Staying Ahead of the Game with CRE Data and Tech
What’s coming up next? What’s over the horizon?
How will it support or hinder the growth of your portfolio and enterprise?
Things in commercial real estate are changing extremely fast. Consequently, we have to stay on our toes to build and maintain a competitive advantage and manage risk. Operators and investors must know where things are heading and be proactive, so they’re in the right place and properly equipped to capture opportunities and skirt threats when they arise.
Technology, data, and analysis are the spyglass that allows you to see over the skyline and craft well-informed strategic plans. In this piece, we’ll look at what’s changing, types and sources of data, and tech tools to harness to stay a step ahead.
Facets of change in CRE
In the era in which we live, the operating landscape is shifting at a lightning pace. While we’re focused primarily on technology here, the change goes much further. I can’t think of an aspect of the operating environment that is static.
Each year and quarter, we see new developments in:
- Monetary policy.
- The cost of doing business (inflation, taxes, financing costs, etc.)
- Consumer (tenant/investor) behavior, preferences, and expectations.
- Environmental and financial regulation (compliance issues).
- Climate change (underwriting risk, insurance costs).
- Design and construction codes and best practices.
- Advancing technology and aggressive adoption by competitors.
It’s imperative we consider all these factors (and more) as we plan how we’ll acquire assets, create value, and exit prosperously.
As the world becomes interconnected, ways of doing business and the rules that apply to the game are evolving rapidly. Society is struggling to adapt and reach an equilibrium that’s a moving target.
To recognize, monitor, and account for changes in the operating environment and how they’ll impact us, conducting a SWOTT (strengths, weaknesses, opportunities, threats, and trends) analysis at least bi-annually is fruitful.
On the internal side, conducting a SWOTT helps you assess what you do best and where to improve. And equally important, it enables you to spot and maintain awareness of where and what external opportunities exist that will support your objectives — and what factors may be working against you.
To make these observations, generate quality insights, and implement best practices, we need data and the technology to aggregate and interpret it.
Types of data and sources
Analyzing the operating environment can be a ponderous task. Fortunately, numerous organizations collect the data we need or offer technologies to assemble it ourselves and make sense of it.
But before we dig into the sources and tools, let’s look at the essential classes of data we need to be aware of in CRE:
- Economic data points: Interest rate trends, cost of capital, inflation rates, materials costs, demand factors, transactions, etc.
- Demographic, lifestyle, and psychographic (behavioral) data for tenants/users/investors.
- Property performance benchmarks (i.e., statistics regarding third-party asset performance, grouped by region, class, features, condition, etc.)
- Proposed, up-for-vote, and passed legislation pertaining to operations, finance, construction, environmental preservation, consumer protection, etc.
- Observed and likely impacts of environmental/climate change.
- Observations of new technologies entering or advancing in the CRE sphere, adoption rates, use by competitors, and typical impact on expenses and revenue.
Now, where can we find this intel?
- Economic/regulatory/social: Trade publications, academic journals, industry analyst firms, and market/industry reports.
- External benchmarks: Trade organizations such as NAA, IREM, and BOMA.
- Internal benchmarks: Collected from your assets, systems, and teams with data/asset management tech.
- Transactional: Brokers, data providers, listing sites, and tax assessors.
- Demographic: Government agencies, institutions of higher education, and private research firms.
With the data in hand, we’re one step closer to moving out front. But to take the lead, we need analytical support and the technologies to implement strategies that yoke the opportunities — and mitigate the challenges — we discover.
Analytical tools and implementation strategies
With so much data available across the many functional areas of business, we need tools specific to the nature of the job and the experience and skills of experts to extract actionable insights from the data.
Quantitative data on economic indicators and property performance can be quickly and cost-efficiently collected and centralized with data and asset management platforms. Rather than digging through spreadsheets or isolated property management software, you can implement a data management platform to connect each unit and system and automatically pull and assemble the internal data with minimal labor and expense.
Some platforms, such as Lobby CRE, take care of this continuously in the background, while also collecting and incorporating economic/market and benchmark data from a balanced variety of sources. In one look, you can see how your assets are performing compared to internal and external reference points.
Once the data is gathered, a team of analysts (in-house or advisory) supported by analytical tools can visually report the data to identify trends and data points to fill out our SWOTT analyses.
That leads us to the fun part: leveraging this actionable intel to select the best asset classes and geographic markets for our strengths and weaknesses — and present and projected opportunity and risk. We can further put the data and knowledge to work to structure ventures and deals appropriately, appeal to and optimally serve ideal tenants/investors, and develop contingency plans to leap threats or flip the script and transform them into opportunities.
Aside from data and asset management technologies, which should always be in place throughout the project and enterprise lifecycle, there are a variety of CRE tech tools we can use to carry out data-driven plans to create value for stakeholders and push us to and keep us on top:
- Technologies to improve how we serve tenants and investors, fostering loyalty, satisfaction, occupancy, growth, and capital flow:
- Tenant/investor portals, digital communication, and automated and convenient visual reporting.
- Building Information Modeling, Facilities Management, and Building Information Systems to forecast, monitor, and optimize expenses (save energy/water/resources, manage construction costs, and reduce waste).
- Digital imaging and rendering tech (3D virtual walkthroughs, remote tours, and project/design conceptualization).
- Automated and AI/machine learning technologies that create cost-efficiencies and returns we can pass on to stakeholders.
- Automated valuation tools to facilitate due diligence and ensure we acquire feasible long-term opportunities.
- Automated lease abstraction and rent roll preparation to ensure internal situational awareness.
- Entity management to keep the machine running and ensure compliance.
With the rate at which new solutions are emerging for CRE operators and investors, there are plenty more data sources and technologies we haven’t discussed. Partner with experienced advisors in CRE tech, performance, and finance to streamline the learning curve and minimize the cost of implementing a data- and tech-driven growth strategy.
Reaching the top in commercial real estate is a function of having the right data, knowing what it’s telling you, and efficiently determining how to put it to work to meet your objectives.
Much like the necessity of a scholastic education (a form of data arranged into knowledge), we need a diverse set of data regarding our operating environment to recognize where opportunity exists and how to capture it. That insight, supported by industry- and asset-specific strategies and technologies, puts us on the expressway to a secure competitive advantage and a position of managed risk.