February 21, 2020
Over the past few years, data has become the most discussed topic in commercial real estate (CRE). Like almost every other field, the proliferation and access to data is fundamentally changing the way the world thinks about commercial properties and commercial real estate in general. And like other industries, one of the critical challenges with the emergence of real estate data is the ability to understand and communicate what we actually mean when we lump every bit of information into a generic term like “data.”
Depending on who you speak with in the real estate space, data can mean a variety of different things. For some in commercial real estate, data is all-encompassing and includes every bit of information available about a property. For others, data includes information about how the building works and all of the relevant systems that power a modern building. And yet for others in commercial real estate, data is everything captured around a transaction related to a specific piece of property.
So, with so much data and so much rapid change, how can we effectively communicate what is meant when we use an umbrella term like ‘commercial real estate data’?
This is not a unique challenge. For simplicity purposes, including any data set related to a commercial building into a broad category makes analysis and processing easier for real estate professionals. However, it does require more work for professionals to qualify what’s included in a commercial real estate dataset to determine if a database can deliver a specific data point to meet their use case. With the lack of data standardization across the real estate and commercial industry, there’s a good chance there will be confusion and frustration.
For many, the complexity around identifying and evaluating real estate data sets results in a deluge of CRE data that quickly becomes confusing and overwhelming for organizations without experienced CRE data leadership. As a result, many in real estate may abandon the idea of being “data driven” simply because it’s overwhelming to start and source value from a data set that is overly complex and ill-defined.
Since we are still so early in the data evolution of commercial real estate, it’s incumbent upon database providers to assist the commercial industry with providing clarity around data sets to help manage what can be an intimidating process.
Over the coming years, we’ll see the data available in commercial real estate continue to expand and increase in complexity. Much of what the field leverages today will be a commodity, but it will give rise to a new data approach that provides an unprecedented look at the future instead of a detailed view of the past.
The data sets below have become increasingly powerful over the last 5 years and will form the backbone of the next generation of data intelligence.
Property data relates to specific commercial property attributes. Everything from location and asset type, to building area and year built, this information contains the physical characteristics of the commercial property being evaluated. Much of this data is already commoditized and generally available from most CRE data providers. This is often where most industrial professionals start their research to uncover real estate opportunities.
Most database providers will define transactional data as all information pertaining to a sale of a commercial property. However, a sale is not the only transaction in commercial real estate. A true view of the transactional history of a property will include not only sales information, but a detailed look at the lease, net lease, or sublease, and overall rent activity around the property. Historically, this has been a challenge for the industry as leasing information is difficult to uncover.
Disclosing this rent information is not required and some believe that guarding this data is a competitive edge for a real estate investment, but much of the industry is moving toward full disclosure as they discover access to more information and a full view of the market is more valuable than only looking at their organization’s own historical lease transaction data.
Mortgage loan specifics and lender information has also become table-stakes for CRE data providers. The ability to uncover and source maturing loans creates an opportunity for investors to uncover potential new deals. Lenders can identify real estate investment opportunities to provide a new mortgage through targeted business development and marketing.
If CRE professionals are still calling local assessor offices for this information, they’re probably losing a good amount of time chasing down data. Access to this information has always been helpful in determining assessed value, tax amount and tax delinquency for CRE. All of these data points help provide a detailed look at the ongoing costs associated with an asset.
Additionally, monitoring delinquency could be an indicator that a current owner may be looking to sell an existing asset. Tax history is a key indicator of pre-foreclosure and provides a unique opportunity to identify a distressed property before the competition.
Owner data looks at all the details about the person who actually owns the property. This information often goes hand-in-hand with the other kinds of data, and can give you insight into an owner’s financial situation, their plans for a office space or office building, and more. Learning about the different people who have owned an office space can give a competitive edge and tell a story about how the building exists today.
Tenant data can give insight into the type of business, how they operate, the leasing conditions and direct contacts within the building. The analysis of this information is crucial to help professionals learn about the current state of a space based on how it’s been used. It’s also valuable to get information about timelines of rent to be prepared for potential opportunities. The time a lease was signed, the conditions under which a lease was signed, and more can all impact the future of that building.
Tenant Experience Data:
Many commercial real estate owners are focused on their tenant experience. Insight into tenant experience can give a unique chance to identify changing lease terms before the competition. If tenant experience data shows discontentment or issues with an office building or commercial space, it can give an edge for new opportunities in commercial real estate.
Market data in commercial real estate is a more broad look at how the CRE industry is performing as a whole in your area. It looks at properties and how well they are moving on the market, trends for owner demographics and selling times, and more. All of this data comes together to give a picture of the overall market locally, and insight into how properties will react to the market in the future.
History is important when it comes to commercial real estate data because it shows trends of the past that can inform the future. The way the real estate market has performed in the past can be a great indicator for the future, so learning about past trends can be key in getting good information for the future. Similarly, negative trends and red flags of the past can help prevent the same kinds of issues in the future.
The commercial real estate market relies on real-time data to give information about constant changes. Real-time data gives accurate, daily updates that can be vital to getting a competitive edge. Pricing changes, comparable property updates, refinancings, and more can all be part of your real-time data. These constant changes are a reality of commercial real estate and it’s vital to be on top of them to stay competitive.
The general term “data” can be confusing due to how broad it is. But in commercial real estate, it’s important to understand the many kinds of data that can help create better knowledge and give a competitive edge in real estate.
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