Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/475894
40 March | April | 2015 Commercial Investment Real Estate platforms can include "unstructured" data that doesn't f t neatly into a spreadsheet, such as emails, social media posts, images, transaction logs, and other kinds of non-numerical information — even social media-sharing f gures. T e result is better-informed site selection, transaction nego- tiations, workplace design, and facilities management, along with a competitive advantage for the clients of data-focused commer- cial property owners, investors, asset and property managers, and brokers. The Tenant Perspective T e increasingly sophisticated use of analytics across various busi- ness activities has led to powerful shif s 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. Simi- larly, 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 prof table than their competitors. Unlike the consumer products sector where intensive data and ana- lytics 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 sof ware. 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 sof ware for their own reporting needs. However, many commercial real estate practitioners — even at large companies — continue to rely on spreadsheets and manual analyses. Where Data Gives the Competitive Edge T e following are some of the major ways data and analytics are pro- pelling the transformation the business of commercial real estate. Complex Comparables. Companies such as LoopNet, Real Capi- tal Analytics, Reis Inc., and Compstak were among the f rst 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 com- mercial 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. Sophisticated Site Selection. Con- sider a third-party logistics company that is expanding its distribution cen- ter 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. With 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. T ese 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. Workplaces T at 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 gets done. To 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 overall productivity. In one 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 f nancial 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. A N A L Y T I C S R E N T C O M P L E X C O M P A R A BL E S T E N A N T S