More transparent data to help investors back into CRE pool

by Kasi Johnston12 May 2020

Commercial real estate deals are collapsing under the pressure of COVID-19. One reason for failed deals in the past quarter is mismatched price expectations, as both buyers and sellers alike are unsure where values are at.

As a result of the uncertainty, investors are becoming more reliant on technology to provide data and information to help ease them back into their comfort zone and bring these stalled deals to a close. Altus Group, a leading data provider, recently announced its latest cloud-based application to help increase visibility and transparency to help investors maximize their investment performance.

DataExchange 3.0 is a value management platform that supports thousands of users and over 8,000 assets with a combined asset value of over $650 billion, and recently enhanced its functionality beyond the U.S. to include U.K., Europe, and Asia-Pacific.

“Valuations are based on transactions, but when there are no transactions being done [due to COVID-19], the next best thing is to look at how everyone else is looking at the value of their assets and real estate,” said Rick Kalvoda, senior executive vice president at Altus Group. For example, if an appraiser comes in with a valuation and assumptions for an office building in New York, Altus Group is able to review that appraisal alongside other office buildings being valued in the same region this quarter.

While the impact on valuations was not significant in the first quarter of the year, Kalvoda is predicting a more noticeable change in the second quarter.

“With continued instability, there will be more adjustments in pricing to reflect that volatility,” he said. “There’s also significant difference across sectors as well, it's much different between industrial and data centers, versus hospitality and retail.”

For the past decade, he added that valuations have been pretty simple, with slight adjustments and little volatility; the COVID-19 pandemic changed that. Now, data benchmarks and understanding the market has become more important than ever. With DataExchange, over 3.2 million data points are collected every quarter. Not only has speed of data collection become a significant factor, but also how that data is presented, according to Kalvoda.

“No one can consume that much information. We drill down to the specific data points that matter, that are causing the value change,” he explained. “Visualizing that data also allows you to see across markets, across sectors, and across quarters, without having to dig in and mine millions of data points.”

While DataExchange and its improvements had always been part of the plan, COVID-19 certainly cleared the path for it, and brought to light the importance of technology, innovation and connectivity in the commercial real estate space. As valuations from third party appraisers come in, Kalvoda says they are able to monitor how it measures across markets and portfolios.

“There’s always resistance to something new, but situations like this force change and all of a sudden, we get used to it. Transparent data is gives companies a huge competitive edge right now, but soon, it will just be the norm.”

Altus also announced the release of ARGUS Cloud Workflow Approval, a new capability that allows users to better collaborate and work more efficiently through the automation of processes within ARGUS Enterprise (AE). AE, used by thousands of commercial real estate companies globally, is a leading investment management platform to help report on assets and cash flows from acquisition to disposition.