Next Wave of CRE Tech: Harnessing Data to Unlock Value
The CRE tech revolution is underway, and the industry is coming to terms with the critical need for data-driven organizations, teams and results. The current tech landscape enables financial data to be aggregated into a single, company-wide system of record rather than compiling disparate data from separate, siloed systems. How organizations leverage and analyze the data is what will ultimately provide the competitive edge they need to rise above the rest.
What comes next is a wave of technology that provides performance analytics and insights that when optimized will increase portfolio value. In fact, every $1 saved in operating expenses can translate into $16 of additional property value created.1 In the world of operating expenses, which is often overlooked, this translates to billions of dollars in unrealized asset value. The optimization comes from seeing the data automatically tracked and compared against local market performance and then continuously monitoring improvements and outcomes.
By then making these performance analytics available across an organization, asset managers can tap into the power of normative comparison to improve outcomes and organizations can then address the need for collaboration. Networks have a massive influence on behavior – and peoples’ competitive nature actually can be used positively to motivate teams and organizations. Companies are starting to understand that open communication and teamwork leads to better results, as can be seen in the office movement toward open concept, collaborative workspaces.
The stakes continue to mount in the race against a CRE market that ebbs and flows with a relative amount of unpredictability. Asset and property management teams are tasked with protecting asset values while also continuing to drive positive returns. Operating expenses is one area that is largely ignored on an ongoing basis due to the complexity of gathering the data needed to identify the largest savings potential, as well as the need to focus resources on higher-impact activities such as acquisitions, leasing and capital expenditure. However, shifting focus to the operating expense side of an income statement can have an enormous impact on net operating income and will benefit greatly from technology solutions that provide critical performance analytics and insights.
For example, a 1 percent reduction in operating expenses across the U.S. can translate into approximately $105 billion of additional asset value created2. With this type of financial upside possible, finding and implementing a better process to optimize asset performance becomes more critical.
Additionally, the risk of maintaining the status quo for manually analyzing the aggregated data is high and investors can miss out on hidden value. Human error and the sheer magnitude of analyzing Excel spreadsheets make it easy to overlook opportunities for improvement unless there is a glaring variance. Using this archaic approach, likely the only way operating expenses are reduced is through contract rebidding due to expiration or anecdotal information.
Tech-enabled information transparency does not have to be limited to financial performance either. The collaborative nature of this type of platform can help planning, improved communication and proactive problem solving. The fact is that as CRE portfolios become more geographically diverse, the need has arisen to make collaboration easier and new technology systems are enabling this in a way that is also driving positive outcomes.
Technology is evolving to ensure real estate professionals have easy access to the data they need to do their jobs most effectively and is available to them in the most user-friendly way possible. By providing the right information with the right analytics with these new data-driven collaboration solutions, teams are empowered to take action and make smarter decisions while unlocking hidden value and driving returns.
- Property value estimated based upon weighted average cap rate of 6.23% (excluding lodging)
- 1% savings of estimated $650B in annual U.S. operational expenses with weighted average cap rate of 6.23% from CBRE Cap Rate Survey First Half 2017.
Diane Vrkic is the founder and CEO of Waypoint, the premier asset management platform for performance analytics and operations management. Waypoint makes it easy for asset managers to identify real-time performance opportunities; property managers to effectively manage costs; and acquisition teams to validate financials of target properties and is fueled by over 2 billion square feet across 275 U.S. markets – making it the industry’s largest operating performance database of its kind. Prior to Waypoint, Vrkic was the Global Chief Operating Officer for Jones Lang LaSalle’s Energy Services Business.