What does it mean for corporate commercial real estate users?
By David Kollmorgen |
before brokers, investors, and other commercial real estate professionals
embraced smartphones and tablets, commercial real estate was a data-driven
business, even if many of us didn’t realize it. Successful professionals in our industry have always
been masterful networkers and information-gatherers, with encyclopedic
knowledge of market conditions. Today, this mastery of data and analytics has
earned a place of even greater importance and is becoming the tool of choice for
gaining a competitive edge.
What’s Fueling the Data Fire?
advances have increased the capacity — and lowered the cost — of data and
analytics platforms that enable quick data aggregation and new ways to create
real-time analyses and scenarios for commercial real estate decisions. Advanced
Web platforms, cloud computing, and new storage technologies are speeding up
the data and analytics evolution, making it cheaper and faster than ever before
to acquire and interpret the data.
And it’s not just numbers, anymore. Today’s business intelligence platforms can include “unstructured” data that doesn’t fit neatly into a spreadsheet, such as
emails, social media posts, images, transaction logs, and other kinds of
non-numerical information — even social media-sharing figures.
result is better-informed site selection, transaction negotiations, workplace
design, and facilities management, along with a competitive advantage for the
clients of data-focused commercial property owners, investors, asset and
property managers, and brokers.
increasingly sophisticated use of analytics across various business activities
has led to powerful shifts in how companies make decisions, innovate, and
strategize. In a 2014 study by Sloan School of Management at the Massachusetts
Institute of Technology, 66 percent of executives reported a gain in
competitive advantage derived from data and analytics, up from 37 percent in
2010. Similarly, a Harvard Business Review study found that companies in the
top third in their industries with regard to data-driven decision-making are 5
percent more productive and 6 percent more profitable than their competitors.
the consumer products sector where intensive data and analytics have long been
used for consumer segmentation and marketing, the commercial real estate
industry has been relatively slow to invest in data management and analytics
software. True, such companies as Yardi and Real Capital Analytics have been
established providers of commercial real estate data for many years. Also, some
of the largest commercial real estate investment companies have created their
own proprietary databases and software for their own reporting needs. However,
many commercial real estate practitioners — even at large companies — continue
to rely on spreadsheets and manual analyses.
Data Gives the Competitive Edge
following are some of the major ways data and analytics are propelling the
transformation the business of commercial real estate.
Comparables. Companies such as LoopNet, Real Capital Analytics, Reis Inc., and
Compstak were among the first to see the potential for automating database
functions for commercial property brokers and investors, providing everything
from recent transaction prices and capitalization rates to concessions and
operating expenses in thousands of markets. Rather than leading to the demise
of commercial property brokers, today’s new analytics platforms enable data-focused brokers to provide
nuanced insights about long-term value, risks, the true costs of a particular
transaction, and more.
Site Selection. Consider a third-party logistics company that is expanding its
distribution center network. It needs to know which makes more sense, paying
more for a premium site close to customers or a lower-cost location on the
outskirts of the market.
data and analytics tools, you can compile such factors as macroeconomic trends,
real estate costs, transportation channels, dock access, and workforce
availability into sophisticated risk and return-on-investment analyses. These
inputs can help a company locate operations where the labor availability and
real estate options will support broad business goals such as speed-to-market
and workforce expertise — in addition to keeping costs under control.
That Actually Work. Real estate shapes the working environment and can tell you
a lot about key corporate priorities such as employee engagement and innovation
potential. It can also tell you what employees don’t report, such as where the best work actually
inform site selection and facilities decisions, a company can use data and
analytics to determine how and where employees are working — and why. For
example, sensor logs and mapping tools can reveal when and for how long
employees are using a particular space. Real-time monitoring of space
utilization can help companies optimize their real estate footprint, tailor
services to employees, and design spaces that match work patterns, thereby improving
classic example, a global pharmaceutical company used data and analytics to
reduce its real estate and facilities costs by $200 million over the course of
three years while improving productivity. Aggregating more than 100,000
portfolio and business data points with on-the-ground market intelligence, the
corporate real estate team used analytics, automated financial modeling, and
scenario tools to determine which facilities were the least productive or
non-strategic. With robust data to guide its facility consolidations and
disposition decisions, the team achieved its aggressive savings goal and freed
up additional capital to invest in research and development.
Transactions and Move-ins. Site selection expertise can be combined with
virtual tour technologies that not only provide remote site visits, but also
provide tracking metrics. An analysis of how clients are using virtual tours —
which videos, for how long, and by whom — can help brokers predict how many tours
will lead to a successful deal, and how to improve the “hit” rate. Then, occupancy and workplace strategy data can be used to
create various move-in scenarios to optimize workplace productivity.
Data, Smarter Buildings. Today’s increasingly informed clients and investors want hard data like
long-term energy costs and operating performance. Advanced smart building
management technologies make it possible to obtain this data and more. New
building technologies offer tremendous energy-savings potential derived from
the data generated by today’s computer-controlled “smart”
systems, and a data-savvy management team can prevent costly and disruptive
equipment failure, optimize building performance, and manage resources across a
huge property portfolio with a single highly efficient dashboard. Combined with
financial and legal inputs, this portfolio performance data becomes an
invaluable tool for long-term strategic planning.
corporate real estate departments, companies have begun investing more heavily
in data and analytics platforms. Data-centricity is quickly becoming the
strategic vision of choice among corporate real estate and site selection
executives, according to Mind the Gap: Aspiration vs. Reality in Corporate Real
Estate, a new Forrester Consulting survey commissioned by JLL.
than half of corporate real estate leaders say they aim to become data-centric
by 2017 — that is, using corporate real estate data not just to support
opinions or decisions, but also to actually shape opinions and corporate
strategy. Sixty-four percent of corporate real estate teams experienced an
increase in their data and analytics budgets in the last fiscal year and expect
a budget increase this year, too, according to the study.
in-house leaders are using data-driven business intelligence and analytics to,
for instance, determine which facilities are most productive in terms of
revenue generation, or which sites are most appealing to critical talent pools.
Some are using complex mapping tools to visualize data relating to hundreds of
sites around the world and quickly determine the best strategies for optimizing
the corporate real estate footprint.
clear rise in the use of big data and analytics technologies is transforming
the commercial real estate industry, and the evolution has just begun. Rather
than detracting from the very human skills required for managing people,
transactions, properties, and portfolios, data and analytics are bringing
faster and better-informed decision-making capabilities to all parties in the
commercial real estate sector.
Kollmorgen is an international director and head of business intelligence at
JLL. Contact him at David.Kollmorgen@jll.com.