Decision-Making in Commercial Real Estate Without Second-Guessing Yourself
We’re faced with many tough decisions in the course of building our commercial real estate enterprises (or empires, if you prefer). A few that we encounter regularly include acquiring, exiting, renovating, refinancing, changing locations, scaling up or down, etc.
What makes these choices difficult is not so much identifying our options and the merits of each but fully understanding where we stand and which route is the best fit.
At some point in the past, when operations, finance, and the market were simpler, we could get a good sense of our position and outlook through empirical observation. However, with the multitude of technologies that CRE operators are incorporating, national and global expansion of our marketplaces, increasing regulation, and ESG expectations, we’re engaged in a landscape obscured with ground cover and growing silos of data.
Here’s where, in a twist of irony, technology (and a bit of teamwork) offers solutions to the problems it creates. Let’s consider how we can leverage data management and our mastermind groups to move forward confidently in our strategic decisions.
1. Gather the data
Data is indeed the underpinning of effective strategic planning and decision-making in CRE. We’ve got to know what we’re dealing with before achieving any certainty in our action plans.
Much of what we do to get to where we are is about gathering data and knowledge. Consider how we train ourselves for our careers. We spend years studying and synthesizing to be able to take on roles that will lead us to success and in which we’ll have the insight to lead.
So too, we do this in our commercial real estate enterprises. The challenge is that nobody’s putting together the data and extracting knowledge for us. Unless we have a system in place, we’re not going to be able to do so reliably or productively. What was once handled by paper ledger and then the digital spreadsheet is now too complicated and time-consuming a task to tackle manually for operators of even modest size.
Data management technology enables decision-makers to monitor and collect data continuously and consolidate it from the many disparate sources from which it emerges. Teamwork is fine, but to run lean, we need to lean on tech that will allow our teams to focus on building our enterprises, managing our properties, and optimizing NOI — rather than bogging them down with number collection, crunching, and forecasting.
Where appropriate, we do need a team of analysts to help us manage and interpret the data; however, there’s no sense in retaining a vast team of highly-paid professionals to do in days or weeks what cloud-based platforms can do in minutes and hours.
2. Analyze it and report
Merely collecting data isn’t enough to build a case for a course of action that we can endorse confidently — we need to understand what realities the data represents, i.e., what it’s trying to tell us (pardon the personification).
Like a rough ore, data can be cleaned, cut, and polished until it’s a crystal lens through which we can see the performance of our properties, the state of the market, and where it’s likely to take us. Data management platforms powered by artificial intelligence, machine learning, and predictive analytics facilitate the speed and accuracy of this process.
And as I noted before, analysts are still an essential component of our teams, and while they’re capable of doing this millwork manually, it’s neither efficient nor practical. This is underscored in an era in which we must maintain our competitive advantage amid other players that will run as lean as possible to reach peak NOI.
Additionally, quants (quantitative analysts) require quality data that is organized, accessible, and accompanied by tools that allow them to quickly formulate and deliver insights to decision-makers for the lowest time to action. With the knowledge that quants backed by tech can manifest, we can unearth opportunities, sidestep threats, and engage assuredly.
3. Lean on your mastermind group
While I’m inclined to say that tech is possibly the most significant driver of value today, the truth is that it’s but a tool for the real instigators of value creation: your team.
That team includes your staff, executives, partners, investors, advisors, attorneys, and all the extended members of your internal and external organization — including your family — that comprise your mastermind group.
As Napoleon Hill eloquently put it, the purpose of our mastermind group is: “To coordinate knowledge and effort, in a spirit of harmony, between two or more people for the attainment of a definite purpose.” In CRE, we have a definite purpose, but not always the knowledge and harmony — that’s was tech helps us acquire and achieve so that we can act in unison with the various parts of our organizations.
Detailed reports and reliable projections are vital, yet, we need the tempering perspectives of our stakeholders and their consensus before we can say, “I feel good about this course and am reasonably certain of the outcome.”
There will always be some second-guessing while we’re built of organic material (carbon rather than silicon), but with the support of data management tech and our teams, we bring our degree of confidence to its peak.
The best and most certain decisions evolve from the culmination of seamless communication between the teams and systems that power our enterprises, data transformed into knowledge, and the insights and support of our stakeholders.