The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
Issue link: http://read.uberflip.com/i/741489
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS 8 Amazon CEO Jeff Bezos has turned that advantage into a revenue stream worth $2 billion per year. Big money equals big data. But remarkably, Amazon is just getting started reaping the rewards. On Christmas Eve 2013, the company patented an algorithm-based system that will eventually ship products before customers even place an order. The forecasting model uses data from prior Amazon activity to extrapolate what the customer needs and when they need it. This will allow Amazon, like the hockey legend Wayne Gretzky, to skate not to where the puck is, but where it will be. And like the Great Gretzky, they will score again and again. Amazon's forward-thinking use of data offers a profound lesson—and an urgent one—to the real estate sector. Too often, even the brightest minds in development and sales don't skate to where the proverbial puck is: We go to where it was. For all the firepower applied to the buying and selling of buildings and land, or tallying square footage and subdivided space, the commercial property model that calculates value in tangible physical assets—and nothing else—goes back hundreds of years to an era of quill pens and parchment. Are we leaning backward as opposed to forward? According to Piper Jaffrey's Real Estate Technology Overview for 2016, commercial real estate's IT spending as a percentage of revenue comes in at an anemic 0.8 percent—the lowest rank of 16 business sectors. Remarkably, even food and beverage processing (1.3 percent) beats out CRE by a healthy margin, though many in and outside real estate might find that inconceivable. LinkedIn established itself as a digital business pioneer by employing as many as 150 data scientists, a figure cited by the high-tech publication VentureBeat. How many real estate companies have even one? Think long and hard about being the first: The ones that have a data scientist or two on board, or a platform that manages the data for them, will have a distinct advantage. Today, data science and analysis allows us to collect the data a property generates and create a storehouse of great worth with permanence and purpose—in categories ranging from energy usage to the number of well-heeled pedestrians that walk past the exterior security system. To that latter category, consider this trio of hypothetical questions: What are the general demographics of the people who dine in or near the building? Which people possess key cards? What do those cameras tell you about foot traffic? Unless building management is evaluating security, these inquiries may seem irrelevant. But in fact, these data points can prove the building sits in an increasingly desirable environment. For example: What if you could count the number of artsy, bohemian males and females that pass by and through the entrances? This data set—a "hipster quotient," if you will—indicates how the block is becoming a magnet for trendy dining, arts and nightlife—and a locale where property values are set to climb. Knowing what is happening in your building represents a very valuable asset. And in the dealmaking of the 21st Century, that data will only continue to grow in richness, sophistication and complexity. Even when every square inch of space is rented, and every tenant amenity taken into account, data creates a value stream that never runs dry. No one wants to leave value on the table when a commercial property is sold; nor does anyone desire to ignore leverage that allows for the lowest purchase price possible when buying. But the peerless advantages that come from gathering and monetizing this data, and making it a part of sales negotiations, separate the smart, savvy and successful from the rest of the pack. Imagine that you can do this. Or to be more direct: You can do this. The methods and tools exist to make it all possible, though as with everything else in the high-tech sphere, changes are coming at breakneck speed. While it's a ground-floor time to get acclimated to this new paradigm, those who delay because "we've always done it this way" will find themselves running up the stairs in vain to catch the elevator. Consider, then, the exciting alternative. Predictive data and analytics—perceived as buzzwords and futuristic tech—can make real bottom-line differences if you utilize it correctly. Properly harvested with the right technology, the ones and zeros in our midst will allow us to add a long string of digits to property portfolios. Are you ready to embrace the possibilities—and the certainties—that already multiply energy savings into financial energy and competitive advantage? If so, we invite you to get started. It is now time to look up and move up together: The elevator, energy efficient, of course, is waiting. In the dealmaking of the 21st Century, data will only continue to grow in richness, sophistication and complexity.