D3 2018 Meeting Report: Making the Most of Data
How often do real estate investors theorize before they have the data?
We are really good at judgement calls; a good investor‚gut‚ can figure out quite a bit. We say this building looks right, let's invest in it, but what if the data says something different? asked Gunnar Branson, President and CEO of the National Association of Real Estate Investment Managers (NAREIM), as he opened up the 2018 Data Deep Dive Meeting in Chicago.
The fact that the commercial real estate industry is behind the data revolution curve, however, is not a cause for lament. A lot of times we brow beat ourselves for not being there yet. We feel bad that our systems are not wonderful and doing everything they should be doing, Branson said. Instead of beating ourselves up about it, we should resolve now to leverage data for decision making, not just reporting.
Throughout the meeting, presenters and participants alike explored where commercial real estate sits on the information technology adoption curve; the pain points that many real estate organizations are experiencing as they test the data waters; and organizational process, business structure, people and governance challenges. Perhaps most importantly, presenters and participants came together to discuss how the industry can overcome challenges and move toward more fully leveraging information systems and data to make more informed, strategic decisions.
While the commercial real estate industry has traditionally lagged behind others in terms of information technology adoption, it appears as if change is finally in the cards.
In any industry, you always have some early adopters and a lot of people who try to be trailblazers but many of these trendsetters fail. We are finally past that point now, though. We are at the point where we have crossed the chasm and the majority of people are looking at how they can better use information systems and data to succeed,‚Äù said Norman Niemer, Lead of Machine Learning at UBS Asset Management.
And, when they do, they will be able to advance their businesses like never before. "Just think. You will have all this data that is available to you to make unique investment decisions. You can understand your company at a deeper level and see a lot more of what is happening inside your own company," Niemer pointed out.
To move in this direction, however, the industry needs to overcome a variety of challenges. More specifically, participants pointed out that, in order to move forward, data structure, data governance and data sharing challenges need to be addressed.
At the same time, as organizations amass more data, the reluctance to share data becomes ever more prevalent as well.
"Data is all proprietary. To share data with others is considered terrible. So, all of our data is sitting in silos," said one of the conference participants. More specifically, much of the industry‚ data is sitting in simple Excel spreadsheets, making it not only difficult to share but difficult to leverage and analyze for a variety of purposes.
John D‚Angelo, Managing Director with RealFoundations, however, hit upon the crux of the problem, when he pointed out that the industry is starting to amass a good amount of data but is "still spending a lot of time trying to get data to a point where we can think about what it actually means."
Indeed, the task is daunting. "I don't think anyone really feels like they have the tiger by the tail and that they have an enterprise systems of data that multiple functions can go to and use," D'Angelo said.
While many meeting participants agreed, D'Angelo emphasized that commercial real estate investors shouldn't let this shortcoming deter their efforts. "I don't know anyone who has the whole thing figured out yet. But we shouldn't let perfect be the enemy of good," he said.
To make the dive into data more manageable, commercial real estate investors need to more precisely define their goals.
"Organizations should not be amassing and analyzing data just for the sake of doing so. With this approach, every function within an organization would need massive amounts of data," D'Angelo said. "The question that commercial real estate investors should ask is: "What information do I need to help drive better decisions?"
By addressing this query, you should find that you only need to get a fraction of the available data and you will be focused on the information that is actionable. Doing so will focus initial efforts on having and using data that enables you to be a better investor and a better steward of risk.
Addressing governance challenges
While it's important to define exactly what you are using data for, investors also need to trust their data, according to HoChun Ho, Global Head of Data Governance and Management at JLL. He compared data consumption to water consumption - pointing to the fact that when walking into a room and finding a glass of water alongside bottled water, most people would opt for the bottled beverage, as they trust that no one has drunk from the bottle and the contents are clean and, therefore, a safer choice.
So, while some people try to avoid data governance, they need to recognize that it is necessary to get trustworthy data. Indeed, data governance programs manage and uphold the integrity of data, thereby ensuring that the right data gets delivered to the right person in the right form at the right moment in time. Achieving this, however, is more complicated than it initially appears.
Recruiting the right people
Getting the right people in place to effectively deal with information technologies and data is quite a challenge for commercial real estate companies. "Most people who are above the age of 50 don't know the difference between Snapchat and Instagram. So we need to start leveraging the talents of younger people when it comes to advancing technology programs in commercial real estate. Hiring interns is a great idea because it is a low-cost and highly effective strategy," Ho said.
Perhaps even more important, interns are capable of pushing the technology envelope because they are "fearless in the technology world," Ho said. "We need more people who are like the Karate Kid, ready to take on any challenge. When it comes to technology innovation, we need more Karate Kids and less Mr. Miyagis."
Certainly, getting the right people in place within a firm can help to make the most of data, according to Tiffany Gherlone, Head of Real Estate Research and Strategy at UBS Realty Investors. She pointed out that one young data analyst was able to recently work with her organization's existing data set and display performance metrics for individual staff members, "something that was previously considered impossible to do".
"What was it about this one guy that was able to make this happen? I think it was his personal passion for data - not just data but the techniques associated with data analysis. It was that passion coupled with the fact that he had a real understanding of our firm's goals," Gherlone said.
At the same time, to succeed, senior leadership needs to overcome their technology fears and start embracing technology as well, according to Gherlone.
"I still see a lot of fear out there even with some of the most confident, advanced senior managers. I look at them and I think "you are at the top of your career, and likely got there with limited tech, but don't let that hold you back from embracing what technology could do," Gherlone said.
When all of these challenges are overcome, however, commercial real estate companies will be able to implement advanced systems and make the most of data. The key to doing so, however, rests in understanding where organizations sit on the technology adoption curve and what new innovations can bring to the table. From there, commercial real estate companies then need to implement governance programs, fine-tune processes and hire the right people to strategically leverage data. Doing all this will enable them to theorize better than they even imagined they could - and to move their organizations toward unprecedented success.
D3 Participants Chime In
Participants at the D3 meeting had plenty to say. Here are just some of their thoughts on what's needed to help move the commercial real estate industry toward increased use of technology and data:
We have to show exactly what the systems will produce and how the data analysis will relate to specific areas within the company.
It's important to clarify the pain drivers and how the new systems will affect the company as a whole. Not each user will get what they need. So, it's difficult to gain consensus.
We have to change the mindset of our employees and executives. It is difficult to do when people are so entrenched in what they do and want to hold on to established routines.
It often helps to point to other organizations and show how well they have done with efficiency and cost savings.
There needs to be a push toward standardization industry-wide. For example, everyone needs to define occupancy in the same manner. And, that is just one of many, many terms that need to be standardized and defined.
Technology cannot be implemented just for technology's sake. There has to be specific goals and objectives in mind.
The issue at the end of the day is not just technology. It is organizational change. You cannot just hire an analyst. There has to be organizational change.