Commercial real estate has been relatively slow with regards to adapting to and leveraging advanced data management and analytics, particularly when compared to other financial industries. In fact, CRE’s percentage of revenue allotted for IT spending is only 1%, about 2% lower than that of organizations across other industry sectors. According to a 2016 report by JLL, more than 50% of CRE executives said that a lack of effective data and analytics had hindered their companies from enhancing their strategic value. Although there is more data available today than in the past, many CRE managers and investors have continued to derive their strategies based on instinct rather than utilizing readily-available data that would enable them to make smarter, more informed decisions.
However, the rise and prevalence of CRE technology (and the opportunities that it provides) has become increasingly hard to ignore. More CRE professionals have begun to understand the importance of data since it is heavily used for important functions including portfolio management, pipeline strategies, and site selection.
Read ahead to learn about how your CRE firm can leverage data analytics and use data-driven insights to make informed strategic decisions for the business.
Why Use a Data-Driven Approach?
A data-driven approach is becoming increasingly less of a luxury and more of a necessity due to the industry’s unavoidable technological disruption. There is a noticeable, widening gap between firms that are early adopters of predictive analysis and those that are laggards. The on-demand and global ease of use that technology provides coupled with critical, in-depth insights from the data have created a movement where technology has become the new “status quo” in today’s market.
Even so, about 75% of the industry continues to struggle with data silos as a result of using non-integrated solutions to oversee their asset and portfolio management functions. To break down data silos, firms are transitioning from isolated data platforms to solutions that centralize data and are fully integrated end-to-end. Solutions like these don’t limit information to certain individuals’ departments – they provide a single source of truth for data and ensure that it is easily accessible.
As data-driven decision making grows within the industry, there has been a shift towards more complex and technological processes. Data analytics and artificial intelligence (AI) can be used by CRE investors and investment managers to manage risks and complexities more effectively because they are able to identify patterns and opportunities and to predict future scenarios. Being able to manage these risks can result in faster decision-making, lower transaction and operational costs, and efficient portfolio optimization.
What Are the Benefits of Software That Enables Data-Driven Decision Making?
Investor management software, like IMS, provides time-saving functionalities such as an investor dashboard and accounting system integrations, that can automatically generate reports. These time-saving features help firms manage multiple properties and transactions in one convenient location.
Communicate Faster and More Effectively
In today’s competitive CRE market, communication speed and frequency can be a major differentiator for potential and current investors. Operating with speed can not only create a competitive advantage for firms, but it can also help streamline processes that allow firms to optimize their efficiency.
Deal management systems with an investor dashboard, like IMS, provide a secure system for effective, timely communication with investors. These platforms also allow sponsor to create, manage, and track past and current projects. Reviewing and comparing this data provides actionable insights, enabling firms to make informed decisions about future strategies.
Quickly Adapt to Market Changes
The commercial real estate industry is in a phase of constant change, meaning that CRE professionals must be prepared to adapt when these changes occur. Not only must the professionals operating these firms be able to adapt, but their data management systems must also be easily adjusted to reflect changes within the industry and/or business model.
What Improvements Can Be Made Based on Data?
One way that CRE firms can leverage data to drive informed decision-making is via tooling that analyzes property performance. A tool such as Key Property Insights (KPI) aggregates key variables and integrates data from your accounting system to generate charts, graphs, and reports that can easily be filtered and customized and even shared with investors with their quarterly statements.
To learn more about data-driven decision making, read Not All Data Is Treated Equally in CRE.