Download the Guide
Complete this form to access the guide
WHY DATA ANALYTICS?
Technological Innovation Is Ushering In An Era of Greater Profitability & Efficiency
It’s no secret that commercial real estate has lagged behind other leading industries in adopting technology solutions. Despite incredulous growth in the quality and sophistication of real estate data analytics software over the past decade, real estate professionals remain hesitant to adopt modern solutions.
But is it possible to maintain a competitive edge in the modern world while holding onto old processes?
For decades, teams have relied on manual work to get the job done, like inputting data into spreadsheets. It’s a familiar process that doesn’t necessitate new training and, for the most part, works.
Yet these seemingly tried and true methods are not quite as cost-effective, accurate, or efficient as developers and their teams want to believe. Manual workflows can serve as huge sources of drain on a team’s resources. They eat away at precious time, forcing teams to spend countless hours on draw requests or cost reporting, and can lead to budget overruns due to inefficiency, ineffective cost tracking, or data entry errors.
When data analytics is mentioned, many real estate professionals also remember legacy applications that were expensive, clunky, and hard to integrate easily. It’s no mystery why so many were left feeling uncertain about the returns on investment in such technology.
Modern solutions, however, are not the same as the commercial real estate data analytics platforms of the past.
Today, intelligently designed analytics tools leverage automation and artificial intelligence to enable better project planning, prevent cost overruns, and identify cost-cutting opportunities early on. They help teams to preserve historical data and access real-time information in a centralized platform. The best solutions also grant you access to proactive insights and automated reporting.
The commercial real estate industry is evolving, and modern real estate teams that are beginning to adopt data analytics technology are seeing significantly higher returns and savings. As this technology separates the haves from the have-nots, it’s time to utilize all that is available to maintain your competitive edge.
Too many real estate professionals simply don’t realize what advancements have been made and what types of data analytics solutions are available. Now is your chance to discover how commercial real estate data analytics can help your team cut costs, increase returns, and improve efficiency.
Modern real estate teams are using data analytics to stay ahead
The commercial real estate sector is facing big changes in our post-COVID-19 world. It pays to stay ahead of trends and make stronger, data-driven decisions.
Modern data analytics technology helps address specific needs and solve problems in virtually every phase of project delivery, and across nearly every asset class in the industry. Whether you are seeking to acquire investment and build stakeholder confidence, successfully navigate the pre-construction stage, or improve your property management processes – commercial real estate data analytics can help tremendously throughout the entire life-cycle of a development project.
Investment & Acquisitions
Any commercial real estate feasibility study requires easy access to historic and real-time data. Leveraging data and analytics to manage transactional information, underwriting, valuations, market research, and site selection can help your team in countless ways.
Transactional Data
to understand the past and present value of a property and its potential return for the owner
Underwriting & Valuations
using big data benchmarks to provide accurate projections of what is to come
Market Data
including demand growth estimation and other fundamental KPIs
Site Selection
for guiding investment and development strategies
The Investment & Acquisitions stage of a complex real estate project requires capturing lots of information. The success of a project relies on the accuracy and quality of this data, but the chance for error can also be high.
Commercial real estate developers have long invested countless hours into researching the most important market indicators and economic factors for site selection, conducting financial analysis in an effort to understand budget restraints and projected returns, selecting the best vendors for their projects, and securing enough investment well before the shovel hits any ground. On complex development projects, this used to entail months of tedious, administrative burdens for teams.
Data and analytics software simplifies the process. In the investment and acquisitions stage, technology allows for seamless management of complex transactional data, easy access to key market insights, and more – allowing for more accurate and up-to-date decision-making or reporting early on.
The right data analytics platform helps teams increase returns, ensure a higher probability of project success, and tighten up development schedules by ensuring historical vendor data is cleanly organized and centrally accessible, past project data can be referred to when needed, and proactive insights keep you thinking ten steps ahead from the start. The benefits of each feature add up, often leading to significant cost and time savings in the long run.
Data analytics helps to eliminate the potential for human error, and make gleaning useful insights much easier than before. No more working out of siloed, convoluted spreadsheets or basing key project decisions off of gut instincts.
With this valuable tech, teams can focus on higher order decision-making, and take advantage of industry best-practices and up-to-date market data to feel confident in their site selection, vendor relationships, and benchmark creation.
Why use data analytics for investment & acquisitions?
- Capture and record all transactional data in real-time without importing or exporting documents from different systems
- Understand the past and present value of current properties and forecast potential future returns
- Effortlessly compare vendors to decide who can best supply you quickly and affordably
- Keep all transactional data organized and accurate throughout the year, no more sifting through unreliable paper trails
Transactional Data
Transactional data is critically important for anyone involved in real estate investment or development. If you’re a part of a development team that also owns the property you’re developing, this is one you’ll want to pay special attention to.
Transactional data, by simple definition, is information that is captured from transactions. It’s used to help understand the past and present value of a property and its potential return for the owner. It does so by recording the time of the transaction, the place where it occurred, the price points of the items bought, the payment method employed, discounts if any, as well as any other quantities and qualities associated with the transaction. Because it’s used to record the date and time of a specific transaction, transactional data is able to be used to inform the timing of pertinent business maneuvers.
Underwriting & Valuations
Automated Valuation Model (AVM) is a service that provides real estate property valuations using mathematical modeling combined with a database. Most AVMs calculate a property’s value at a specific point in time by analyzing values of comparable properties.
The concept of AVMs have been around for years, but have left many real estate development teams underwhelmed. Before today’s modern technology, AVMs haven’t met the diverse and specific needs of most development teams. Savvy real estate teams are beginning to change that by leveraging big data benchmarks to provide more accurate valuations.
According to research from JLL these benchmarks include:
Local Amenities
ESG Accreditations
Occupant Reviews
All of these can have an impact on valuation. With this data, AVMs can deliver updated property or even portfolio valuations throughout ownership.
During the acquisition process, valuation data will drive efficiency in internal underwriting and provide accurate projections of what is to come. It can actually differentiate investment strategy and give both development teams and their investors the ability to look at assets differently than competitors by including robust data sets in the underwriting process.
Data reveals appreciation trends on a specific asset, forecasts pro forma rents on new developments and renovation projects, as well as provides critical insight into demand. It can also look deeper into financial records and cash-flow models that can provide better net operating income (NOI) projections.
Market Data
Those who are best armed with market data are best positioned to succeed. The proper utilization of market data consists of determining value by comparing a property to other properties of similar size and condition in the same area. If two similar properties are $500,000 each, then your property would be estimated at $500,000.
This form of real estate data plays a part in almost any situation throughout the early stages of your project, including:
- Whether to buy or sell a property
- How much to buy or sell a property
- Whether a property could be redeveloped
- What type of return to expect
- Whether it’s worth investing in certain building amenities
Let’s look at our same real-world example from above. A developer has a plot of land earmarked for a new office building. The organization must first get an equity investor, and then they need to line up a lender. A lender looks at the market and sees that rents for similar commercial spaces are $5 per square foot, but the developer needs to get $7 per square foot in order for the deal to work.
The lender sees this as a major red flag, and it is a signal that the deal must be tweaked in order for the project to move forward.
Let’s not forget about real estate demand growth. It’s not all so cut and dry; market conditions matter. You wouldn’t develop a region with no demand! This is one of the fundamental KPIs that you need to think about before starting a project.
Demand growth is notoriously difficult to forecast, but certainly not impossible. It can be estimated by using mortgage application numbers, population trends, and construction permit data.
Site Selection
Investment and development strategies typically have a narrow focus. They outline many characteristics, from big picture items, like geographic market and asset class, to more nuanced details, including proximity to job centers, average area income, average education, as well as access to transit and amenities.
The Most Important Data Tools for Pre-Construction
In the pre-construction stage of a development project, real estate professionals need to be on top of every aspect of project planning, design, contracting, and budgeting. Successfully managing the flurry of incoming data is not only essential to ensuring project success, but also essential to building investor relationships. Luckily, data and analytics solutions guarantee better project outcomes every time.
Cost Estimation
including cash flow projections & anticipated cost reporting to ensure you get the funds you need throughout your development project
Historical Cost Data
Use data stored from past project performance to inform current decisions
Historical Vendor Data
Refer to past performance data to ensure that your project is staffed with the best possible team at the best rates
Current Vendor Data
Keep a close eye on large volumes of vendor communication and management
What Does Your Process Look Like?
Most project teams still rely on spreadsheets, siloed information and outdated cost reports to make important budget decisions.
Before your construction team ever breaks ground, you need a pretty good idea as to how much each stage of the project is going to cost.
The key here is that the cost estimates
must be as accurate as possible, meaning based on analytics and not guesses. Ensuring you are utilizing your historical cost and real-time performance data is the best way to make accurate cost projections based on data.
Mitigate the Risks Associated with Unreliable Vendors.
Leveraging a combination of historical vendor data and real-time vendor tracking is essential to ensuring your project remains on time and on budget. Instead of keeping pertinent information siloed in spreadsheets,
consider using real estate development software to ensure strategic vendor decisions can be made quickly and efficiently
Tracking historical vendor data such as past bids, change order history, and past project outcomes helps you refer back to all available performance data to ensure that your project is staffed with the best possible team at the best rates.
Once you’ve used past data to select the vendors you need for your current data, your project moves to a new stage– one where you need to keep a close eye on current vendor data.
Cost Estimations
Chances are pretty good you don’t have a blanket check for developing your new project. Before your construction team ever breaks ground, you need a pretty good idea as to how much each stage of the project is going to cost. The last thing you want to do is run out of funding halfway through.
Cost estimations include metrics like cash flow projections and anticipated costs. These are important to gaining access to the funds you need throughout the development project.
Imagine a teenager goes to their parent and asks for $100. What is the first thing the parent will say? They will ask what this money is for before determining whether or not to give it. The parent wants a cost estimate regarding what this money will be going to and whether it truly costs $100 dollars or not. The bank, mortgage company, or any other financial lender acts in just the same way! Without data-driven and realistic cost projections, you’ll have a hard time getting the money you need to make any of it possible.
The key here is that the cost estimates must be as accurate as possible, meaning based on analytics and not guesses. Ensuring
you are utilizing your historical cost and performance data is the best way to make accurate cost projections based on data. Storing your cost data in separate spreadsheets will make it hard to aggregate and make assumptions in a timely manner, but modern real estate development software has empowered development teams to ensure every decision is backed by data.
Historical Cost Data
Remember, the information you’re looking for isn’t based on guesses. Data stored from past project performance can inform current decisions. This is known as “historical cost data.”
By harnessing and organizing this knowledge instead of letting it get buried in one-off spreadsheets or living in the mind of a single employee, your development team will be able to better negotiate proposals, contracts, and change orders more effectively.
You can also put deals together faster by starting projects with pertinent information instead of from scratch.
Never make the same mistake twice. With historical data at hand, your team is able to mitigate risk by knowing which vendors are reliable and low-risk. This is an incredibly helpful way to keep your project within budget and completed on time.
Preserving institutional knowledge is a fantastic way to deliver your current and future projects with more efficiency and accuracy. For your development team, institutional knowledge can include things like:
- Cost data from past projects
- Vendor rates from past projects
- Experience negotiating change orders
- Operational workflows that proved successful
Historical Vendor Data
A complex real estate project can have upwards of 200 vendors, in charge of everything from surveying the site to manufacturing the lighting fixtures. With so many moving parts, it’s
no surprise that the overall success of a project relies greatly on every vendor completing their respective job on time and within their allotted budget.
Wouldn’t it be great to know ahead of time who you can trust to do their part? By harnessing the power of data, you can!
The best way to keep your project moving forward smoothly is to mitigate any risk associated with unreliable vendors. Tracking historical vendor data helps you refer back to all available performance data to ensure that your project is staffed with the best possible team at the best rates. This includes: Past Bids, Change Order History, and Past Project Outcomes.
But, how do you operationalize this data? The key is to aggregate and store your historical vendor data in a way that your entire team has easy access to the information and can quickly make decisions based on what the data tells them.
Instead of keeping pertinent information siloed in spreadsheets, consider using real estate development software to keep it easily accessible to empower your team to make strategic vendor decisions quickly and efficiently.
Current Vendor Data
Once you’ve used past data to select the vendors you need for your current data, your project moves to a new stage– one where you need to keep a close eye on current vendor data.
Now, you’ll be tracking recent bids and bid tracking, where the bid is in the process. You need a bid tracking system for this stage, in order to keep track of all the bids your company has submitted.
If your project team submits a large volume of bids, housing this in one database will be extremely valuable in letting your team members monitor bid status, deadlines, and milestone dates. While you may have managed this in the past across multiple spreadsheets, this is absolutely not the best way to handle, manage, and store this incredibly valuable information.
Proper real estate development software helps you centralize vendor communication and management, issue RFPs quickly, find new vendors to work with, easily compare bids, and more. Without the vendor management capabilities that make this holistic vision possible, your current system is leaving gaps.
Real-Time Cost Data
Project management in the construction phase is complex. Yet, it’s important to have a pulse on costs at any given time. This includes both the hard cost data and soft cost data. Effective utilization of this data ensures a more favorable outcome.
Hard Costs
costs that are directly related to the construction of your project. You may hear these referred to as “brick-and-mortar costs,” because they include the structure, construction site, and landscape.
Soft Costs
costs that are indirectly related to materials, labor, or the physical building of the project. They are considered “soft” because they are intangible.
As your project progresses, both types of construction costs become more of a factor. What you’re looking for is data that provides an accounting team with a clear vision of the financial implications.
Resources, logistics, and productivity are major aspects of this type of data. Having insights into resources enables your real estate development team to know what materials, equipment, and labor are necessary to complete a job. Having this data readily available in real-time, like a budget line trending high, helps project managers make adjustments quickly
This process usually involves multiple departments, including accounting, and inevitably leads to delayed information, difficulty tracking, and vendors being both over and underpaid. You’re making your job much harder for yourself if this is still how you’re working.
Modern tools allow you to track and organize vendor communications to help with visibility surrounding contractor management data. By embracing today’s most-helpful technology, successful real estate teams are able to dramatically increase visibility into a project or portfolio. They have fast, real-time access to all project data in order to always understand the status of a project and make critical, informed decisions.
As well, this also gives development teams the ability to quickly share project details in real-time with management teams, partners, clients, investors, and other key stakeholders. Accounting teams don’t want to also act as project managers. Ensuring data is easily flowing between teams helps accountants focus on their core job duties.
Industry Best Practices With Data
t’s easy to compromise on industry best practices as your project progresses. Maybe there’s a small compromise here and there in order to move the project forward faster, or because the best practice doesn’t feel needed at the time. But those little compromises add up to larger issues down the road. If you want to ensure the project remains on track it’s
important to follow industry best practices every step of the way, no matter how inconvenient it may seem.
Compiling and storing best practices, and baking them into your current workflows is the best way to ensure every action your team takes is up to industry standards. In turn, you’ll be well positioned to complete projects on time and under budget.
Examples of how to store and track your project against industry best practices include:
- Reporting templates that share pertinent data with stakeholders
- Cost-cutting development strategies that your project is actively checked against
- Checks to ensure decisions are data-backed vs. gut-driven
Return on Investment
Now that you’re well into the construction phase, it’s time to think about your return on investment (ROI). ROI is a widely used financial metric for measuring the probability of gaining additional funds from the initial investment made. It is a ratio that compares the gain or loss from an investment relative to its cost.
Your investors made an investment in your construction project and they want to know how well their investment has performed. By keeping all of your cost data readily available, you can produce ROI numbers quickly and make adjustments as needed.
The Importance of Commercial Real Estate Data for Your Team
The importance of commercial real estate data cannot be overstated. Having a single source of data is important to a project’s success, from the earliest stages of securing financing to finishing construction and handing it off to a property management team.
Tracking your team’s financial and performance data takes more than the commitment to do so. In fact, the process often goes off the rails when a team attempts to track too many different indicators using manual processes, spreadsheets, and force-fitted technology. This is because you’ll end up with more data than you can successfully analyze when the data is spread between multiple spreadsheets, stored away with different employees that have keystroke errors, resulting in decisions made based on a lack of or misguided information.
Clearly, these metrics are much easier to calculate if your team has the right software in place. Northspyre is real estate development software that was specifically designed to help track, analyze and make actionable decisions based on commercial real estate data from pre-development all the way through project completion.
Running a multi-million dollar real estate project in static spreadsheets often exposes your project to unnecessary risk, delays, and budget overruns. Knowing that, why would a savvy real estate developer manage a large project in a tool that is inflexible and error-prone?
See Northspyre in action
Get a demo to see how leading developers use Northspyre to work smarter at every stage of the development lifecycle.