In today’s world, data is, literally, everywhere. It’s generated every time you go shopping, browse the internet, or even make a phone call. Nearly everything you do creates data. The data you created can be used as a product to make calculated recommendations for daily activities. As an individual, you create tons of data with every card swiped, button pushed, or browser clicked. All that information is the foundation of what many refer to as “big data.”
Big data is the basis for business intelligence, which is about taking all that information and turning it into knowledge to drive better business decisions. Whether its data about retail consumers or homebuyers, it’s all the same.
The real estate industry today is just evolving from spreadsheets and simple reports. While useful, they’re so 1980s. Right now, we’re on the edge of a rapid evolution. The real estate sector is very much exposed to the impact of data. Businesses and real estate investors are more aware of the risks involved and endeavour to make smarter business decisions.
There are several data sets that can have a major impact on both business and government decisions. One of these is having access to accurate data on interest rates. Interest rates greatly affect the real estate markets as changes in this can significantly influence a person’s ability to purchase property. As interest rates fall, the cost to obtain a mortgage to buy a home decreases. This in turn creates a higher demand for real estate, and pushes prices higher. Conversely, as interest rates rise, the cost to obtain a mortgage increases, thus lowering the demand and prices of real estate. Additionally interest rates play a role in the equity markets. When looking at the impact of interest rates on an equity investment such as a real estate investment trust (REIT), rather than on residential real estate, the relationship is similar to other investment modules such as bonds. When interest rates decline, the value of a bond goes up because its value becomes more desirable, and when interest rates increase, the value of bonds decrease.
In context, the presence of data itself is not the main issue. The real magic happens with data analysis. Understanding how for example data on demographics can provide the composition of a population, by age, race, gender, income, migration patterns and population growth can be extremely powerful for business and government decision making. Whereby decisions such as; where next should the next power-plant be located, or even where investors should locate retail malls or even ATM centres for banks. These decisions are driven by population demographics data. As is very often the case, these statistics are often overlooked but are a significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades.
Recently JLL using technological innovation has developed and launched a data analytics platform known as Real Estate Database (RED). JLL’s new global data and insights platform connects data, technology and people to reach new levels of productivity in corporate real estate. RED brings together master data governance, knowledge management, business intelligence and advanced analytics, underpinned by cutting-edge technologies and tools to dramatically improve real estate decision making. The RED platform is designed to integrate Corporate Real Estate (CRE) data with sales, workforce, finance, economic and other business data to offer a holistic view of a corporation’s business and macroeconomic environment. Its open architecture enables a company to integrate data from almost any source and rapidly visualize the results through interactive dashboards, offering greater transparency and ultimately, actionable insights to improve operational efficiency. The platform has been successfully utilised by a leading financial institution in Nigeria to make smart business decisions for their Abuja portfolio such as:
- Creating cost-benefit analyses for different expansion scenarios, such as relocation versus renovation or expansion. This predictive capability is informed not only by real estate data, but also by labour costs and active accounts, balance sheet total, head count, savings potential and more;
- Expansion of their catchment areas and scenario recommendations;
- Analysing branch/property categorisation
- Determining which corporate locations are more productive than others.
RED has helped the client optimise their portfolio by identifying the ideal scenarios that support their business growth strategy.
Data can be used to create tangible insights into consumer behaviour by research, forecasting and data analysis. Analysing the data to gain insight into micro and macro environment will have profound impact on an organisation’s portfolio and real sector. With this tool, organisations are better positioned to not only be reactive and predictive, but also be proactive, a key skill in an ever changing and competitive business environment.
As big data is used more, investors or agents who put the analysis into practice will see revenue rise, costs drop and market share increase. Those agents or clients will squeeze out those who ignore the data and tools (or fear them). The real estate industry is expected to be part of this evolution towards advanced corporate practices in the use of customer and business information.
Contributing Author: Abdulhakeem Sadiq