches in future communications with investors to demonstrate your strategic foresight. 

#3 – How Do We Notice Change?

Commercial real estate is poised to undergo rapid changes over the next five years, following the impact of COVID-19 on the market.

Soon, only owners and operators who understand technology and leverage its full potential will be cutting ribbons.

While those who fail to acknowledge and embrace the change will flounder, struggling in vain to catch the attention of investors.

In its same survey of commercial real estate owners/operators, developers, brokers, and investors, Deloitte found that 56% of the respondents had digital shortcomings that they only discovered within the past year.

Despite this revelation, “only 45% of [the same] respondents plan to increase their investments in [technologies, such as] cloud, robotic process automation (RPA), artificial intelligence (AI), and digital channels over the next 12 months.”

If you’re an owner or operator, ‘noticing change’ isn’t only about tech. Getting the right people on your team (i.e., those committed to your vision), listening to them, and understanding their situational insights gives you a strategic advantage.

It will also involve building systems that monitor and analyze data, as well as leaving room for qualitative research through conversations with salespeople, brokers, and tenants.

Showing potential investors that you prioritize data and analytics in your operations to detect and preempt disruptive changes, puts you in the best position to secure a capital partner.

Achieving Longevity

Today’s commercial real estate investors are overwhelmed by endless requests for capital by a growing number of owners and operators.

As a commercial real estate stakeholder, you create the best blueprint for success by building a unique brand, creating enterprise value, and becoming data-driven.

Committing to distinguishing yourself from competitors and position your company for successful raises.

Bitcoin vs Commercial Real Estate: What Should You Do with $1M?

If I gave you $1 million, would you invest in Bitcoin or commercial real estate?

Bitcoin has been on a tear recently. If you bought $1K worth of bitcoin this time last year, you’d have $6K today. Bitcoin is quickly going from a punchline to a serious investment. 

What does this trend mean for commercial real estate and you as an investor? Let’s make a quick comparison and see which is the right fit for your wealth and business-building goals.

Pros and Cons of Investing in Bitcoin

Pro: High Annualized Returns

Over the last ten years, Bitcoin has produced an average annualized return of roughly 230% — more than ten times higher than any other asset class. 

Even if you aren’t interested in investing in Bitcoin as an asset, we have to acknowledge that digital currencies are disrupting the financial world.

Recently, Paypal announced plans to allow its $70M+ Venmo users to “buy, sell, and hold crypto,” further opening up the door to broad acceptance. Due to this unprecedented development, users may soon be able to settle bar tabs with cryptocurrencies.

In fact, CashApp has already taken a step in that direction. The app recently added support for bitcoin so its $34M users can buy and send the currency.

Recently, Coinbase added a feature that lets users buy cryptocurrency with their PayPal account. This integration simplifies how people interested in Bitcoin acquire this unpredictable asset, making it more accessible and providing validation for the concept.

However, that doesn’t mean Bitcoin’s all sunshine and rainbows. As with any investment, Bitcoin carries inherent risks. And, when it comes to one with returns as high as 230% year-over-year, you can expect the risks to be substantial.

 Con: Volatility — And an Almost Guaranteed Correction

Bitcoin is volatile, to say the least. Most crypto experts, like billionaire investor Mike Novogratz, predict some level of correction. How much and how soon, though, is anyone’s guess.

That said, if you look at the history of the booms and busts, Bitcoin regularly experiences 30-40% corrections.

According to most estimates, during the 2008 Financial Crisis, housing prices dropped by only 20-30%. 

Could you hold your $1M as it crashes to $700k or lower? What if it stays there for the next 3-4 years (or longer)?

Pros and cons of investing in commercial real estate

Pro: Favorable tax treatment

Let’s say you win big on cryptocurrency; what are the tax ramifications?

Unless you want to hold the asset forever, you’re going to have to pay at least 15-20% tax on capital gains every time you withdraw even a small portion of your returns.

If you’ve been holding for less than a year, expect to pay short-term capital gains tax, which, depending on your income, can be as high as 37%.

Meanwhile, commercial real estate has tons of tax benefits. You can completely avoid paying capital gains tax with a 1031, or ‘like-kind,’ exchange. You can write off depreciation and control your deductions. 

And if it’s passive income from a commercial real estate investment and you’re incorporated, you can use a pass-through deduction to get up to a 20% write-off. 

Pro: More traditional, time-tested investment

Commercial real estate is a mature industry with stable, risk-adjusted returns. After accounting for volatility and confidence, the asset class consistently beat the S&P 500 over the more than two decade period from 1992-2016. When accounting for volatility, only bonds offered less risk (but without the comparable return).

Con: Not as liquid.

On the flip side, even if the tax benefits of Bitcoin aren’t that great, it’s easy to sell any cryptocurrency investment. All you have to do is click a few buttons. 

Conversely, CRE is much less liquid. Selling a position in a commercial asset will take a bit more work and time.

Blockchain making an impact in real estate

No one knows if Bitcoin will emerge as a dominating cryptocurrency. There are fears about its climate impact and ability to scale, but one thing is for sure: Blockchain is here to stay.

From the software engineer in DC who bought his dream home using bitcoin, to the penthouse in the Netherlands that just sold for 21 BTC, there are numerous examples of people using bitcoin to buy real estate — and this is just the start.  

A risk-adjusted perspective

As with anything, there are pros and cons to investing in bitcoin vs commercial real estate. The investment choice that will best suit your expected return — and tolerance for risk — requires careful consideration.

On one hand, Bitcoin returns have been astronomical. With so many new users across a variety of platforms, there’s an immense possibility that the currency will continue to grow. 

But while Bitcoin speculation may work in your favor over the long term, if you can endure the volatility, nothing beats CRE from a risk-adjusted perspective.