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    The State of Predictive Analytics in Commercial Real Estate

    Predictive analytics has only played an active role in commercial real estate in the last decade, but its impact has been massive. Traditionally, developers have made key project decisions with retroactive insights and intuition. With no other options, firms have had to work around the problems inherent in depending on an outdated and inexact methodology.

    However, companies have found a better way forward by using predictive analytics in commercial real estate. And as these innovative tools have become more technologically savvy, they’ve enabled users to be more deliberate in their project delivery.

    Here’s a closer look at how predictive analytics work, its usage in the commercial real estate sector, and how it can help firms scale and reach the next stage in their trajectory.

    Understanding Predictive Analytics

    Although the phrase can sound like the domain of university data science researchers,  predictive analytics isn't a difficult concept to understand.

    In essence, predictive analytics is digital pattern recognition that involves analyzing past and current data to make predictions. Humanity has used that decision-making approach to decide when to plant crops for centuries. But with the advent of computer systems, we’ve learned how to create less anecdotal, more accurate forecasts by collating vast amounts of information.

    Thanks to recent innovations in artificial intelligence technology, we’ve developed platforms that can perform millions of complex calculations in seconds.

    Accordingly, today’s  AI-driven predictive analytics software can create complex trend forecasts that let users proactively identify and mitigate risks. Because of their fast processing speed and universal applicability, software engineers have created specialized tools to service many industries.

    Advanced predictive analytics programs now enable better weather forecasting decreased manufacturing downtime, and more efficient detection of medical scan anomalies. Researchers expect the market for that type of software to grow from $7.32 billion in value in 2019 to  $35.45 billion by 2027.

    [Ebook] Discover the data that’s necessary to bring complex real estate  projects in on time and under budget.

    How Predictive Analytics Software is Used in Commercial Real Estate Today

    Predictive analytics has had a seismic impact on the commercial real estate sector by helping developers optimize every phase of their work, from planning through construction.  

    Users can also tap their purpose-built software programs to create detailed project roadmaps that breakdown for the budget will be allocated over several months. Project teams can tap into their database of institutional knowledge to see how their service providers have performed over time. With that information, leadership can make data-driven vendor procurement choices that will keep their projects on track in the long term.  

    Firms also use their AI-powered platforms to see how their projects perform in real time. Since modern programs automate cost data entry and organize it within the system accordingly, AI can flag long-term budgetary issues like a sudden increase in building material costs. With that kind of proactive insight, companies can adjust their anticipated spending to prevent overruns before they happen.

    In an industry where  69% of projects don’t come within 10% of their proposed budgets, proactively addressing excess costs is a massive advantage to real estate development firms.  

    In addition, using predictive analytics software in commercial real estate development lets companies centralize their data. Automated platforms give leadership a 30,000-foot perspective on their past, present, and future project spending. From that position, it’s much easier to identify cost-cutting opportunities in their proposals, contracts, and invoices.

    How Predictive Analytics Can Help the Commercial Real Estate Firms in the Future

    According to the  KPMG Global PropTech Survey 2019, only 25% of real estate companies had an established data strategy that involved capturing and analyzing information from their portfolios. The same study found that 30% of respondents had no data strategy in place. Back then, hesitating to embrace predictive analytics meant passing up the opportunity to be an early adopter of a promising emerging technology.

    But in 2022, it means turning down the chance to achieve significant financial growth and industry recognition.

    Right now, using predictive analytics in commercial real estate development helps firms future-proof their portfolios. AI-powered platforms give project teams the data insights necessary to be proactive and decisive when facing major external disruptions. With the comprehensive real-time visibility commercial real estate platforms provide, leaders can take steps to mitigate problems as small as change orders and as big as macroeconomic trends.

    Real estate development software with advanced forecasting tools allows for more lucrative financial outcomes on a per-project basis. When deployed across a portfolio, they allow for consistently predictable results regardless of asset class, geography, or complexity. Firms can leverage those advantages to build a reputation for showing resilience in the face of adversity and turning in better-than-expected ROI.

    That’s the ultimate benefit of utilizing predictive analytics software and commercial real estate development. When harnessed correctly, it can play an integral role in assisting promising startups in evolving into industry leaders.

    Download our  Complete Guide to Commercial Real Estate Data Analytics to learn more about the data every developer needs to track to cut costs and earn more on each project.

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