Artificial intelligence, virtual reality, the Internet of Things… all trending technologies that are showing up everyplace from online shopping recommendations to continually monitored physical systems.
This big data is collected, analyzed and deployed to help users make smarter choices and is increasingly guiding forces across the commercial real estate industry. Beyond property management and building operations, these types of analytics can also inform important development decisions.
To gain a sense of how CRE firms are using advanced data analytics, the NAIOP Research Foundation commissioned “The Role of Data Analytics in Commercial Real Estate Siting, Design and Valuation Decisions” to examine applications in site selection, design and valuation for commercial buildings.
The report notes that while the CRE industry has been slower than other industries to adopt data analytics, some firms have identified several ways that data analytics can support land and building development and contribute to better project outcomes.
Through research and interviews with brokers, data providers, investors, developers and other professionals at CRE technology firms, the report outlines key takeaways on how data analytics have the potential to add substantial value to new development projects through improved siting decisions and building design, including:
- Most commercial real estate firms continue to rely primarily on traditional forms of market research when making investment and development decisions, but data analytics have the potential to improve many aspects of the development process.
- Emerging applications for data analytics include examining parcels within a jurisdiction to identify land packaging or building development opportunities, advanced construction planning and project management, evaluating the rent premiums associated with different building amenities, and evaluating a building’s suitability for conversion to a new use, among others.
- High costs associated with developing in-house data analytics capabilities lead most commercial real estate firms to outsource analytics tasks. More companies will develop their own analytics resources as they become more useful.
- Advancements in artificial intelligence and further investments in CRE data collection and structuring will expand applications for data analytics in commercial real estate development.
The report was authored by Clifford A. Lipscomb, Ph.D., MRICS. Lipscomb is chief investment officer, High Speed Alliance; consultant, Inveniam Capital Partners; and research affiliate in the School of Public Policy, Georgia Institute of Technology.
