Investment decisions can make or break your success. Elon Musk invested early in some of the most successful and innovative companies of the last 25 years: PayPal Holdings Inc., SpaceX, DeepMind, Tesla Inc., and The Boring Company, just to name a few. 

The diversity and profitability of his roster demonstrates that his investment decision-making process can be applied to a range of industries, including commercial real estate.

If you’re wondering how to invest in commercial real estate to maximize your ROI, it’s time to ask yourself: What would Elon Musk do?

Here’s a look at some of the strategies he’s used when making wildly successful investment decisions.

 

Diversify

One thing stands out about Elon Musk’s investment decisions when you run through them one by one: The companies are vastly different from one another.

Consider the companies mentioned in the intro and you’ll see a payment processing platform, electric vehicle manufacturer, and a commercial space explorer. 

The entrepreneur invested in these companies after achieving his first success with an online phone book called Zip2.

There’s no pattern to the types of companies he’s chosen to invest in. 

Rather, he’s continually diversified — a traditional but essential strategy to reduce risk.

Commercial real estate investors often adopt the same approach. 

We diversify by balancing investments in single-family properties, multifamily, office buildings, and other types of real estate. 

A high level of diversification insulates your business from risk and supports long-term growth.

Consider the Public Good

Investors buy and sell commercial real estate to make a healthy profit. 

But it’s even more admirable when they consider the public good in their dealings.

Musk always prioritizes investing in companies that promote the public good. 

For example, his AI company’s mission is to ensure that all of humanity benefits from artificial intelligence — not just a privileged few.

Musk lives by this commercial-plus-altruistic principle.

When Puerto Rico suffered a devastating storm, Hurricane Maria, he took a voluntary stake in rebuilding the territory’s power grid.

Yes, profit is the bottom line in commercial real estate. 

But, as Musk’s career demonstrates, financial gain and public good can coexist under the same corporate umbrella. 

Weather the Storm

Looking back at his track record, we see many of Musk’s investment decisions look like strokes of genius. 

But that wasn’t the case when his ventures were fresh and the companies were still journeying toward success.

PayPal, as ubiquitous and successful as it is today, was voted the worst business idea of 1999.

Tesla and SpaceX have also received heavy criticism at times, even though they’re generally considered successful companies now.

No commercial real estate professional wants to stick with a bad choice. 

However, when you’re confident in the long-term viability of an investment that isn’t going well at the moment, make sure you persist through the criticisms and downturns. 

 

Get Your Hands Dirty

Elon Musk is notoriously hands-on with his investments. 

He’s never been one to kick his feet up in the corner office and delegate to those beneath him. 

Instead, he gets involved in day-to-day operations to push his companies toward success.

When Musk first launched SpaceX, he cold-called rocket scientists to learn more about the industry. 

Today, that commitment to learning and understanding operations has helped him create a company worth billions.

As a commercial real estate investor, stay as close to the business as you can. 

You’ll gain a competitive advantage and make informed moves when you’re intimate with the markets you invest in.

Commit to Excellence

Elon Musk always ensures that “things are great” at his companies. 

This dedication to excellence drives the success of his investments.

Musk even uses a specific tactic to practice excellence on a daily basis. 

He focuses on what he calls “first principles” and boiling things down to their fundamental truths. 

As a commercial real estate investor, you’re operating in a competitive market. 

Indeed, finding a strategic advantage based on principle is the difference between a strong portfolio and one with lackluster performance. 

 

Skyrocket Like SpaceX

Musk is undoubtedly one of the most successful investors and entrepreneurs of his generation. 

There’s much that commercial real estate investors can learn from his career, motivation, and approach.

Your investment decisions are only limited by your willingness to look beyond the industry for lessons from leading entrepreneurs to apply to your commercial real estate vision.

Psychology explores the effects of biological influences, social issues, and environmental factors on human thoughts, actions, and emotions.

Successful players in the commercial real estate sector embrace psychological insights to support their relationships with all stakeholders — investors, personnel, and the public.

Despite the upsides of incorporating psychology in the efficiency- and metrics-driven industry of commercial real estate, many operators still neither realize nor harness the psychological element of the business. 

But recognizing and respecting consumer behavior is crucial to creating a brand that’s ready to lead and serve.

To leverage psychology to grow your brand, consider these four fundamental strategies:

 

1. Align with the values and ethics of your stakeholders

Productive long-term business associations are relational, not transactional.

In other words, every founder has the capacity to forge lasting bonds when they cultivate synergistic relationships with stakeholders based on aligned values — rather than finance.

The word ‘Stakeholder’ appears in almost every CRE monthly newsletter, weekly op-ed, and quarterly business review. 

But what do we mean by that?

Your stakeholders are everyone who is personally, professionally, or financially invested in the success of your venture — which includes the community.

So, how does someone become your stakeholder, and why would they want to?

For the why,, it’s because they believe in what you’re doing and who you are.

As for the how, a critical thinker will only choose to invest in you, financially or emotionally, if your values and ethics match theirs.

Get to know what’s important to your various groups of stakeholders, and build your offering and brand around them.

The road to merging their beliefs with your brand begins with  goodwill. 

Let the public and your potential stakeholders know that you’re motivated by the greater good — most everyone would say they are — and then back it up by dealing fairly, delivering on your promises, and operating according to the ESG principles.

 

2. Frame your brand with benefits and consistency

Your brand is among your most valuable assets, with two of its major components being visual image and perception.

Consequently, it’s vital to consciously shape that awareness and interpretation of your company to fit the needs of your stakeholders.

Starting with market research — which some would argue shares threads with psychology — we can identify the needs, both physical and emotional, that drive our target market’s beliefs and actions. 

Thanks to your discovery, you can speak directly to their preferences through your marketing messages, visual campaign designs, and communication channels.

To build trust and maintain credibility, stay consistent in the visual and written voice of your brand, the benefits you offer, and what you stand for.

 

3. Build confidence and trust by demonstrating transparency, knowledge, and experience

Trust is, in itself, a social behavior and psychological concept. 

Still, it must be earned.

How do we earn trust?

By doing what we say we’ll do.

At its heart, trust is about a basic physical and emotional need: safety. 

For investors, ‘safety’ means their money, time, and reputation are protected by your willingness to openly share information and your possession of the knowledge, tools, and experience to deliver returns and manage exposure.

You can further foster trust by providing insights and solutions to your target market’s key questions and concerns. 

Position yourself and your firm as a thought leader and build familiarity by holding seminars, producing white papers and case studies, and sharing your knowledge through your blog, contributor articles, and media interviews. 

 

4. Be the firm your peers and clients want to be associated with

Lenders, tenants, employees, and peers want to work with a successful firm: i.e., a market leader and innovator. 

Capitalize on the innate desire to work with the ‘#1’ by leveraging your success stories in your marketing and honestly projecting the core competencies that drive your value proposition.

Keep it real, but don’t understate why you’re the most qualified and how you’re leading by example and results. 

As you’ve seen me advocate in other articles, tech adoption and utilization set the best apart.

Our society values tech not only for its novelty but also for the powers it grants the organizations that wield it wisely.

Appeal to that need for physical and emotional ‘safety’ by showing you have the technology to seize any opportunity and adapt to all economic, social, environmental, and regulatory conditions.

Stay ahead of the curve, and you’ll stand out as a nimble leader of an organization capable of stable growth and returns.

 

Relating Authentically 

Developing and implementing strategies based on these psychological factors aren’t sly tactics we utilize to gain an upper hand.

Rather, the study involved in that planning and execution is how we learn to authentically relate what makes us the best fit for those we partner with.

Understanding how our stakeholders think and feel is fundamental to our finding ways to better meet their needs and offer ideal solutions in a way that appeals to their sensibilities.

Entrepreneurs often spend years developing a project that fulfills the needs of their target market. 

But things work a bit differently in commercial real estate, where success depends largely on attracting the right investors and addressing their needs upfront.

Convincing real estate investors to give your venture a ‘go’ is essential for building a brand.

An elevator pitch can help you get a foot in the door, but a compelling brand story is what you need to seal the deal.

Here’s how to create a story to help you secure investors for your commercial real estate projects.

Establishing legitimacy

Taking time out of their busy schedule to listen to your pitch is low on an investor’s list of priorities. 

To catch investors’ ears (and eyes), make it clear that considering your project is in their best interests from the moment you introduce yourself.

The initial step in making a solid first impression is identifying and studying your target market, so you start with a keen understanding of your prospect’s goals.

Start with these four essential questions: 

• What type of investors do you want to attract?
• How do their interests align with yours? 
• What are their priorities? 
• What are their concerns (fears/pain points)?

To encourage investors to consider your proposal, assert your legitimacy from the get-go:

• Introduce yourself in a personable way that showcases your values — investors put relationships and trust first since you’ll be managing their assets. 
• Highlight your first-hand experience and share proof that you have a track record in commercial real estate.

While sharing your values and vision are essentials, your brand story needs to be backed by concrete evidence — data that investors can only acquire through you and your underlying data management systems.

Once your legitimacy as an entrepreneur is established, show your target market that you are the best candidate to fulfill their needs.

 

Fulfilling your target market’s needs

Why should real estate investors participate in your venture? 

To tell a compelling story that provides context, you must identify your target market’s desires and the obstacles they face.

Most investors will raise some concerns when hearing your proposal. 

Be proactive with your message and speak clearly to your investors’ objectives and needs. They’ll feel confident you understand their struggles and priorities.

You’ll convince them not only of the viability of your venture but that it will provide the outcome they’re seeking.

A compelling brand story also underscores why investing in your project is compatible with their values and priorities as individuals and organizations.

Besides establishing a connection with your target market and interesting them in your project, your brand story can also help you stand out from the competition. 

 

Differentiating yourself from the competition

You are likely one of many entrepreneurs competing for an investor’s attention and funds. 

Despite being one business among many, your brand story can help you distinguish yourself and convince investors that you are the right bet.

To tell your story, consider what your brand offers that is unique and then include any non-commercial facts or anecdotes that can speak to investors.

Business plans and other economic reports and projections can indicate that your commercial real estate project is viable; however, formal reports are limited by formats that offer little creativity. 

But with your brand story, you have infinite flexibility in the way you appeal to investors. 

Though the services and the projects you offer may be similar to others in many respects, brand storytelling gives you the freedom to express yourself and make a lasting impression.

 

Why a compelling brand story can help you attract investors

An effective brand story plays an essential role in getting investors. It resonates and connects them with you and your project. 

For the highest chances of success, your brand’s narrative should relate to your target market’s concerns and priorities, and demonstrate why you — out of many — are best positioned to help them flourish.

More than a marketing gimmick, your brand story allows you to catch the attention of backers that your commercial real estate project needs to take flight.

‘Data’ can mean many things to different people in the commercial real estate space. 

From one perspective, data consists of statistics on leasing spreads, property valuations, tenant behavior, and marketing KPIs. It’s a powerful tool that enhances decision-making processes across a portfolio of businesses or real property. 

But for many commercial real estate operators, data is a mountain of Excel spreadsheets that gather virtual dust in a forgotten computer folder. It is something that is collected but not used consistently in a structured way to drive growth. 

In the past, having the ‘we’ll address it later’ attitude toward data did not prohibit an operator from achieving returns. However, today, the companies that leverage data-driven decision-making are achieving the most in commercial real estate. 

In this article, we’ll explore how approaching data as a language enables commercial real estate operators to extract the full value from their data. 

What is ‘data?’

Data can be any bit of information that you collect, digitally or traditionally. 

In prior decades, operators fixated on market and property numbers, such as: 

• Cap rates. 
• Property values.
• Lease rates.
• Rent rolls. 
• Schedule of expenses.
• Net operating income.

But data has since expanded to include many more soft variables, such as: 

• Property showing volume.
• Foot traffic generated.
• Marketing metrics. 
• Energy efficiency.

Curiously, a myth has persisted that getting the data is complicated. In a survey of real estate managers conducted by Deloitte, the majority spent more than 80% of their time gathering and manipulating data. 

While gathering data was once considered a daunting task, it has become much easier due to the recent development of numerous ‘prop tech’ companies and data analytics firms that streamline the task. 

Data speaks many languages

Would you assemble the United Nations without asking members what language they speak and employing a qualified interpreter?

No, because nothing would get done. 

Yet, this happens when owners don’t take the time to assess what language their data speaks and develop solutions and teams to bridge the gap. 

The challenge commercial real estate operators face when approaching data utilization is not knowing what language their data speaks or how to put it to work.

For instance, the data in your BIM (“Building Information Modeling”) system and the data in your asset management platform are held in different formats and are often siloed (isolated) in various software or databases. 

How do we unravel and interpret the message — knowledge — hidden in our data?

We leverage centralized data management and analytics systems that pull all the data together and help us make sense of it. 

But it’s not just tech — we also need a team of advisors that understand how the data fits together and what the reports are trying to tell us about our situation and the market.

Prevailing despite a moving target 

Conceptualizing data as a language, you can bring in the synergy of tools, technology, and people to translate data into knowledge that will inform your strategic decisions. 

Approaching data through this lens has become critical for commercial real estate as the industry heads into new territory. We’re confronted with a dynamic market that is redefining CRE asset classes.

The work-from-home trend, the demand for last-mile industrial, and the instability in retail require us to re-assess our strategies — a task for which we need the best intel we can get.

By translating data across your systems and putting it into actionable forms for management, you can more intelligently make critical decisions.

Discovering the missing element 

Analysts remind commercial real estate operators all the time that data is essential. 

Still, losses and inefficiencies confirm there’s a missing element between data gathered and data successfully harnessed to improve our investment and development strategies. 

Implementing data management systems and partnering with the appropriate professionals enables you to take raw information and transform it into metrics that inform success. 

Collecting data is crucial but not as vital as decoding the language your data speaks and what it’s trying to tell you.

Anyone can purchase commercial real estate as long as they have enough investment capital and financing.

But, if you want to be successful in building a portfolio that naturally scales, you have to do things differently than the competition.

You must constantly evolve, optimize, and innovate in your processes and offerings. 

As the needs and desires of investors, tenants, and users continually shift according to the growth of their businesses, the only way to succeed in commercial real estate is to stay ahead of the curve.

Evolution drives innovation

Commercial real estate has operated the same way for decades (and longer). 

Investors acquire and develop buildings, find tenants, set and collect rents, cope with operating expenses, and seek to maximize their net operating income (NOI).

The cycle continues with stable income as the lifeblood of operators.

But over time, especially with continuing advances in technology and the appearance of disruptors on the real estate scene, strategies began to reform. 

Commercial real estate operators had to adapt to the changing industry and find innovative ways to provide advantage-yielding value. 

For example, the oft-repeated mantra of ‘location, location, location’ typically resulted in two assumptions: 

First, if you had the ‘best’ location in town, the tenants would inevitably come. 

And, second, having a great location made many commercial real estate sponsors complacent: “We’ve got the most desirable location, so let’s dictate the rental and leasing terms.”    

Yet this ideology began to change as many commercial real estate firms started to innovate — or adapt innovations — and create more efficient processes for acquisitions, financing, development, and management.

Positive feedback loop

Ever heard the cliche that ‘Energy begets energy’ in the context of fitness?

The equivalent in entrepreneurial life is: ‘Innovation spurs innovation.’

We see this in sustainable design and construction. The evolution of Computer-Aided Design (CAD) to Building Information Modeling (BIM) allowed designers and engineers to proactively (pre-construction):

• Look at the long-term effects of weather on efficiency and durability.
• Select optimal materials to deal with specific environmental conditions.
• Study carbon emissions during the building construction phase and throughout the lifecycle of the property.

This, in turn, allowed architects and engineers to develop new design strategies, craft more efficient materials, and advance green building tech — yielding benefits in terms of efficiency, comfort, and health that both landlords and their tenants enjoy.

Back-end innovation

Innovation also occurs on the ‘back-end.’

This is where entrepreneurs leverage the primary innovations introduced to the industry to improve their processes and offerings on a client or user level.

In a CRE context, developers incorporate enhanced amenities and facilities for tenants — environmental controls, natural views and lighting, ideation/creative zones, fitness areas, communal recreation, food service, and more — to support users’ productivity. 

While not strictly technological, these strategies are innovative in the sense that building and workspace design shifted in focus to the needs of the user.

Additionally, the experience for property managers is unified and uplifted by improvements and integration in the processes of leasing space, booking and staging viewings, signing leases, collecting rents, and paying invoices.

Transitioning from being location-centric, many commercial real estate projects have become a ‘destination’ where people want to work and live.

In practice 

Cortland, a developer based in Atlanta, is an excellent example of how innovation is transforming the industry via a shift in focus.

In 2015, Cortland had around 5,000 units. Now, they have more than 60,000 — more than 10-fold growth.

Their value prop is built on putting residents’ needs front and center. 

By offering a superior living environment, the brand has become synonymous with providing something ‘extra’ — and an affordable, high-end lifestyle to which residents aspire. 

But most of all, Cortland is a model of how innovation can transform your commercial real estate business without significant changes in the fundamentals of building construction and management. 

Keep moving forward 

Innovating and adapting is the only way to set yourself apart and challenge the status quo.  

Accomplish this by studying and considering your tenants’ and stakeholders’ priorities. 

When you find new ways to deliver value and run lean, you’ll be a game-changer in the commercial real estate industry.

Is real estate a commodity?

With information more accessible than ever, investors can compare offerings from a wide variety of sponsors. And thanks to the tech-enabled industry environment, they’re no longer limited to investing within their personal networks or geographic area.
As a result, real estate is often considered a commodity: investors care little about who is producing the returns as long as the cash flow is stable and the ROI meets their objectives.

But is this true, or is it that investors don’t frequently encounter sponsors presenting a differentiated (unique) brand and offer?
While every real estate company believes its offerings are ‘special,’ the reality is that most investors perceive real estate firms as interchangeable — much like the underlying assets.

Cliché marketing phrases like ‘superior risk-adjusted return’ and ‘value-add strategy’ don’t make a company inherently unique. Additionally, most firms share the same organizational structure and investment approach.

So, if the returns are comparable and models commonplace, how can any company stand out among the expansive pool of competitors?

To de-commoditize, you must understand what matters to stakeholders, develop a compelling vision, and devise an evidence-based plan to materialize it.

When investors understand the why, they’ll appreciate the investment strategy — and the team behind it — rather than the strength of the deal alone.

Collaborative Disconnect

When teams are siloed and procedures rigidly followed, it’s less likely that working groups will evolve and innovate.

Many real estate firms rely on generic and ineffective organizational structures, wherein each department manages a specific set of isolated tasks.

In most firms, the senior management consists of a few industry veterans, each managing their respective functional area without input or collaboration with the broader team.

Sound familiar?

Though each firm has its style in terms of the types of assets, return requirements, financing structures, and operational procedures, none of these differences individually constitutes a unique value proposition.

Investing in real estate is rarely a linear process, so why are most companies structured this way?

What’s missing is an organic model that inspires creativity, promotes transformational leadership, and leads to innovation and improvements in strategic decision-making.

By breaking from confined corporate structures, teams can better understand the role their departments play in the integrated investment strategy.

For example, the acquisition team can educate the management group on factors that maximize the property’s value in the current market. Likewise, the management team can share insights from tenants with the development unit — the collaboration and idea generation possibilities are endless.

Returns without context won’t convince someone to invest in you. Investors need to understand how you achieve returns — what is your vision, how innovative is your business plan, and most importantly, “can I trust you?”

Gaining an edge through data and analytics

Companies that conscientiously learn about the people they serve gain a tremendous advantage over their competitors. To illustrate, Cortland, an innovative global real estate firm, offers a unique hospitality-like living experience in their multifamily properties based on what their residents want.

Nowadays, rooftop pools and state-of-the-art fitness centers are almost basic requirements in luxury apartments. But quite often, residents don’t take advantage of all the amenities their buildings offer.

To minimize the inefficient utilization of on-site facilities, Cortland leveraged data and analytics to identify what features are crucial to each resident’s lifestyle. Their personalized approach took offerings to the next level.

By leveraging extensive data from their residential properties, the company attracts residents more effectively than competitors. To residents, Cortland’s products are no longer undifferentiated substitutes for any other Class A offering in the market.

Unsurprisingly, Cortland’s apartments continually generate high returns and win awards. The firm’s accolades confirm what is now an open secret: real estate companies that incorporate data and analytics into their processes serve their customers in a more focused manner and drive enhanced investment performance.

Connecting vision with strategy

The final step in de-commoditizing your real estate company is to understand the impact you have on society.

As real estate is tightly integrated with the lives of everyday people in our community, companies must consider the impact their decisions have on tenants and the world in which we live and work.

A recent report by PwC highlights this trend: “Now, more than ever, the real estate industry has the chance to take the lead in using planning and development skills and investment capital to reshape our work and lifestyle environments.”

Companies are increasingly held accountable for how ESG (environmental, societal, and governance) factors impact their environment.

KPMG found that 83% of industry leaders believe tenants and residents will start pressuring landlords to ensure their buildings are environmentally friendly.

Company leaders who address these concerns position themselves as thought leaders that drive societal change rather than merely as reactionary suppliers of real estate commodities.

Moving beyond the commodity

As investors consider more options than ever, it’s become more difficult for real estate companies to transcend their reputation as commodities.

A unique brand is more than just high returns. It communicates your values and provides compelling evidence of your commitment to bringing your vision to fruition.

If data and analytics don’t fit your strategy, think about what else you can offer that your competitors don’t (or can’t), then make that your unique asset.

Real estate is an industry where decisions are felt by real people. Consequently, the way you present yourself to the market and community will determine whether your firm is perceived as a commodity or a distinct creator of value.

‘Disruptive innovation’ is pervasive across many business sectors.

Yet more important than creating your own disruptive innovation in commercial real estate is to pay attention to the ways in which existing innovation methods and ideas are evolving.

In other words, you don’t need to be the person who’s going to create a new app or AI model. Sometimes it’s better to embrace and adapt what’s already available to suit your commercial real estate objectives.

What disruptive innovation is all about

Take a look at Clayton Christensen’s definition of ‘disruption innovation.’ He states it’s, “a process by which a new product or service takes root, initially in simple applications in the lower reaches of a market. It then relentlessly moves up market, eventually displacing established competitors and allowing a new population of consumers to access a product or service.”

Christensen supplements his definition by differentiating it from ‘sustaining innovation,’ which focuses on making current products or services better (ex. Uber and AirBnB).

Now, more than ever, established businesses need both sustaining innovations and disruptive innovations to become and stay competitive.

Fundamentally, disruptive innovation comes down to taking advantage of change to create new value for a business or industry.

In the case of commercial real estate, it’s about harnessing opportunities to reinvigorate the sector and provide the most advanced products and services to stakeholders.

Disruptive innovation is a constant evolution in CRE

It’s apparent that disruptive innovation is an evolving situation. New ideas and applications get better as they are put into practice and adaptations and refinements are incorporated.

Consider AI and machine learning: as applications continue to mature and we learn what works for the market, engineers are continuously tweaking the tech to reinforce its original purpose — efficiency and convenience.

Not long ago, there were no apps to help you pay rent, utility bills, or reserve a meeting room. And now, with AI as a supplement to the systems in your building, you don’t need to think about how or when to switch off the air-conditioning or lights.

Corporate real estate: primed for disruptive innovation

Design, building systems, and marketing are three core areas of corporate real estate where disruptive innovation introduced dramatic changes in the last two decades.

For instance, within design and architecture, computer-aided design (“CAD”) software replaced manual drafting, and, subsequently, building information modeling (“BIM”) disrupted CAD.

Stretching what was conceivable at the time CAD was introduced, BIM allows integrative design teams to see what a building will look like in great detail before it’s even started. The disruptive tech also allows teams to test wind and weather tolerances, project heat loss and retention, and assess energy-saving potential.

Likewise, Building Management Systems (“BMS”) in ‘smart commercial buildings’ are becoming even smarter. Whereas BMS can, for example, be programmed to turn HVAC systems on and off, the addition of sensors and AI help simplify and automate these decisions.

Controlling energy costs while keeping things simple for building occupants, reduces operating costs, lowers maintenance fees, and yields higher profit margins.

On the marketing side, 20 years ago, who could have imagined micro-drones sweeping through a property, delivering hi-def images from all angles. Drones and digital imaging have become an invaluable ‘tech-aid,’ particularly in light of COVID, to help commercial property users make buying and renting decisions remotely (and more confidently).

We’re moving fast in CRE, but what’s next?

Human-computer interactions are becoming mainstream in CRE. The ability to improve decision-making is growing quickly, and the world of big data is already here.

Many of the early effects of disruptive innovation were aimed at better design, improved control of operating costs, and enabling superior visual presentation of a property.

But lately, more attention from asset managers is on tenant retention and revenue growth. This shift in priority has positioned predictive analytics as the next big disruptor in CRE.

It’s no longer just about what we did yesterday to know about today, but about giving greater clarity to occupancy, rental, and demand factors.

Powered by machine learning, innovations in predictive analytics are helping CRE investors make decisions based on where the market is likely to lead in the coming years.

Disruption or advancement?

All industries evolve, yielding inevitable progress; however, a number of changes in CRE are not ‘disruptive’ in a negative sense.

Despite the musings of the media, things are always changing for the better. Tech inherently creates value by offering industry and consumers continual improvements in convenience and efficiency.

Perhaps it’s the pace of change and dependence on machines that make us think ‘disruption’ rather than ‘advancement.’

To keep up, and preferably lead, it’s crucial to develop your awareness of emerging technology and how to leverage the data and functionality it offers to facilitate your growth.

“Take your 10-year life plan and ask yourself, ‘Why can’t I do this in six months?’” – Peter Thiel, co-founder of PayPal.

Thiel’s quote reflects a common narrative in business psychology that says, ‘if you don’t think big, you won’t win big.’

But the dynamics of commercial real estate, a sector unlike any other, demands we question that premise.

The accumulation of gradual, everyday improvements determines the value of your portfolio and enterprise. But these advances don’t have to be ground-breaking innovations.

In other words, making minor adjustments to the way you do things will compound and deliver considerable returns.

Rather than ‘go big or go home,’ think in terms of 1%.

1% improvements to the way you operate — whether it’s acquiring properties or managing contractors — the aggregation of small but deliberate steps produces massive success in commercial real estate.

Start small: The research behind 1% improvements

This quantum business approach has firm roots in behavioral psychology.

For more than 20 years, BJ Fogg, the founder and director of Stanford’s Behavior Design Lab, has been researching why some desired behaviors succeed and others don’t.

His most prominent finding is this: to achieve big things, you need to start small. This revelation challenges many of the existing notions about professional and personal growth.

Motivation naturally waxes and wanes. Consequently, if an investor expects to maintain constant motivation to accomplish lofty goals, they’re tenuously relying on a factor that’s not entirely in their control — though you can influence yourself to an extent with affirmations (positive thinking).

Instead, break those ambitions down into small, easily achievable objectives and form new habits that will lead to the desired outcome. 

Though you can’t reliably control motivation, you can control the scope of your goals. If you set objectives that are more practical to achieve, you create momentum and inspire confidence in you and your team’s abilities.

Achievable short-term goals motivate your team (and yourself)

Aiming for 1% improvements alleviates the fear that people experience when they set ambitious goals.

Consider an operator who would like to improve the occupancy rate of a newly acquired property. They set the goal of getting a 60% occupancy rate up to 90% within a month.

Given such a tight deadline, not only is the operator likely to fail, but the goal also has the potential to become a significant stressor for the team.

By the first week of the initiative, if the building doesn’t have a 65% occupancy rate and the operator starts every meeting asking the team why they’re ‘so far behind,’ the unrealistic expectations will undermine the team’s motivation.

To repair this counterproductive atmosphere, set smaller, more manageable goals in every area, and it will improve mood across the board. When members see goals as achievable, they’re more likely to put in the work it takes to make it happen.

Tech helps commercial real estate operators make a series of small improvements

Often, people in debt don’t know how bad their debt is. Likewise, some commercial investments harbor hidden inefficiencies.

By implementing a data management system, you can more easily target the areas that increase your ROI when optimized.

For an operator that owns a moderately sized mixed-use portfolio and manages it using obsolete platforms and tools, there’s likely a significant opportunity to break the silos that keep data isolated.

When data across your organization is unified and analyzed, you can leverage it for enhanced situational awareness and decision-making.

Kaizen: A philosophy of continuous improvement

In the business world, the strategy we’ve been talking about has a name: Kaizen, or ‘continuous improvement.’

Toyota calls the kaizen methodology the ‘soul’ of its business. It’s one of the core principles of the Toyota Production Method, a system that made Toyota the 7th highest-revenue company in the world.

This business philosophy originated in post–WWII Japan, but you don’t need to be a historian or behavioral researcher to understand and appreciate its value: 

In 1946, a famine limited food to less than 800 calories per person daily. Resources were scarce, and the country’s outlook was bleak.

Yet within 50 years of adopting the Kaizen methodology, Japan saw its economy grow by a factor of 15. Life expectancy doubled, and the unemployment rate steadied at 6% or lower.

The philosophy of focusing on small, manageable improvements transformed the country into the economic powerhouse it is today.

Start small for big results

You don’t need to achieve your 10-year goal in six months. But by thinking in terms of 1%, you can add tremendous value to your investment.

The micro improvements will compound, leaving you with better-performing assets, greater enterprise value, and a more productive team.

As a commercial real estate operator, you may get the impression that return above market, or alpha, is all that’s needed to capture an investor’s attention.

However, most savvy investors understand that every aspect of commercial real estate is unique, and no two properties, operators, or strategies are the same.

The alpha you achieved on a property in Florida versus the alpha a peer earned on an investment in Arizona is often difficult, if not impossible, to equate. There are too many unknown variables to justify an equivalent comparison.

Consequently, alpha is a weak selling point in raising capital.

If you can’t use alpha, how can you differentiate yourself?

Through speaking with thousands of owners and investing in dozens of deals, we’ve observed that the most successful real estate operators are the ones who prove themselves in the three critical areas that we’ll dig into in this article.

A clear vision

Successful real estate firms lean into their unique story and vision to attract investors.

However, many commercial real estate operators make the mistake of pitching themselves in the same way as the rest of the crowd.

Novice sponsors often will use similar words, models, and metrics as the competition. Their presentations are generic and only outline a specific deal or their overall investment thesis — saying next to nothing about their personal story, qualifications, and vision.

A cliché pitch won’t distinguish your project from the hundreds of other competitor’s presentations sitting on an investor’s desk.

As an entrepreneur and operator, YOU are the differentiating factor.

Therefore, the goal of your pitch is to convey how you’re doing things differently and why your approach is the best.

Cortland, a real estate group based in Atlanta, is an excellent example of how a clear vision can accelerate a firm’s growth. In 2015, Cortland had an idea: Challenge the standards of apartment living through innovation, technology, and best customer practices.

Merging this vision with their unique background, the company accomplished something unprecedented: growing from a decent 5,000 residential units to a mammoth 60,000 residential units within just five years.

In the process, Cortland built a $7.6 billion real estate portfolio and earned numerous innovation awards.

To experience similar rapid growth in today’s market, you need a strong vision that attracts investors.

Operational structures that support innovation

Firms with innovative organizational structures are most likely to raise capital successfully.

The current management structure of most commercial real estate operations is outdated. In a recent survey conducted by Deloitte, “more than 31% of RE respondents … made little to no progress in modernizing their HR processes, technology, and capabilities in the past 10 years.”

Today, the most successful real estate firms have modernized corporate structures, transformational company cultures, and new roles within their organization, such as:

• Vice President of Talent Engagement.
• Executive Vice President of Capital Markets.
• Building Automation and Technology Manager.
• Resident Experience Manager.
• Vision Information Engagement.
• Marketing Automation Specialist.
• Business Intelligence Solutions.

Because COVID-19 compelled CRE to go digital, roles reflective of technology, vision, and innovation are critical to staying competitive and taking a tech-informed perspective of the market.

Putting your data to work

The third critical way real estate operators can differentiate themselves from competitors is by applying a unique approach to data.

The firms that stand out to investors are those who adopt an inquisitive point of view in their day-to-day operations. They have tailored strategies for evaluating properties, investment strategies, horizons, and resident engagement.

But while every real estate operator collects massive amounts of data they could use to streamline processes and inform strategic decisions, not every owner leverages that data equally.

Indeed, without robust data and analytics capabilities, you will blend in with your competition and struggle to secure equity.

A 2019 report by NAIOP highlights the slow adoption: “60 percent of [real estate] executives said their firms still use spreadsheets instead of software as their primary tool for reporting.”

Because many firms are working with data traditionally, the operators that incorporate software, artificial intelligence, machine learning, and automation are in the best position to outperform their peers.

Unfortunately, there’s much misinformation about the cost of transitioning to a data-driven model. Many firms assume modernizing their systems requires hiring six-figure data scientists and engineers.

But this is not the case. A full-time, Google-level data scientist is only warranted when dealing with massive amounts of data on the scale of an international airport during the holidays.

The data most real estate firms generate isn’t enough to necessitate a huge outlay on data engineers.

Additionally, because Python, BI tools, and data processing are emerging skills among young talent, there is an opportunity to hire in-house data analysts at a fraction of the perceived cost.

The new recipe for CRE success

In commercial real estate, operators will always outnumber investors, resulting in a straightforward demand-supply dynamic.

The heightened competition to acquire funds makes it crucial for real estate firms to differentiate themselves from peers. And because COVID-19 disrupted the industry, investors no longer emphasize alpha in their due diligence.

Today, real estate firms with a clear vision, an innovative structure, and data management and analytical capabilities have the best chance to capture investor attention.

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.