A data-driven approach is becoming increasingly less of a luxury and more of a necessity due to the commercial real estate industry’s unavoidable technological disruption. 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.
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.
Read ahead to learn why modern-day sponsors and investors alike are counting on data to drive the success of their investment deals.
Data-Driven Decision Making for Sponsors
Historically, real estate sponsors have collected and used data to make informed decisions in one way or another. Today, however, data can be aggregated on a more granular level thanks to advancements in technology and a growing database of resources from which to pull additional information. There are now platforms available, like RealPage IMS that provide Investor Dashboards and reporting that enable educated and informed decision-making that helps sponsors to act more strategically while minimizing risk. Additionally, in a recent Deloitte survey, more than 80% of investors indicated that CRE sponsors and firms should prioritize the development and use of predictive analytics (PA) and business intelligence, as predictive data analysis saves time and creates efficiencies.
Data-Driven Decision Making for Investors
Countering the Impacts of Risk
When making an investment, there are many factors that can impact the performance of the investment. These risks include inflation, unemployment, interest rates, and so on. To minimize and/or counter potential risks, investors can leverage data to better determine market trends and anticipate change. Using data to make informed decisions can significantly lower risk.
Overcoming Market Shifts
Although monitoring the performance of a portfolio is important during each stage of the investment lifecycle, in times of volatility extra attentiveness to how investments are performing becomes even more critical to investors. While some investors may have forgotten that risk-management matters, history shows us that it is the effective preservation of capital in the face of market shifts that truly drives successful long-term investment outcomes.
Market shifts cause an accurate assessment of risks to become even more essential as investors begin to review their portfolios performance more often so that they can determine the best actions to take. Thus, as the market shifts, investors’ expectations and demands regarding data and insights is likely to become stronger than ever before.
Ultimately, having access to relevant data and being able to transform that data into actionable insights is critical in the evolving world of commercial real estate. This visibility empowers both sponsors and investors to make data-driven decisions about their investments and optimize the performance of their assets.
Watch the on-demand webinar Managing the Investment Lifecycle: How to Leverage Data & Insights to Maximize Returns to learn more about the importance of using data for modern investments.