Real estate executives increasingly acknowledge the need for data governance frameworks

Almost two-thirds of global real estate executives plan to increase data governance investments over the next 18 months, according to Deloitte’s 2020 real estate outlook survey.

The survey, which captured views of 750 CRE executives— owners/operators, developers, brokers, and investors—in 10 countries during the summer of 2019, shows that the real estate industry is starting to take data governance significantly more seriously now that individual firms are capturing and utilising their own proprietary data for businesses decisions.

Technology has unleashed the potential of data for real estate owners, investors, developers and financiers – and with that comes responsibility for security and new protocols. Deloitte says real estate companies need to develop platforms, processes, and a governance structure that enable data discovery, availability, management, and usability. The development of a flexible data governance framework that outlines processes, policies, standards, roles, responsibilities, and procedures will structure data’s commercial utility and security.

Deloitte explains:

“Data governance policies should also identify the data management and governance owners and assign responsibilities. This is important even if the data is managed externally, as is the case for 45% of our survey respondents. For the remaining

55% of respondents, data is managed by a chief data officer or an equivalent C-suite executive or by collaboration across business verticals. The bigger focus, though, should be on recruiting the appropriate talent to manage various data governance activities.”

“CRE companies, managers, tenants, and third-party vendors should be clear about who owns different forms of sensor data captured at their properties. These parties can improve transparency on data ownership by outlining policies at the time of a service contract and avoid any confusion related to the ways in which the data can be utilised. For instance, the data captured by beacons in retail stores could be owned individually or collectively by the retailer, mall owners, and/or the equipment vendors.

“CRE organisations should consider using data lakes, a common repository that stores all structured and unstructured data at any scale and in raw format. Next, they would require a data dictionary, a ‘firmwide policy that defines the terms and attributes of each data element’ that can be used across an organization.26 When put into action, CRE organizations would have to index which specific data characteristics they want to use to support the use of data analytics tools to generate meaningful insights. They should also consider classifying data based on its value and risk, such as personally identifiable information (PII), and ensure compliance with regulations, such as GDPR.”

There are a variety of tools and technologies available for every stage of the data governance process. CRE companies should evaluate and make appropriate choices based on quantity and quality of data they can capture and analyses they wish to perform, Deloitte added.

‘Developments in technology are transforming buildings’

proptech is improving efficiency and delivering cost savings as well as leading to smarter offices which are sustainable, have cleaner air and promote well-being

Kevin Turpin, Regional Director of Research, CEE, Colliers International, tells The Real Estate Day that proptech is improving efficiency and delivering cost savings as well as leading to smarter offices which are sustainable, have cleaner air and promote well-being

Kevin Turpin, Regional Director of Research, CEE, Colliers International

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CRE firms’ data strategy is rising among corporate priorities

The commercial real estate (CRE) industry is heavily relying on data to drive-decision making but is hindered by disparate data requiring greater amounts of time to manage, according to a survey by Altus Group.

According to the report, which is based on a global survey of 400 CRE executives, there exists a growing prioritisation by CRE firms to address these challenges through dedicated executive ownership and governance related to overall data strategy. 

Altus Group’s CRE Innovation Report also highlights:

  • Almost half (45%) of CRE teams are spending at least 15% to over 25% of their time managing and organizing data (equivalent to two to three months of the year);
  • Eight out of 10 CRE firms now have a Chief Data Officer or equivalent senior executive who oversees their organization’s data strategy and data governance. This compares to Altus Group’s 2016 research where 44% of firms surveyed indicated a lack of executive sponsorship;
  • CRE executives now believe the timeframe for competing technologies to start gaining traction and is upon us, with PropTech consolidation a necessary outcome;
  • 89% of CRE executives said significant consolidation is needed for PropTech to more effectively deliver on the needs of the CRE industry, with 43% saying it is already underway or will occur within 12 months
  • Areas of PropTech most likely to experience consolidation include property management, property transactions and listing services, and financing and lending firms;
  • A large majority of CRE executives (87%) believe global data standards for commercial real estate will eventually be adopted, however, numerous obstacles were identified including a lack of standardized data definitions on a global scale, and privacy and data protection regulations; and
  • 50% of executives believe 5G wireless will create major disruptive impact on the CRE industry with 81% saying it will support increased adoption and use related to smart city development.

The 2020 Altus Group CRE Innovation Report is based on a global quantitative survey of 400 CRE C-level and senior executives in both front and back office positions at owner operator and investor firms in North America, Europe, Asia-Pacific and Latin America. All firms represented in the survey had a minimum of assets under management of at least US $250 million at the time of being surveyed, representing an approximate total AUM of over US $2 trillion.

Structural demand drivers and technology reorder customer experience as top real estate priority

Increasing urbanisation, changing workforce demands, including flexible location and workspaces, and technology advancements, such as AI and Internet of Things (IoT), are combining to make prioritisation of tenants’ and end users’ needs ever more urgent, according to Deloitte.

In Deloitte’s 2020 outlook surveyed 750 CRE executives— owners/operators, developers, brokers, and investors—in 10 countries during the summer of 2019 to assess how emerging technologies and analytics are helping CRE companies to make more informed location decisions and create a more memorable tenant experience.

According to Deloitte’s survey 92% of respondents plan to maintain or increase their tenant experience–related technology investments.

  • Most respondents rated tenant experience as a top priority. Yet, for a majority, digital tenant experience is not a core competency.
  • Executives acknowledge that the benefits of IoT and AI technologies are not limited to tenant experience. They also can raise operational efficiency and lower costs.
  • When it comes to tenant experience–related technology investments over the next 18 months, 36% of respondents expect their organisations to hold the line, 42% anticipate a moderate increase, and 14% plan to significantly increase.

Interestingly, almost three-quarters of respondents (72%) of Deloitte’s surveyed CRE executives plan to maintain or increase their overall technology investments even if an economic slowdown occurs. In contrast, 81% of the surveyed executives from CRE broker firms and consultants with revenues of US$10 billion or more are likely to maintain or reduce technology investments. This could be because the existing technology budgets of some of the largest brokers and consultants are high, and they are more likely to be further along in capturing and leveraging data and using analytics to generate meaningful insights than smaller firms, suggested Deloitte.

The survey revealed divergent view about how the CRE industry will perform over the next 18 months: 15% are very optimistic, 61% are somewhat optimistic, 14% are neutral, and 10% are somewhat pessimistic. “This is not surprising,” wrote Deloitte in its 2020 real estate outlook paper, “when it comes to economic changes, the industry typically lags the broader economy by six months.”

Regionally, respondents from Asia are the most optimistic, followed by those from North America and Europe. A relatively higher proportion of respondents from Hong Kong, Singapore, Japan, and the United States are very optimistic about the industry’s performance. In contrast, on an average, 18% of Netherlands and UK respondents are somewhat pessimistic about the industry’s performance, which is higher than the global aggregate of 10%.

‘Paris is getting critical mass’

Paris: usually investors start with core but in the last 18 months there has been more interest in core plus funds and value-add and more willingness to understand the market

Beverley Shadbolt, Country Manager, France, LaSalle Investment Management, tells The Real Estate Day that usually investors start with core but in the last 18 months there has been more interest in core plus funds and value-add and more willingness to understand the market

Beverley Shadbolt, Country Manager, France, LaSalle Investment Management

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Six out of 10 global CRE executives now acknowledge PropTech’s disruptive impact

The majority of global commercial real estate (CRE) leaders now fully recognise the disruptive impact of PropTech, according to a new survey by Altus Group, marking a tipping point for technology adoption.

According to the report, which is based on a global survey of 400 CRE executives, online marketplace platforms are gaining significant traction with 61% of CRE leaders saying they will have a major disruptive impact on the industry. Recent years have seen new platform-based marketplaces connecting a broad network of market participants (such as buyers and sellers, tenants and landlords, lenders and borrowers, and investors and fund managers), and delivering transactional efficiencies as well as the collection and aggregation of data for the benefit of users.

Lending platforms have experienced the largest level of adoption to date with 63% of CRE firms having used an online lending marketplace for a recent transaction and 79% planning to increase use in the future.

Courteau, Chief Executive Officer, Altus Group, explains:

“CRE continues to rapidly accelerate its digital transformation and despite the growing complexity stemming from the proliferation of data, the industry is clearly shifting from a stage of ‘trial and testing’ to one of practical innovation to solve their current challenges today. At the same time, continued automation and significant PropTech consolidation will both have a major impact and deliver considerable opportunities for the industry.”

Altus Group’s CRE Innovation Report also indicates a significant majority of CRE executives (75%) say automation will eliminate jobs. This was counter-balanced with the view that automation also presents an opportunity to introduce new types of jobs within the industry (71%) and shift jobs towards higher value-add tasks (67%). While CRE leaders recognize both the impact on jobs and the short-term productivity benefits that automation can deliver, a major challenge is to anticipate how it shapes the future of the CRE workforce. 

Data usability challenges continue to intensify as a result of fragmented data sources, data duplication and heightened complexity of overall data management. CRE executives report increased challenges in a majority of key areas related to data management when compared to five years ago:

Altus’ survey highlights continue tomorrow.

CBRE: Central London take-up in January slid 66% month-on-month

Central London take-up in January 2020 was 0.6m sq ft, declining by 66% month-on-month, according to CBRE data. The largest deal of the month saw Google take 134,900 sq ft at Euston Tower, NW1.

Office investment totalled £55 million in January, bringing the total for the last 12 months to £11.2 billion. Availability rose by 3% to 13.0m sq ft, remaining below the 10-year average of 14.2m sq ft. Under offers fell slightly to 3.4m sq ft (-2%) but remained above the 10-year trend of 3.2m sq ft.

At the end of the month there was 12.4m sq ft under construction across Central London, of which 56% was already let or under offer. Active demand was 7.8m sq ft at the end of January, compared to 7.7m sq ft at the end of 2019.

Following a strong end to the year, take-up across Central London in January was subdued, which is often expected at the beginning of the year. Take-up declined by 66% to total 566,500 sq ft, but active demand increased to 7.8m sq ft.

The month-on-month fall in take-up saw demand 13% below the January 2019 total. This took the rolling 12-month total to 12.8m sq ft; remaining below the 10-year annual average of 13.1m sq ft. The largest transaction of the month saw Google take 134,900 sq ft at Euston Tower, NW1, representing the majority of take-up by the creative industries during the month.

In total, the creative industries accounted for 35% of take-up, but the business services sector took a slight lead representing 36%. There were two additional deals over 25,000 sq ft in January; both from occupiers from the business services sector. Though take-up across all qualities of space was below trend, transactions for second-hand space drove space-takes during January due to its high supply.

However new and pre-let space accounted for 25% of take-up, as occupiers aspire to acquire space in high-quality buildings.

Following a fall in December, availability increased during the month, rising by 3% to 13.0m sq ft. Despite the slight rise, supply remained below the long-term average level of 14.2m sq ft (-8%). Central London supply continued to be dominated by secondhand space, which represented 10.0m sq ft (72%) of the total. During the course of the month, secondhand supply rose by 6% to 9.4m sq ft; above it’s 10-year monthly average of 8.7m sq ft.

Newly completed and new early marketed availability (supply that is not yet ready to occupy but will become so within 12 months) both declined during the month and both were below their 10-year trend levels. The Central London vacancy rate was 4.2%, up from 4.0% at the end of 2019.

”The yield factor will attract investors to Warsaw and Budapest’

both institutional investors looking for safe havens and opportunistic ones looking for oversized returns are showing an interest in the Polish and Hungarian capital cities despite the relative lack of liquidity

Thomas Frater, Founder & CEO, Hussar & Co, tells The Real Estate Day that both institutional investors looking for safe havens and opportunistic ones looking for oversized returns are showing an interest in the Polish and Hungarian capital cities despite the relative lack of liquidity

Thomas Frater, Founder & CEO, Hussar & Co

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International investors spend €4.2 billion in Dutch residential market last year

International investors invested €4.2 billion in residential rental properties in Dutch, which reflects 46% of the total market transaction volumes, according to Capital Value, as international interest continues to increase.

The proportion of residential market as part of the entire market has risen considerably – up from 35% in 2018. Approximately 90% of the international transaction volume involved pension fund capital.

Progression on stock within the Dutch housing market has stalled somewhat due to lack of suitable sites. Housing associations and investors are increasingly willing to invest in healthcare and senior accommodation. A record amount of €1.25 billion was invested in healthcare and senior homes, as well as in healthcare real estate, in 2019. Healthcare real estate investors have a minimum of €3.4 billion available for investment in healthcare real estate over the next three years. Housing associations want to invest more in this sector, which will allow this market and the number of suitable senior homes to grow in the next few years.

There is also a lack of suitable supply for those entering the owner-occupied market. In the next five years, an additional 114,000 new owner-occupied properties must be built for this target market. To ensure these properties are within reach for this target group, the government could once again offer subsidies for the segment of the population with a borrowing capacity of up to €250,000.

Marijn Snijders, Director Capital Value, explains:

“Increasingly more international investors are prepared to invest in new-build homes. This is important because together with Dutch institutional investors, they can contribute to reducing the housing shortage. They are able to purchase larger projects than Dutch investors. They also bring knowledge from other housing markets or for specific targets groups, such as for students or seniors. We expect that more new-build projects will be sold to foreign pension funds in 2020.”

Calastone: UK property fund redemptions slows to £78 million in 16th consecutive monthly outflows

Outflows from UK property funds slowed to £78 million in January, the lowest pace since May 2019, according to global fund transaction network Calastone, in a month beset by sentiment woes as the effects of coronavirus began to take effect.

January’s £78 million redemptions among retail investors – the 16th consecutive months of outflows – were down from £329 million in December and £2.2 billion over 2019, in a year marked by Brexit uncertainty and late-cycle nerves that weighed on sentiment. The improvement in net outflows was a steep reduction in selling, rather than an uptick in purchasing. Buying activity fell to £137m in January, the lowest level since September 2016, Calastone’s data shows.

Edward Glyn, head of global markets at Calastone, explains:

“The real and present danger of contagion across the whole property fund sector seems to have been contained, but it is not out of the woods yet. From a cashflow perspective, sharply lower redemptions give fund managers valuable breathing space to rejig the portfolio and rebuild liquidity buffers, but a buyers’ strike leaves the sector vulnerable to any further negative news in the short term.”

In November, the £2.5 billion M&G Property Portfolio, one of the UK’s biggest property funds, was suspended after “unusually high and sustained outflows” prompted by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector”, the investment manager announced. The news triggered a spike in monthly redemptions to £251m in November and £329 million in December. Accumulative redemptions by retail investors in UK open-ended property funds have now reached £2.9 billion since October 2018.

Edward Glyn, head of global markets at Calastone said the coronavirus hit has spooked some retail investors. “The response of fund investors shows how the virus was most impactful for fund categories where its effect will be greatest, like Asia.”