The Challenges Faced By Institutional Commercial Real Estate Professionals

As commercial real estate becomes more mainstream, price fluctuations have a broader impact on investors, markets and economies at large. While metrics and analytical tools are maturing, they continue to be imperfect for managing an asset class with heterogeneous assets, fragmentation, agency issues, and a lack of data transparency. Compared to other asset classes, even the U.S. property market lacks some key historic data to support extremely advanced modeling and decision making.

Lack of accurate, timely, consistent, and unified data from across the enterprise compromises CRE firms’ and analysts’ ability to benchmark performance against the market via reliable indexes. This is an increasingly critical capability as competition grows.

The challenge facing organizations today is not finding data to analyze – it’s having a capability flexible enough to analyze all-of the disparate data through a single lens. Further, spread-sheet based processes and unintegrated function-specific applications result in data silos. As a consequence:

  • Significant time and resources are required to aggregate data to obtain a full understanding of a market or portfolio.
  • Out of necessity, highly compensated and very capable individuals are typically compiling data from multiple sources in a spreadsheet in a labor-intensive way, then working to manually scrub the data for inconsistencies or errors.
  • Substantial time and resources are required to aggregate data in order to obtain a granular, portfolio-wide view or meet reporting transparency requirements.

Many institutions have multiple, specialized investment teams focused on specific markets or verticals. Each of these teams possess valuable data in their systems and files. However, this valuable data is often siloed and not easily available to colleagues from other teams.

Existing data from real estate fundamentals or the U.S. Census Bureau have been immensely useful in understanding and forecasting trends in real estate performance. However, much of this data is released with a time lag, making it difficult to be ahead of market-moving trends.

Today, ICRE investors and lenders have recognized the strategic importance of data assets to achieve business results.  To realize the full benefits of data assets, firms need to create, manage, share, and leverage these assets in their daily processes. Therein lies an opportunity for technology to optimize processes and improve alpha.