Transparency is a hot topic in CRE, and for good reason. Over 60% of investors cite degree of transparency as being an important consideration for their investment, and the accelerating rate of CRE tech adoption brings with it a greater demand for more transparency around investing. Despite the inevitable winds of change, however, transparency (when misunderstood) can be alarming.
IMS recently participated in a roundtable discussion with industry leaders at Propmodo’s Metatrends event, where panelists analyzed the meaning of transparency with regards to the commercial real estate industry and discussed some common misunderstandings related to the term.
Panelists Ron Rossi (VP of Business Development at IMS), Michael Mandel (co-founder and CEO of CompStak), and Amy Millard (CMO at VTS) joined moderator Candyce Edelen (CEO and Founder of PropelGrowth) to share the insights and trends they are seeing with regards to investor transparency.
What It Means to be Transparent
The concept of transparency is not unique to CRE, and its meaning is pretty consistent across industries. Put simply, transparency means that information, data, and insights are shared openly. This exchange is the crux of investor relationships. Striving for transparency enhances the client experience by providing the context and security that comes with information and insights.
Technology makes it easier than ever to be transparent with investors by providing 24/7 on-demand access to investment data and enabling more regular and efficient communication. These factors drive better engagement and help to establish and maintain a trusting relationship. As tech adoption accelerates, the desire for transparency among investors also scales.
According to Fast Company, “Transparency is one of those subtle things that can make a dramatic impact on a business … It helps everyone do business better – you, your clients, and your team members.”
A More Liquid Market: Everybody Wins
Transparency is transformative, and it certainly impacts every player in the CRE landscape. Michael Mandel said it well: “Most sophisticated landlords want to get market deals done. Tenants want to feel like they’re getting a fair deal. Brokers want to get deals done so they can move on to the next deal. Everybody who’s involved benefits from transparency because it leads to a more liquid market.”
But liquidity does not equal fluidity. Let’s unpack that statement. A more liquid market has many benefits to all parties involved. Fast, stable turnover generally leads to increased profit when all is said and done. But market liquidity doesn’t necessarily mean that everyone has unfettered access to sensitive data. This type of fluid information leakage is of concern to many sponsors. Ron Rossi laid out the boundaries of data dissemination as related to transparency: “It’s about delivering the right information to the stakeholders that have a right to the info, and then giving that stakeholder the ability to access that information when it’s convenient for them, in a manner that’s as real-time as it can be.”
When your investors have access to more of your data they can come to decisions more quickly, leading to shorter capital raises and accelerating the speed of your transactions. As deals become more competitive, transparent data-sharing becomes a clear advantage. And while the digital disruption of the CRE industry is in full swing, privacy and security are still just as vital as ever before. However, the right information shared with the right parties can create a path to profit wide enough for all to enjoy.
The Standardization of Data
Transparency within systems is a driver for improved data accuracy and standardization. “Typically, about 30% of the data that’s in the accounting system is wrong. And they’ve been making decisions and reporting on data that’s just inaccurate, so there is a pure productivity and accuracy benefit to transparency,” said Amy. Here’s the catch 22 of data transparency: privatized data, riddled with inaccuracies, is unable to drive informed decision-making. Take into account that a staggering 88% of spreadsheets include at least one error. According to Amy, “The way to improve the data is to expose it, number one, and so much of what real estate companies use today is hidden from them, leading to inaccurate data.”
Data siloes impair productivity by making it difficult to identify the key data insights that can really drive results. Transparency exposes the hidden inaccuracies that may ultimately impact decision-making and investor relationships. Ron shared how this is one aspect of the vision at IMS: “We want to be able to have an open ecosystem; we want to be able to push and pull data that’s valuable for our clients and deliver that through our tool.”
A Transparent, Insight-Driven Future
There’s no stopping the snowball effect of technology as it transforms CRE from the inside out. The big question today is, how will the landscape continue to evolve? While transparency is a hot issue today, will it still be one tomorrow?
The panel came to a resounding conclusion that the answer is yes. Taking it a step further, Ron believes that, along with transparent access to data, artificial intelligence (AI) will soon guide investment decisions through advanced analytics. “You’re not going to necessarily be looking at stale data and running this analysis; machine learning and artificial intelligence are going to be able to make actionable insights very quickly about things that you need to know, right in front of you on the dashboard.”
In this type of a climate, transparency is all the more imperative. To understand how these actionable insights could impact their portfolios, investors need to understand where the insights themselves originate. The modern investor wants to take an active role in portfolio management and be able to make data-driven decisions; they aren’t just going to take your word for it. Satisfying this desire is accomplished through transparency and accessibility to data.
For more information about CRE trends and hot topics, check our our free eBook: 20 Trends that will Shape Commercial Real Estate in 2019