Will Data Transparency Disrupt Commercial Real Estate?

by | 12 June 2015

Transparency of data and information is a key benefit of the Internet age. For example, we can negotiate the purchase of a car knowing the price the dealer paid and the price range of deals made in our area with KBB or Edmunds. When it comes to shopping for a house, Zillow and Redfin provide a plethora of data points regarding recent sales, price changes and days on market prior to your working with an agent to discuss your preferences. With stocks, we can easily find the price of bids, asks and most recent trades.

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Yet in the commercial real estate market, information on lease or sales transactions and even available space is still not completely accessible to participants in the market. Data democratization has disrupted other industries: Are we on the cusp of change in the CRE industry? Will we see an Uber-like effect on CRE that causes significant displacement?

Data transparency is already here

You can already find available property information on the open market, by subscription or by point-and-click on individual property websites. While self-service property search is a convenience for business users in the same way that property search sites are convenient for residential consumers, the availability of information does not necessarily make the procurement of space any easier.

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Has access to information in our personal consumer life really made it any easier to buy goods and services? Readily available information allows us to make informed decisions, but it also makes the decision process more complex because we have so many data points to consider.

Changing role of the broker and advisor

Access to property and transaction data has a similar effect on occupiers of real estate. A facilities manager who oversees a portfolio can frequently end up with a lot of information about multiple markets where property variables are not easily comparable. Now what? The process of site selection, determining facility amenities and workplace strategy, creating leverage and negotiating leases still requires careful consideration of multiple variables.

Data transparency makes information more available. But it’s also changing the role of the commercial agent from one of data provider to data assimilator and strategic advisor.

Shifting roles but better decisions

In some segments of the investment sales markets, access to available property opportunities has already made the market more efficient. A net-leased investor who previously might have been limited to a metro area for geographic diversity in a portfolio can now easily find investment opportunities nationwide that return comparable cap rates with similar credit tenants. Data transparency opens up opportunities to property investors by providing additional data points to make better decisions.

The commercial real estate professional who works with a client adds value by providing interpretation of market opportunities and an additional array of information regarding market growth analysis, demographic trends and growth forecasts for lease rates.

What will happen to companies that make these data available to the marketplace?

Data have already become commoditized in some segments of the commercial real estate industry. The value added is now placed on the analysis and interpretation. Vendors who simply provide market data will be disruptive to the extent that they force shift in where information is available. But data transparency alone is not the end of the road for technology platforms in commercial real estate.

The commercial transaction process is made efficient by commonly available data. The disruptive shift is the emphasis placed on the interpretation of data to make better and more informed decisions.

In the end, it’s not about transparency actually. It’s about analysis.

Dan Spiegel is Executive Vice President of U.S. Operations for Colliers International, where he works closely with the company’s brokerage professionals to provide a market-leading platform of professional services. Since the last boom of emerging technologies in the late 1990s, Dan has taken a keen interest in the intersection of technology and the commerial real estate services industry.