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Data and analytics are the cornerstone of the technological revolution in commercial real estate. The information gleaned through data and automation gives real estate organizations unique insights—and knowing what others don’t is a valuable competitive advantage. Although real estate is known for its glacial adoption of new technology and innovation, companies have quickly understood the benefits of data and have integrated analytics tools at the fastest pace of any other type of new technology.
The industry is only in the early stages of understanding how to extract the most value from datasets. Currently, real estate companies use data as an external accounting of market information, but curating an index of a company’s internal development data can be just as impactful.
Internal (or historical) data is information gained from past experiences or professional expertise, and it can inform investment and development decisions and guide strategy. For small developers, in particular, data can elevate an organization to compete with much larger players and pursue opportunities that would otherwise feel out of reach.
There are three key ways that data and analytics is transforming the core competency of small development shops for the better.
Long before the benefits of technology and automation, large institutional real estate developers have had access to a critical dataset that has allowed them to make market-driven, competitive decisions: historical data. Large development shops execute dozens of projects annually with a robust pipeline that stretches across several markets. All of that activity generates a lot of data, targeted and personalized data. When retained, that data can be carried onto future projects to generate better and more predictable outcomes, and when paired with current market information, these developers have a meaningful market advantage. “I like to call it market omniscience. They're sort of all-knowing,” says William Sankey, CEO of Northspyre.
Traditionally, this has been a key differentiator between small and large developers, but technology can help mimic scale for small shops. Northspyre, for example, has completed more than 2,000 projects representing $125 billion of investment. “At Northspyre, we have more data than the biggest developers in any city. We know a lot,” says Sankey. With it, the company has created an index of information from each of those experiences to deliver the same expansive proprietary data as a large organization. “We can feed you data quickly and help you iterate quickly,” says Sankey. “This is a fundamental transformation.”
The technology creates a data index across several development projects and then, through robotic intelligence, can produce different targeted scenarios unique to an individual developer’s business model and strategy, based on development site, location, and asset class. This process is becoming a standard for the development industry, according to a recent study on technology integration from CBRE. “Fueled by technology that enables unprecedented access to data, real estate decisions are now increasingly personalized to the unique needs of the client,” said the report.
Conserving Internal Experience
Small development shops might not turn dozens of projects annually, but most have a long and stable history of bringing successful projects to market. Although smaller than the institutional players, small and mid-sized developers have historical datasets from past projects. However, most aren’t conserving or retaining that information. Even worse, that historical information can live with veteran employees, and it’s lost when the employee leaves the organization.
As a company grows and expands, historical knowledge becomes a valuable resource. Through automation, companies can take care to retain historical data and create a central database that employees can access to understand the company’s experience and approach, and even take care to avoid past errors and pitfalls during the project management cycle. Real estate development is an experience and institutional knowledge game,” says Sankey. “It's very easy to run into certain change orders or problems or mistakes. You get burned and lost.”
This type of retrospective data includes past project performance, market performance, and property features, as well as project management variables, like realistic construction scheduling and exposure to overages. Developers can often learn a lot from their own experience, but small outfits do not typically have the time or resources to index the information. A combination of automation and machine learning algorithms can manage and retain past project data so that developers have an archive of their experiences to draw on when planning for future projects.
Building Institutional Knowledge
Not all lessons come from the past. Many emerging challenges and opportunities are born from present-day market dynamics. Real estate developers have no better resource to unearth and proactively respond to emerging trends than a strong team of experienced professionals. However, often small developers are not maximizing the value of that resource due to a lack of knowledge sharing. This is a major problem across industries. A productivity study from Panopto found that companies lose $40 million annually due to insufficient knowledge sharing.
Institutional knowledge allows professionals to relay or pass down critical information and experience to other members of the organization. When this happens, development teams operate as a cohesive unit, a network—rather than a fragmented collection of workers. Many business leaders agree that institutional knowledge is a company’s greatest asset, but it can take time, effort, and investment to make sure that institutional knowledge is captured and shared.
Technology can create a system to build institutional knowledge and share information. In fact, an analysis of institutional knowledge from the Harvard Business Review recommended investing in technology as a key step to create processes that can capture institutional knowledge and store it in a central and accessible company index, not in the minds of legacy employees. Automation amplifies the benefits by extracting and retaining information with little effort from employees.
For small developers, this technology is readily accessible. It doesn’t take an IT team like a larger developer might have. Products like Northspyre are cloud-based technologies easily embedded into projects to achieve more desirable outcomes and meet targets. By taking control of internal data and experience, real estate developers are investing in their own success and longevity, project after project. Discover more about how data and analytics tools can help your firm navigate today's market in our video interview Real Estate Development Technology: Why Adoption is Crucial to Success.
Tag(s): Real Estate Technology
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