Real estate investment used to be an art form rather than a science. It was an inexact parlour game that favoured big-time gamblers working on little more than a few spreadsheets of data and a hunch.
But times have changed. Technology has wormed its way into all facets of the financial industry, including real estate investment. Modern investors now leverage real-time insights, reams of data, and a suite of emerging technologies.
But no technology has had a more significant impact on real estate investment than big data analytics. In this article, explore what makes this technology special – and how it has radically reshaped the way investors buy, market and manage their commercial real estate.
What Is Big Data Analytics?
Big data is defined as any data that’s a) too voluminous, b) too fast and c) too varied for conventional software to store, analyze or interpret. An easy example would be the sum total of daily data on a social media site – all the text posts, shared photos, viral videos, etc. The data is too enormous, fast-moving and diverse to capture in one place.
And that's where modern analytics makes its entrance. Current analytical practices based on artificial intelligence and machine learning can comb through this data for insights and exact trends.
It’s no wonder the real estate industry is excited about big data analytics. As Nobul CEO Regan McGee put it, “The real estate industry is awash in data, yet we as a sector (had) not really embraced the tools available to leverage that flood of information.” Now, however, the industry has “finally started to see the light and embrace the benefits that data analytics have to offer.”
What are those benefits, exactly? Let’s take a closer look.
Precise Insights for Sounder Investing
A critical advantage that big data analytics brings to the table is its ability to trawl for precise insights. And it does so by analyzing a comprehensive compendium of both traditional and non-traditional data.
Traditional data is your average real estate information: sales history, comparables, basic neighbourhood demographic data, etc. And non-traditional data is everything else, a wide-ranging overview of anything and everything that could possibly impact a property’s current and future value. This might include the average ratings of coffee shops in an area, the tone of reviews for nearby recreational centers, the percentage of a neighbourhood’s citizens employed in the financial sector, etc. The list goes on. Together, these wide-ranging data paint a strikingly accurate portrait of current and potential worth, allowing investors to make sound decisions about where to put their money.
Targeted Marketing and Effective Tenant Vetting
And big data doesn’t stop when the deal is signed. After an investor leverages big data in the transaction, they can continue to leverage big data to market, protect and optimize their investment. One way a modern investor achieves this is by using big data analytics in their targeted marketing. Because they can access so much information about their property and about potential renters, they can marry these insights to create an effective marketing campaign.
Likewise, investors can vet potential tenants (whether residential or commercial) to determine the likelihood that they will pay on time, the potential for turnover, cleanliness, etc. This big-data-powered vetting process helps an investor protect their investment from misuse or arrears.
It will take some time before big data analytics sees widespread adoption among investors. But a savvy minority have already come around to its merits, and it’s only a matter of time before the technology completely changes the industry.
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