Where do you begin to develop a real estate data strategy for your firm? What are your goals? What are the components of that strategy? And what should you expect in terms of value?
“CRE brokers who can tap into today’s sophisticated data tools can differentiate themselves and their core value proposition to clients.”
That’s the clear takeaway from a Jan. 2020 Forbes magazine article – and it’s quickly becoming the consensus opinion for thought-leaders throughout the commercial real estate industry.
Of course, admitting that data is the future is a lot easier than configuring your business to take advantage of it. Commercial real estate has been notoriously slow to adopt new technology compared to other industries; in some cases, firms may have to make up ground before accelerating into the future.
Where do you begin to develop a data strategy for your real estate firm? What are your goals? What are the components of that strategy? And what should you expect in terms of value?
The goal of a real estate data strategy
Many of the pain points that commercial real estate firms have in common can be tied back to manual, high-touch processes. If headcount rises when assets under management increase – it likely points to a lack of automation. If reporting is a time-consuming chore, it could be because critical data is trapped in spreadsheets and not integrated into an enterprise data warehouse.
“Typically, you will spend a third to half of a quarter putting together reporting that isn’t even accurate because of dirty data,” said Kevin Tran, a senior manager at Saxony Partners. “You spend lots of time and effort to deliver something that is riddled with errors.”
The goal of a comprehensive data strategy is to establish repeatable processes for collecting, integrating, reporting, and analyzing your data. Doing so will save time, eliminate inefficiencies, and positively impact your bottom line.
Where do you start?
At Saxony Partners, creating the data strategy begins with a focus on the firm’s people, processes, and technology.
“Technology for technology’s sake is just going to make things worse, faster,” said Derek Thornhill, Vice President of the Real Estate practice at Saxony Partners. “It’s not going to solve your problem.”
“Instead, you have to do the due diligence on the front end to understand what problems your employees are facing and what issues are presenting within their workflows. Then you can begin to devise a technology roadmap aimed at solving those issues.”
First, there’s an assessment. During this phase, consultants conduct focus group meetings and gather information on pain points employees are experiencing. Business processes and workflows are examined in detail. The current technology stack is assessed to identify opportunities for upgrades and optimization.
“We look at their outputs and reports,” Thornhill said. “We use internal and external reporting to find the source – the original data sets. We find out if anyone manufacturing that data owns it, and then we determine the value of the data once it reaches the reports.”
From there, business consultants collaborate with technology consultants and begin the strategy phase. Here, initiative-specific business cases are developed and prioritized. A high-level implementation plan is developed and reviewed with key stakeholders. It’s at this point that specific fixes for those aforementioned pain points are introduced.
“We drive technology decisions toward centralizing data,” Thornhill said. “In practical terms, that’s getting your data out of Excel and into a true database.”
“Once your data is centralized, then you can start to fix all of the other components: your accounting system and business processes within the company. The integration is the key to eliminating errors and redundancies.”
Tran agrees – and emphasizes how centralization leads to automation.
“All we want our clients to have to do is tap in and analyze the data after we have consolidated it,” Tran said. “We eliminate the grunt work of pulling data down, consolidating it, and cleansing it by having all of those rules as automated as possible. Once they are accessing their data from a singular, centralized point there are fewer chances for discrepancies to happen.”
Finally, the roadmap is developed and implemented. Importantly, it is implemented with scalability in mind. Technology that is built for the present is out-of-date as soon as it is implemented. The key is to incorporate future state ideas and data flows into the current data strategy to ensure that what’s devised can grow and evolve along with your business.
The value of a real estate data strategy
Now that you have a real estate data strategy, what should you expect to get out of it?
Operational Efficiencies: With an enterprise data warehouse in place and automation employed, firms will be able to reduce the amount of time employees spend on routine, repeatable tasks. This allows your staff to focus on activities that actually add value.
Clean Data: With a single source of truth, gone are the risks associated with duplicate data collection processes and siloed data.
Reduced Risk: The likelihood of errors and associated costs due to a lack of understanding of data – or poor-quality data, in general – are all but eliminated. Process-related risks – those associated with too few people having access to your data – are reduced. Reputational risks – those associated with reporting incorrect information internally or externally, are eliminated.
Future Automation Opportunities Enabled: Effective data strategy and governance provides the foundation necessary for future technology initiatives. Data analytics is already uncovering astounding insights and this technology will only continue to evolve and improve over time. In the future, prescriptive and predictive analytics will be employed to turn raw data into a serious competitive advantage. Getting a scalable, adaptable strategy in place will put your firm in position to take advantage of emerging technology
“Real estate is becoming more sophisticated when it comes to data and technology,” Thornhill said. “We have more and more people entering the workforce who have never lacked instant access to data. This is the future of commercial real estate – without a doubt. And now is the time to embrace it.”