By: Matt Murphy, CMO of Chime Technologies
As 2016 drew to a close, a number started to circulate: 90% of today's data was created in two years. The stat came from IBM, which in its “10 Key Marketing Trends for 2017” report said stated that we create 2.5 quintillion bytes of data every day. It’s hard to even wrap your mind around the magnitude of those numbers. They feel abstract, but that explosion of data has very real-world, practical, tangible applications for just about every industry out there, including commercial real-estate. Big Data is shaking up the real estate industry in many key ways.
Big Data in its raw form isn’t particularly useful, but it has spawned a new industry of machine learning, AI, and natural-language processing that empower computers, and thus businesses, to make sense of it all. The computers do the hard work of driving out analogies, conclusions and insights, which business leaders can use to make strategic decisions.
From a commercial real estate perspective, there is now access to countless new troves of information. Commercial real estate used to be a black box. What a building sold for, the rent roll, square footage and other key metrics were not accessible to people in the industry. Now thanks to Big Data, commercial data is coming online. It’s worth noting that commercial is roughly 10 years behind residential on this front.
About a decade or so, Big Data began to transform residential real estate through the appraisal process. Home evaluation reports for appraisers and for agents used to be offline and local, locked away inside the planning department. Then all that information started migrating to the cloud and real estate professionals leveraged Big Data to streamline the process and create visual reports on homes’ estimated values and recommendations, based on comparables. The level of accuracy improves year over year.
The same shift is now unfolding in the commercial space. Big Data is enabling a far more streamlined, accurate, and precise appraisal process to calculate property values, which helps agents improve their efficiency. Big Data is also opening up new opportunities and efficiencies on the financing side. Access to Big Data provides financial stability. If a person wants to take out a loan on a property, an agent can get quick access to information that helps them make smart decisions. With all the available data and information, insurance companies and lenders can share trends, risks factors, and FICO scores in order to create an algorithm that determines loan offers faster and supports data-driven decision-making.
Big Data is also shaking up commercial real estate in management of buildings and utilities. Internet of Things (IoT) sensors collect data that flag potential issues before they become problems. If a fan stops working or there is a water leak, sensors can track that and spark an alert to building management to react faster. The faster the reaction, the less it will cost. In addition, IoT sensors and Big Data can be used to develop appliances that collect data around air pollution and temperature and respond accordingly to set optimal building preferences. This helps drive energy savings, which is impactful from an environmental and a financial perspective.
Market research is another Big Data opportunity. Real estate professionals now have greater access to information that can help predict whether an investment will succeed. If there is a mixed-use property available, trends around home prices, retail openings, population patterns, etc… can help reveal whether a property is a smart investment. Or it can help a property owner decide whether to lease large offices or divide a property up into smaller office units.
By the same token, Big Data enables professionals to expand their reach. If an agent is interested in a property outside of their usual region, Big Data can help them analyze opportunities more quickly, without having to physically be there. Add all this to the fact that Big Data is real-time, and it’s not only giving commercial real estate professionals access to more insights, but at a pace never before seen.
In short, Big Data is breaking open the black boxes that have traditionally shrouded commercial real estate and making it more transparent from start to finish. The industry is profoundly changing, and harnessing all that data will be a key to real estate success in the future.