Go Big

Intelligent buildings have been around for decades, but we are being told that the real advantages are when they are connected to smart infrastructure, utilizing analytics, sensors and big data. But how big a deal is big data, anyway, you ask? Well, industry analysts estimate that globally 2.5 exabytes of data is created each day (one exabyte equals one million terabytes), which is why the real estate industry continues to spend billions of dollars updating its hard assets with sensor-based, data-collecting technology through building automation systems and smart building technologies.

So is the industry taking advantage of this wealth of market, property and business data to better streamline their operations and generate critical information required to drive investment performance? Not really, says the latest Altus Group report , titled Harnessing the Power of Data in Commercial Real Estate. The sheer volume of unrefined data being created, as well as a lack of data structure, makes it difficult for companies to take raw, crude data and turn it into something useful.

“What’s referred to as a data chasm in commercial real estate exists because the ability to refine data and put it to strategic or operational use lags the amount of data that is being produced,”says Peter O’Brien, the director of the national valuation advisory team at JLL United Kingdom. “The ability to refine data and utilize it is not just a matter of tools and systems and skillsets for CRE; it is also a matter of the data itself. Specifically, data is neither produced nor organized in ways that allow it to be easily refined and consumed for business purposes.”

According to Altus, the lack of refined data in CRE has left a gaping hole in the industry’s ability to benchmark. As an industry vying for global investment, the transparency provided by benchmarking is needed if CRE is to truly compete for capital against other well-established investor asset classes, which by comparison all utilize well-established benchmark indices and capabilities. CRE firms need to prioritize technology and processes to improve their data visibility and comparative metrics or they could risk losing their competitive position.

Investing in tools to process valuable data is vital, but it is only one piece of the data and analytics puzzle. The other important piece is having the right people in the organization with a solid understanding of data collection, normalization and management.

“The financial side of real estate and real estate lending is data rich, and [there is] a critical opportunity to capture and utilize available information comprehensively, creating much better insight into the commercial real estate marketplace,” said David Tobin, founder of Mission Capital Advisors, speaking at a Real Estate Forum in September, 2016. “Essentially… having the ability to examine all loans, borrowers and tenants and the associated trends simultaneously. This will bring real estate further into the institutional-investment arena and allow for more informed decisions.”

There is an industry-wide gap between having data and making use of it. But very soon, big data will become a necessary asset for every real estate sector, as it turns data into insight: imagine a future where energy consumption in a hospital or business premises is predicted and managed according to the weather or a day of the week or time of day. “There is going to be a future where there is very detailed predictive modeling of what’s going on in districts and neighbourhoods that will feed into analyses of individual properties and their value,” says Meighan Phillips, portfolio manager at Principal Real Estate Investors. “The future is about the level of detail you can bring into analyzing a property’s value.”

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