Data is all around us. The trouble, especially for the real estate sector, is that we haven’t got a clue how to make the best use of it and put it to work effectively and efficiently. Samantha McClary takes a closer look at the issue
It has been written many times on these pages that leading businesses embrace technology to utilise data for strategic advantage. However, the sheer volume of data being created – and a lack of structure – can make it difficult for even forward-looking companies to take raw data and turn it into something useful.
This is particularly true in real estate, where pressure to increase shareholder value and to be able to report back to investors in real-time is forcing the industry to focus more and more on data and analytics. And while the sector may be getting better at gathering the data, there is still a sizeable chasm between having it and knowing how to use it.
Altus Group’s Commercial Real Estate Innovation Report, released last week, found that 89% of the firms it surveyed had “major impediments” to collecting and using data to drive improved asset and investment management decision making.
“To succeed in today’s commercial real estate market, firms need more than great assets, tenants and partners,” says Robert Courteau, chief executive at Altus Group. “The ability to capture, analyse and understand the growing amount of data that is available is critical to driving strategic decision making.
“Without the ability to make strategic use of data, the industry is at risk of trailing behind at a time when investors are increasingly demanding timely, data-driven decision making and reporting transparency in assessing real estate against other investment asset classes.”
While the vast majority of the more than 300 international property executives surveyed believed they had problems analysing data collected and putting it to work, three-quarters said investing in technology and data analysis was a major priority, with 68% planning to increase their spending on it over the next two years.
So, if property people know that data is vital for business but are struggling to use it to its full potential, what needs to happen next?
The main issues identified in the inability to properly utilise data were a lack of data or poor veracity (36%), a lack of tools and expertise (26%), issues around regulatory requirements and lack of buy-in from the company (28%).
“Data is absolutely critical and essential to this industry going forward,” says Peter O’Brien, director, valuations, at JLL. “What is 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.”
The industry needs to start investing significantly in modernising its data management infrastructure and benchmarking capabilities, says the report.
Last year, the sector spent just $1.9bn (£1.6bn) on big data and analytics tools, with most of that invested specifically in building automation and smart buildings. Compare that with the $5bn to $15bn spent by industries such as financial services, manufacturing and retail, and it is clear how far real estate is lagging behind.
The positive impact technology investment can have on a business is vast. Some 86% of the survey respondents said it produced cost and operational efficiencies, and almost three-quarters said it aided their ability to raise capital.
Despite that, the commercial real estate industry appears to be at a crossroads in its collective utilisation of data. To get past this means investing in technologies, processes and strategies that unlock the benefits of analytics while at the same time avoiding the potential chaos brought on by a lack of resources or strategy.
But investment in tech and analysis is not the solution on its own. For the commercial real estate industry to really start capitalising on the results of the data it collects it needs full buy-in from the top of the business to the bottom.
According to Altus’ report, some 44% of respondents believed they did not have sufficient support from executives who were actively involved in exploring innovative ways to leverage technology and data. It claims that this lack of executive leadership involvement in determining how to strategically capitalise on these investments could be making it harder to unlock data’s potential.
By not being actively involved, it says, executives lack the understanding of what is needed to derive strategic value from these information systems and data strategies.
While they understand from a high level that data and analytics are needed to compete in the market and satisfy investor demand, they appear unaware of the level of expertise needed to bridge the gap between just having data and being able to draw strategic insights from it.
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