The State of Data Overload in Commercial Real Estate
The commercial real estate industry has always had a lot of data available, but it’s been very fractured in the past. Today, the industry is more driven by data and analytics than ever before, but without the ability to interpret and understand complex data, it’s pretty useless. Along with that increase in the volume of data comes the demand for more actionable insights that enable data-driven decision-making, a sentiment shared by 70% of CRE firms today. It’s estimated that CRE produces 2.5 quintillion bytes of data each day! Consider for a moment just how much information is hidden in that data that could uncover opportunities that positively impact a firm’s ability to lower costs and increase profits!
Using Data to Make Informed Decisions
We’ve established there is no shortage of data in the commercial real estate industry, but often that data is stored across multiple accounting systems that don’t always communicate well with each other. The multifamily industry, for example, has over a dozen commonly used accounting systems, which can be a data aggregating nightmare for third-party management firms and developers. CRE is in dire need of a simple solution for data aggregation that includes historical performance along with charts and graphs so trends and performance can be easily viewed and interpreted. Accessing the data is only one part of this puzzle though; once you have the data, how do you interpret it so that you can make decisions that lower costs and increase profits?
3 Financial Data Points to Measure
A unifying practice across all industries and countries is financial data collection. Often this is in the form of Net Operating Income (NOI), Effective Gross Income (EGI), Operating Expense (OpEx), and other similar metrics. In commercial real estate, occupancy is a prominent driving factor in each of these measurements. By layering occupancy data over financial data on a historical and predictive model, proactive decisions can be made to adjust efforts to stay on budget.
For example, if you notice operating expenses are higher than expected but occupancy is lower, there may be additional turnover or vacancy loss expenses that can be highlighted in the data. In layering the data, you may see that turnover expenses such as carpet cleanings increased and that marketing expenses were higher due to needing more exposure. From here, you can adjust your current spending and predict future expenses in these categories.
Analyzing & Visualizing Property Performance Instantly
Key Property Insights (KPI) reporting within the IMS dashboard provides aggregation of key variables to help determine the performance of your properties. By integrating your data from various accounting systems IMS can automatically generate your reports, saving hours or even days of time that can be dedicated back to value-add activities. KPI dashboards give a quick snapshot of that data and provide insights so that you can make educated and informed decisions and optimize your portfolios. Leveraging this type of technology can also provide an additional level of transparency to investors, such as if you append your KPI to statements.