Since the onset of the pandemic in particular, the real estate industry has quickly adopted data science strategies. Yet, data science still remains an untapped opportunity for most commercial real estate (CRE) investors, according to a new report from Altus Group.
Titled the State of Data Science in Commercial Real Estate, the report highlights opportunities for data science leadership within the space from both investors and providers.
Altus conducted a survey in the second half of 2022 of over 400 CRE executives directly involved in their firm’s analytics and data science strategies, spread through 14 countries across North America, Europe and the Asia-Pacific region. The results revealed that while data science and analytics adoption in CRE is growing, nearly half of investors still aren’t employing data science to support decision making, portfolio performance, and operational efficiencies.
This doesn’t mean that the industry isn’t ready to adapt for the future, however. It should be noted that 55% of the investors surveyed reported that they already employ data science tools and techniques to support their investment decisions. Furthermore, according to the report, leveraging data science is cited as a high priority, something that’s highly motivated by competitive differentiation for performance and risk management, asset and portfolio optimization, and business strategy enhancements.
The research found that CRE firms have limited visibility into what their peers are doing in data science and how they fall on the adoption curve in comparison. In the absence of a strong central player to offer inspirations and leadership, it suggests that each firm is forging ahead independently when it comes to how to best invest in, implement, and optimize data science capabilities.
As it turns out, many of these firms think they’re in relatively good competitive shape on the data science front. When they were asked how their current data science capabilities compare to that of their peers, 73% of respondents describe their firms as being ahead of the curve. In reality, however, the report found that those who considered themselves trailblazers in the data science space are actually less likely than their peers to have adopted more advanced data science capabilities in their careers.
“Competitive forces are reshaping many aspects of our industry at a pace never seen before,” commented Michael Clawar, Vice President of Data Science at Altus Group. “Tapping into data science helps CRE firms identify opportunities others miss such as which high-potential sectors or profitable properties to invest in. As we help our clients assess their requirements and implement data science capabilities, we’re seeing powerful proof points on how data science can help manage risk and drive performance.”
The report highlighted that, although in-house capabilities are advancing, CRE firms increasingly rely on external providers for their data science needs as in-house development continues to face challenges obtaining high-quality relevant data inputs. Other obstacles include challenges associated with hiring and retaining qualified data science staff at CRE firms -- something that drives organizational buy-in and adoption.
The inevitable reality remains that the future of business -- whether commercial real estate or completely unrelated industries -- involves data science. So, firms will either adopt or get left in the dust.