It is coined one of the largest, if not the most significant, aberrations for our industry. Messages surrounding the need for real estate companies to harness the utility of data and to ensure its visibility are plentiful. And they aren’t wrong. We operate in a sector where anecdotal evidence is the norm, insight on deal size and nature is communicated on a phone call. Real estate information is amassed in the human cerebral as opposed to online data stores, even in 2020. There is a ripeness for greater transparency as to how our industry operates and the intricacies involved.
There’s been increasing clamour around the topic. Julian Carey of Stenprop talks extensively of the mileage in a robust data collection and analysis process (PropertyWeek). It hasn’t fallen on deaf ears.
Propel London | Role of Data in Commercial Real Estate
Julian Carey of Stenprop, Edward Berks of Xero, Paul Kendrick of Evans Randall Investors
A plethora of tech offerings are encroaching on the CRE (Commercial Real Estate) space. Many of which are promising the fruits that data and the application of the subsequent insights can bear. It would seem that the intent of real estate companies globally is aligned also. With a Deloitte study showcasing 66% of industry professionals expecting that their data governance will increase in some capacity in the next 18 months.
It demonstrates a maturation of the sector. The realisation that a shift towards extensive information residing online with transparency and timeliness is underway. However, with an abundance of data, it is essential to bear in mind the salience of a robust and equitable data strategy. From my conversations with early-adopters and observations of infant attempts to exploit data in the industry, it is evident that the war chest of data which is being gathered must be lead by an impartial lieutenant.
Data, and the insights it can provide, have fallen victim to confirmation bias. When you have preconceived beliefs about your portfolio and/or team operations, it is more than likely the output of your data will reflect that gut feeling. When structures and tools are enabled within CRE companies, they are usually implemented with the notion that they will democratise the level of understanding for those interested in the detail. Data is vital in solidifying and validating a hunch that business leaders may hold about their business and assets. Yet it can easily skew the perception or output of data if the objective of the undertaking is unsuccessfully removed from partisanship from the outset. As a result, an unbiased mindset when engaging in a data strategy is paramount.
Through my role at Re-Leased, I have witnessed business leaders in real estate successfully implement systems which process and expose several internal data points on their company. Yet a prejudiced lean towards achieving a certain outcome before the activity was engaged meant that the analysis of data failed to reveal a true representation of business operations. Those individuals were also far more likely to interpret ambiguous data in a way that supported their prevailing standpoint. One particular example looked at property maintenance response times. Management sensed that the response times were less than optimal and allowed this to lead their data exploration and also the investigation into the successive invoicing process for jobs completed. As opposed to being non-discriminatory from the start and tracking the function as a whole, the firm was siloed in their approach.
The aforementioned Deloitte study surfaced observations that that well over a quarter of real estate industry professionals believe that one of the biggest issues in their sector is the lack of availability of quality data to make timely decisions. As new tech entrants spot this opportunity to pounce, they will be all the more willing to provide solutions that reinforce the objective rather than uncover true underlying opportunities/threats. The psyche that “My data is the right data” can lead companies down a road of groupthink on a scale that only further detriments an old way of working. This inevitably leads to an overconfidence in the initial belief which may actually contradict the reality exhibited by the data.
The path to concreting business processes to be data-led and the enforcement that strategic decisions to be justified through data is one that all real estate companies should embark upon. Yet, not all data is created equally. When there is an incongruence between established beliefs and data findings, it is imperative that the company is honest in its assessment and the interpretation of the results. The continuation to make decisions from data that was generated through a lens that was tainted from the outset will lead real estate companies into an endless spiral. Real change is unlikely to be derived from this pathway of data strategy.
So what can real estate leaders do?
- An open-minded approach to what data collection may expose. Particularly when the data service is one that benchmarks and compares industry-standard to internal operations.
- A willingness to engage in an external-facing data strategy, one that takes into account the outlook from the wider market and understanding what best practice looks like. Data providers and consulting companies will prescribe you the tools based on your own self-diagnosis.
- Relinquish the attitude that “My data is the right data”. Confirmation bias in the project scope and the resulting inductive reasoning is a very real threat and will only improve when this mindset is adapted.