Firms tapping new sources to get insight on investments


Real estate managers are in the early stages of using data collected at their properties — gleaned from such diverse sources as facial recognition software to social media programs — to gain insights into their investments.

Most managers say efforts to develop big data to build and maintain portfolios is only just beginning, with some bringing in data analytics and information technology experts to help understand how that competitive intelligence can give ​ them an edge on investments.

The efforts mark a sea change in focus for real estate managers, which traditionally have used data as part of their due diligence for investment decisions already made. Now, they are turning to big data to identify trends, determine what properties to buy and how they can squeeze additional returns from properties already owned.

Global real estate technology spending is projected to reach nearly $3 billion in 2017, up from $2.7 billion in 2016 and $2 billion in 2015, according to the 39th Emerging Trends in Real Estate report released in October by the Urban Land Institute and PricewaterhouseCoopers.

Blackstone Group LP, for example, recently set up a committee made up of real estate investment executives, operations executives and information technology professionals to study how technology will affect the firm’s $111.3 billion real estate business, said Hamilton E. “Tony” James, Blackstone president and chief operating officer.

Everything is questioned, from whether an investment strategy can be developed at the intersection of technology and real estate to how technology can help portfolio companies perform better, he said.

At Goldman Sachs Asset Management Private Real Estate, executives are “very focused on it,” said Joe Gorin, New York-based managing director and co-head. “We have access to a lot of big data at Goldman Sachs.”

For example, GSAM’s real estate investment professionals anticipate that as millennials get older and have children, they will move out of urban centers. GSAM real estate executives are analyzing public school systems, filtering school performance reports to target areas in which to invest, Mr. Gorin said.

Putting data to work
Real estate managers are not only expanding the type of data they collect and use, they’re also using the data in a different way.

“Real estate has historically been the asset class that used data retroactively to justify their underwriting after they had made their selections,” said Joseph Sumberg, New York-based managing director and co-head of Goldman Sachs Asset Management Private Real Estate.

Now data can be used to identify trends, he said. “Ninety percent of the data in the world was created in the last two years and 20% of that is googleable.”

Goldman Sachs & Co. has made “a tremendous push” in this area, Mr. Gorin noted. The bank assembled a team of data engineers to slice and dice data collected across its business units that GSAM’s real estate team can share.

Queensland Investment Corp., a Brisbane, Australia-based money manager, recently began offering free Wi-Fi for shoppers at all of its Australian shopping centers. Executives analyze the data they collect from that Wi-Fi to give them insights into the way customers interact in the firm’s shopping centers, which leads to operational changes that improve the shopping experience.

Big data is becoming more valuable and real estate executives are becoming more adept at interpreting that data, said CEO Damien Frawley. The data allow them to track where customers go and how long they spend in a store or in front of a particular display.

“Our ability to capture that data is greater than it was a few years ago and the richness of the data is also greater,” Mr. Frawley said.

QIC also is sharing the data with tenants to help them with business planning and marketing, he said.

Technology in malls that capture shoppers’ activities also helps property owners pinpoint the highest traffic areas of malls to raise rents for the most desirable spots, industry sources said.

“You can know what race (customers) they are, their ages, their mood,” said Peter Borzak, chairman, CEO and co-founder of Chicago-based real estate asset and property manager Pine Tree speaking on a panel at the Urban Land Institute’s fall meeting in Los Angeles, Oct. 23-26.

“You can tell where they go when they leave your property … and how many people are in the car” Mr. Borzak said. “We have not begun to scratch the surface. It’s embarrassing how little we know about what happens at our properties.”

However, real estate firms have to be very careful with data privacy, said Chandra Dhandapani, Dallas-based chief digital and technology officer at CBRE Global Inc.

“You can do a lot of things with anonymous data without compromising privacy,” Ms. Dhandapani said.

Meanwhile, real estate firms are just beginning to understand how to use data, Ms. Dhandapani said. Right now, much of the uses are backward looking, such as connecting data from various parts of the firm to understand a property’s history, she said.

“The holy grail” is to use the data to be predictive as in helping real estate executives make future investment decisions.

“There are green shoots now” that could lead to ways to use the data to predict future outcomes and the level of accuracy of those predictions, Ms. Dhandapani said.

Smaller firms also using big data
Smaller, more specialized real estate managers are also using big data to help with their investment decisions and manage their portfolios.

Frederick W. Pierce IV, San Diego-based president and CEO of Pierce Education Properties LP, which specializes in student apartment communities, said in an email that his firm uses “a variety of data and information collected from our properties and other sources to inform and enhance our leasing, marketing, property and asset management.”

“We utilize intercept surveys taken on campus to measure the awareness and market positioning of our properties,” he said.

The firm also uses Modern Message — an intraproperty communication tool — to continuously measure feedback from tenants. “We monitor apartment listing services and our online reputation every day,” Mr. Pierce wrote.

The firm has also experimented with geomarketing, using location information from mobile Internet app users to target potential renters. In the future, Mr. Pierce said he expects that a variety of data, largely collected from Internet shopping, Internet browsing and social media, will provide opportunity for businesses, including real estate managers, to reach their target markets.

Investors intrigued
Investors are taking notice.

Paul Chapman, director of real estate for the Santa Fe-based New Mexico State Investment Council, which has 9% of its $22.7 billion in the asset class, said the use of big data by real estate managers to improve their decision-making is a hot topic among asset owners as well.

“It knows who you are and it knows what you will buy and it knows what you will pay a premium for,” Mr. Chapman said.

Real estate managers are starting to invest in new technology and data analytics that give managers the ability to gather data, analyze it and process the data very cheaply, Mr. Chapman said.

But people are not superfluous — yet.

“Real estate fintech is a big deal in the industry and is evolving and is being rapidly adopted, but it is not yet to the point where it can do automatic underwriting (of properties),” said Karl Polen, chief investment officer of the $38.8 billion Arizona State Retirement System, which has a $3.4 billion real estate portfolio. “We still need humans for that.”

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