The Numbers Game
Data and analytics are potential tools to help improve business amid the COVID-19 pandemic. But it’s not just about information — it’s about knowing how to use it.
While various portions of the national economy continue to open and close, depending on the prevalence of coronavirus in a particular location, many in commercial real estate have used the downtime to examine business practices in an effort to prepare for success once things get “back to normal,” if that's even a possibility.
One area that offers promise to CRE professionals is data. Additional knowledge, the thinking goes, allows one to work smarter, not harder. While many businesses are pushed to the brink amid a national recession, such efficiencies could mean the difference between hitting the ground running or closing up shop.
Recently, we spoke with Rich Sarkis, chief executive and founder of Reonomy, a leading property intelligence platform for commercial real estate professionals. He detailed how instability in the wake of COVID-19 can be an opportunity for companies to evaluate business practices by leveraging data to save money and time.
Listen to the full podcast episode, Reonomy's Rich Sarkis on How Data Can Fight Uncertainty in a COVID World.
CIRE: Considering the global impact of COVID-19, CCIM Institute Chief Economist K.C. Conway, MAI, CRE, CCIM, has said that the timelines for many existing forces in commercial real estate may be compressed, such as online grocery sales, for instance. How can CRE use big data to adapt to quickening changes?
RICH SARKIS: It's a very topical question - and one that countless folks in the CRE community are wrestling with. A pandemic, obviously, is very different than most recessionary forces that we've seen in our lifetimes. There is a precedent for this, but you have to go back a century or so. What tends to happen in most recessions, regardless of the cause, is that they shine a bright light on affected businesses. In the case of COVID-19, pretty much every business is impacted, including brokerage firms, insurance companies, retail, and hospitality. Executives at these firms are reevaluating their business models. In some cases, they're examining how they're doing things - if inefficiency has crept in over the years. When you're in a decade-long recovery, you can let your guard down. When you shine a light on a business, data and technology tend to emerge as solutions to help cure some of these ills, to help make inefficient processes more streamlined. In some cases, this is directly tied to costs, but in other cases, you can mitigate risk and grow the top line. I would say that we are not seeing a renewed interest in data and CRE tech, but we're seeing a need for executives to do their due diligence and see what's available to help improve performance.
CIRE: You mentioned how a recession can illuminate business practices. Is now the perfect time to examine how data and analytics can improve performance?
SARKIS: For sure. It's not like pre-COVID folks weren't looking at data. Many businesses in the space have hired CIOs and CTOs, sometimes from industries outside of CRE, like gaming for example. It's certainly been a part of the market. I would say this has been an impetus that has accelerated some decision-making processes, but it has also raised the bar in terms of adoption, because right now, in a lot of cases, it's do or die, right? Big decisions are being made and any solution has to have a very clearly demonstrated ROI, right? You can't just say, “Oh, well, the marketing sounds good, so let's do a pilot.”
Now is the time to embrace data and technology, but it's also the time to have a high bar to make sure technology and solutions are going to be around in the next few quarters and years. You need proven solutions that can make a positive impact on business.
CIRE: This pandemic is a once-in-a-century crisis that few people could've predicted a year ago. Has COVID-19 changed the game as far as data collection and analysis?
SARKIS: Absolutely. Look, this is different than any sort of recessionary show we've seen in our lifetime, as I said before. I'll give you a concrete example how it has affected our business. Some of the data we collect, we get from local municipalities and the tax assessor's office, where they record mortgages, record the deeds when a property sells, etc. Guess what? When everyone had to shelter in place, that meant the tax assessor isn't going to the office. People aren't around to physically record mortgages, so there is a gap in the recording of data. Now that things are beginning to come back online, we've seen that gap be filled, but it has had a pretty big impact at the source and for downstream companies like us.
In terms of our business, the analogy I like to give is a restaurant. We are not in the business of selling raw ingredients, like chocolate chips, butter, and milk. What we do is we get the best ingredients we can find from different purveyors, so we can bake the most delicious chocolate chip cookies, and that's what we sell. In this case, our supply chain was stressed, which had a downstream impact on our ability to bake cookies. In our case, it's to deliver insights and analysis via our products. During the shutdown, we were able to mitigate some negative impacts with multisourcing across public outlets. But the nature of the shock, being a virus, is a different challenge than a terrorist attack or natural disaster.
CIRE: In recent years, the appetite for data has been growing in nearly every industry, from sabermetrics in baseball to commercial real estate. But like you said, it's not only about the ingredients - it's how they are packaged. How do you go about taking raw data and presenting the best analysis for your clients?
SARKIS: I, like a lot of folks, am thinking, “Oh, I've got to embrace data. I've got to embrace technology or whatever new solutions are out there because I don't want to be left behind.” Those are all good things, with the pandemic forcing people to rethink the status quo. But there is risk because a lot of people don't know where to start necessarily because it's not something they've done before. Back to our analogy, you don't need to go out and buy chocolate chips in bulk. You don't necessarily need the raw data. You need insights drawn from data that allow you to do your job more effectively, to make more money, to make better decisions. The consumers of data don't necessarily need it; they need insights derived from it.
There's a risk in having too much data or the wrong kinds of data presented in an incorrect manner. But this is a crucial part of the equation that sometimes gets overlooked, especially with folks who are just beginning their journey into data.
CIRE: Now that we're heading into the final stretch of a tumultuous 2020, have you identified any obstacles or opportunities that lie in front of us?
SARKIS: One opportunity that will be available to certain businesses is the availability of companies to snap up distressed assets. Others are going to find opportunities to lend to companies with more COVID-proof portfolios. But as far as obstacles, the big question about this recession, which is unlike any other, is when will it be over? There's no clear end in sight. We're still living through the pandemic, and it is a global problem, not a local or national one. It seems to be likely we will have a second wave. There is going to be a lot of uncertainty in terms of what the next few quarters are going to look like. Historically, the time between Labor Day and Thanksgiving is when a lot of business gets done. This is an incredible moment for the country and for us as an industry to figure out how to handle the uncertainty in the air. Is a vaccine in the works? Will there be therapeutics? What's going to happen with the election? Is there going to be a second wave?
Uncertainty is an obstacle because it cripples people. If things are bad, you can make decisions based on a bear market. If things are good, you make different decisions. But if you don't know which way is up, that indecision can be a major obstacle. I hope we get clarity through the end of the year, and we'll see the rebound everybody wants and is hoping for.
CIRE: As someone in the solutions business, what would you say to a CRE professional who might be a bit fretful or indecisive?
SARKIS: I would just say start somewhere. Start putting in the work. The worst thing someone in this business can do is sit on the sidelines and say, “I'm not going to do anything because of the uncertainty.” Guess what? Your competitor isn't playing wait and see. As I've said before, when economies do restart and when we do mitigate some of the uncertainty, the people who have been putting in the work will be ready to take advantage of the situation - and this can mean anything from calling your existing book of business and making sure you're relevant to reaching out to potential new clients to be on the front foot when things start moving.
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