19 Jun A Critical Trend in CRE Over The Next 10 Years
Big data is not necessarily a new concept. However, it has been a big topic of conversation when it comes to commercial real estate lately. “Although Big Data is not new, its exponential growth within CRE is. Today’s challenge involves getting a handle on a workable platform, taking the right steps in assembling a CRE data repository, isolating meaningful data patterns and understanding which opportunities that analytics is actually bringing to the table.” Says Phil Wales, CEO Ebusiness Strategies LLC. (And that article was written over 18 months ago!)
With big things on the horizon for big data, let’s look at a couple ways that it will impact the future of CRE.
What is Big Data?
Big data is a terminology used to define large volumes of data that industries use for analysis. Additionally, there are four general attributes of big data called the “4 V’s”: Volume. Variety, Velocity, and Veracity. Let’s explore below
-Volume: Volume encompasses why big data is “big.” The sheer amount or volume of how much data is amassed, and how it is growing exponentially. It seems that no one can truly know how much new data is generated annually, but the amount is exorbitant.
-Variety: Big data is comprised of a variety of different types of data. This includes traditional “structured data.” Structured data are things like dates, times and amounts that can be sorted into a relational database. Then there is “unstructured data” which is a more loosely defined concept. Unstructured data includes more creative concepts like logos, web pages, audio, and social media feed.
-Velocity: Velocity is how frequent the incoming data is processed. This is important as it gives insight and analysis on the bigger picture of things.
-Veracity: Veracity includes the trustworthiness of the data. How trustworthy is the data and how many discrepancies can be found in the data collected?
How Does This Impact CRE?
As we move into the latter half of 2019, we see a competitive advantage to CRE companies that embrace big data. In fact, big data allows brokers to make more informed decisions, which saves time and money. CRE companies that partner with PropTech companies who have made it their business to harness big data’s power have seen improvements in performance up to 81%. For example, companies like CrediFi use big data to analyze and envision property values. This can help investors and brokers get better insights on risks, performance, and future valuations, rather than relying on their ‘hunches’ or ‘experience.’ Big data will provide easier access to facts, statistics, and real-world trends.
Additionally, big data can be used to streamline property management. It can be used to explore a location’s target demographic and market to them to fill vacancies or to assist property managers in keeping existing tenants happy.
Making More Money
With the appropriate resources, and as big data tools become cheaper and more accessible, companies and individuals will also use big data to maximize profits. “Being able to answer questions like, ‘Are we using a space efficiently?’, ‘How much foot traffic does an area get?’ or ‘Does one part of the building consume more electricity?’ are critical to maximizing return, but such questions haven’t always been the easiest to answer quickly.” – Dustin Dunham With data such as this, property owners will have supportive data to demand certain leasing rates, retailers and business owners will be able to make better business decisions, and everyone will have a better chance of maximizing their profit margins.
Overall, CRE professionals, investors, and enthusiasts can use big data to their advantage to make data-based, strategic decisions with information to back it up. Combine this with the fact that big data is continuing to get even bigger, and the CRE industry is in for some groundbreaking innovations as 2020 approaches. I really think that more data and increased efficiency are going to be the trend for commercial real estate over the next 10 years. Check out our latest #InternQuestions video where I talk about just that!