You’ve probably heard the term “big data” — after all, it is one of the biggest buzz words these days, and for good reason. Big data is everywhere and is having a huge impact on nearly every industry, including commercial real estate. And soon enough, if commercial real estate professionals aren’t using big data in their business, they’ll get left behind their competition. But before you get started, how much do you really know about big data in the real estate space?
Recent research has shown that technological advances, combined with increased mobility, will require everyone to adapt to new ways of living, working, servicing, and more. Competitive marketplaces and unprecedented price pressure will force changes in all of these areas, driving new innovations and change. When you combine these drivers with data, you can expect to see business models completely transformed. But what does this mean for real estate professionals? When it comes to commercial real estate, there are two questions that become especially important:
What is big data?
Big data, when utilized properly, provides key insights that can help drive revenue in the commercial real estate space. With massive volumes of data (reaching terabytes and petabytes), the applications used to process big data must be increasingly powerful enough to deliver immediate results. In larger terms, big data doesn’t only refer to huge pieces of data, but also the required changes and updates in tools needed so that this data can be analyzed effectively.
Technically speaking, the basic features of big data are volume, velocity, variety, and veracity, although there are many researchers who add other characteristics to these, including value, volatility, and validity. Typically, the most common discussions of big data begin with explaining its volume — which truly is massive. In 2020, the total amount of data will equate to 40 zettabytes and by 2025, this volume will likely have exploded to reach 163 zettabytes.
Today, this data is captured through a number of different channels and devices, including smartphones, social media platforms, search engines, plastic cards, and more. US companies regularly store approximately 100 terabytes of data, with some claiming to hold ever larger volumes.
How does big data help commercial real estate professionals?
Along with other industries, commercial real estate has benefited tremendously from embracing big data. Today, there are a number of proptech companies around the globe that analyze data and records using proprietary algorithms to deliver highly customizable analytical tools for commercial real estate that are truly game-changing.
Analysis and decisions that were once based solely on manually collected data, industry experience, and knowledge of the market can now be made more quickly — and more accurately. For instance, real estate developers can now use huge volumes of historical data to estimate future project costs and any schedule delays in construction. Likewise, property managers can also use the same types of data to optimize the performance of their building systems and reduce overall operational costs, driving profit margins.
Before the COVID-19 pandemic hit, millions of workers were scattered throughout thousands of buildings and towers across the United States. Now, as cities attempt to reopen and get back to business as usual, many organizations are deciding it’s likely that not all of their employees will return to those buildings – now or ever.
Even research giant Nielsen agrees – even once the pandemic crisis has passed, its 3,000 workers in New York City will no longer be required to work in the office full time; rather, they can choose to work from home most of the week, if they would like.
And they’re certainly not alone. As COVID-19 continues to ease its grip, many companies are not only considering how to safely bring back their employees but whether they need to come back at all. When the coronavirus hit, companies all over the world were forced to quickly figure out how to continue to function with employees working from home – and many realized that the changes weren’t all bad, after all.
Given that this is the case, these same companies are now wondering whether it’s really worth it to continue paying high commercial rent prices, especially given public health considerations and social distancing practices that will likely make the packed workplaces of years past a less realistic option.
The return to the physical workplace has been slower than many office owners expected, which is causing them to consider creative measures to make returning to their buildings more attractive. In the beginning phases of many cities’ reopening plans, office owners readily implemented quick and easy solutions, such as social distancing signs and hand sanitizing stations.
Even with these precautions in place, the number of employees returning to the buildings was lower than expected. Here are some measures that smart office owners are taking to help make their buildings more attractive to tenants:
Upgrades to HVAC Systems
This is easily one of the most costly updates that many office owners are considering, given that tenants are more concerned than ever about the air that flows through their offices. However, the high cost, combined with the uncertainty about how effective HVAC upgrades are at slowing or preventing the spread of the virus, is leading some building owners to hesitate.
The types of upgrades that are recommended to help combat COVID-19 can cost approximately $3 per square foot – meaning that for a 200,000 square foot building, you’re looking at a cost of $600,000. And in addition to the upfront cost, these types of upgrades will likely increase the building’s monthly utility bills, as well.
Temperature Check Stations
Rather than having someone sit out front and check the temperature of everyone walking through the door, many landlords are also considering implementing new technology to take employees’ and visitors’ temperatures before they even enter the building. Bruce Pike saw a need for this technology early on in the pandemic and created a company called Temperature Check.
Pike’s company offers free-standing temperature checking stations with face-scanning technology for approximately $3,000 and also offers a smaller-scale product that scans the wrist for temperature for around $1,300. Pike freely admits that there are significant costs to implementing his products, but explains that most of the building owners he has talked to are more concerned about getting people back to work – and doing it safely.
Lobby Storage Lockers
Another feature being offered in many commercial buildings is storage lockers in lobbies of buildings where employees can leave their jackets, shoes, bags, or other items that may have become contaminated or exposed to germs in their daily commute. Utilizing these types of lockers can help cut down on the germs being brought into the office, especially among employees who take public transit.
New accounts filed for the UK and European flexible office company bought by Blackstone show the company was performing strongly before the outbreak of the coronavirus.
Revenue for The Office Group rose by 23% in 2019 to £119M, and earnings before interest, tax, depreciation and amortisation rose from £13M to £52M, figures for the holding company that owns it show.
Read Full Article: bit.ly/2KJgjCu
New office developments that offer outdoor spaces, bike amenities and germicidal tech may have a competitive edge in the effort to win over wary tenants.
More than seven months into a nationwide experiment in working from home, office developers and designers are grappling with a familiar challenge: creating welcoming environments for companies and workers. That perennial task has been intensified by a host of new issues, including heightened safety protocols, liability risks and a lingering unease about returning to the office.
Read Full Article: bit.ly/33etCRz
A decline in office utilization if it lasts beyond the pandemic could pose risks for loans backed by office assets, because it is likely to impact office rents, occupancy rates and market values, according to a recent report from Moody’s Investors Service. The report notes that the impact would be greatest in urban markets with the highest average rents. That, in turn, would heighten risk to office-backed CMBS loans—the largest segment of the CMBS market. It would be a particular problem for loans with aggressive underwriting that are maturing in four to seven years, according to Moody’s.
Read Full Article: bit.ly/39eHBe6
Price discovery in the private real estate market is always a challenge when there is a sudden change in the market as we have now with COVID-19. As happened during past recessions, the number of transactions activity declines to the point where it is a challenge for appraisers to find “comparable sales” to value the property. Capital flows to the commercial real estate sector as tracked by Real Capital Analytics are below levels in 2018.
Read Full Article: bit.ly/3704PSl
The demand for office space is going to shrink even after the coronavirus pandemic recedes, according to a new survey of more than 400 finance and accounting executives by LeaseQuery, but will likely rebound from its current minimal footprint.
Some 31% of the respondents said they have reduced their real estate footprint in response to the pandemic, while 18% say they reduced their real estate leases. Looking ahead to next year, roughly as many say they will have a smaller real estate footprint (22%) as those who say they will have a larger one (21%). Most of the respondents, some 57%, say that there will not be a change in their real estate footprint in 2021.
Read Full Article: bit.ly/3kLhoWz
Figuring out how to value properties amid unprecedented circumstances has been a challenge that's vexed commercial real estate pros throughout 2020. New data, new technology and new property types are all changing the game for the experts who estimate the value of real estate properties.
Read Full Article: bit.ly/331EX7I
One of the country’s most prominent baby boomers in the business world has aged very well.
Born 60 years ago in the U.S. with a handful of companies, the REIT structure is now a dominant force not only in American commercial real estate, but also now a vehicle that is employed globally.
The U.S. alone boasts 222 publicly-traded REITs, and IRS records show that about 1,100 listed and non-listed REITs pay taxes. And REITs now operate in 39 countries overall. Today, the market cap of the FTSE Nareit All REITs Index, the broadest index for equity and mortgage REITs in the U.S., stands at $1.1 trillion.
Read Full Article: bit.ly/36E1YyA
WeWork burned through $517M during the third quarter of 2020 as the company struggles against coronavirus pandemic-inspired headwinds that have dealt the coworking business model a body blow.
The company's cash reserves, plus commitments from major investor SoftBank, now stand at about $3.6B, down from about $4.1B at the beginning of the third quarter, the Financial Times reports, citing an email from CEO Sandeep Mathrani to WeWork employees.
Read Full Article: bit.ly/36Kx47F
There are several contributing authors here.