Big Data: How Big an Impact for REITs?

By Stuart Eisenberg, Partner, BDO USA: How using Big Data enables real estate owners and REITs to better predict, monitor and measure their investments.

Eisenberg, Stuart.assr mgn ptr.NYCBig Data is big-time ubiquitous in headlines across industries, but the real estate industry has been slow to take advantage of it. That’s all changing. Commercial real estate companies and REITs are embracing new technologies to harness the power of Big Data, elevating their investment and management strategies and optimizing their operations.

When we talk about “Big Data,” we mean the exponential growth in volume, variety and velocity of structured and unstructured data. That data, however, is only as useful as our ability to interpret it—an ongoing challenge for every organization. But in recent years, advanced analytics and powerful business intelligence technologies have enabled us to extract real value from Big Data. And it’s about time—because Big Data is only getting bigger. Embedded sensor technology and wireless connectivity have opened up a whole new world of information: the so-called “Internet of Things.” In real estate, as in most industries, knowledge is power; those who not only have the information but know how to use it are empowered to make smarter decisions, faster.

Of course, all investment decisions ultimately hinge on investors’ future predictions. But there are several significant ways real estate developers and owners (REITs included) can gain an edge by turning Big Data into actionable insights.

On the investment front, property owners have access to unprecedented information and intelligence around demographics, supply-and-demand trends and economic nuances, as well as better algorithms to analyze that intelligence. At a time when REITs are wise to exercise restraint in their investment decisions and deploy capital sensibly, this could be a valuable tool to help them better understand and target certain markets. At the property level, many variables impact an asset’s value, and with the rise of Big Data, REITs are able to analyze demand for specific features within a property, including amenities, LEED status and energy efficiency. This intelligence can help enhance value by better aligning with tenants’ demands.

From a management perspective, greater access to demographic and real-time local trend data can help landlords make decisions at the individual property level. When setting rents, for example, REITs might analyze traditional population data, along with new, non-traditional data sources to determine if a certain property is a candidate for a rent increase or if they’ll need to invest in upgrades or other perks to attract and keep tenants. Similarly, activity trackers and smart watches and phones mean more data is available than ever before at the individual level. If data indicates people in a certain population center are walking or biking instead of driving, REITs might forecast increased demand for properties in their portfolios that are near walkable retail centers, entertainment and other amenities.

From an operational perspective, the application of the Internet of Things within properties themselves allows owners to capture and analyze data from physical objects. Many owners are upgrading their buildings and automating certain decision-making processes to build efficiencies. For example, many have installed smart sensors and devices that can track temperature, air quality and other metrics that proactively alert owners to maintenance or repair needs within their properties. Many are also automating back-office processes. As new technologies come into market, REITs and other property owners will be better able to monitor properties, trim costs and make their overall operations processes smarter.

It’s clear that Big Data affords real estate owners and REITs a big dose of opportunity to better predict, monitor and measure their investments, and could ultimately unlock more value for shareholders.