Why investigate a property when you can evaluate an entire portfolio?
In a recent webinar hosted by David Bodamer, executive director of content and user engagement for National Real Estate Investor, two experts from commercial property intelligence firm Reonomy discussed the growing role big data is playing in the decisions of commercial real estate investors at a time when traditional prospecting strategies falter in the face of the market’s unprecedented uncertainty.
“[E]very month in 2020 we seem to be experiencing something novel, whether it’s a novel virus or a novel set of climate change events that are ravaging parts of the country,” said Aviva Fink, Reonomy’s vice president of business development and partnerships. “As part of that, people are thinking about data in really new and exciting ways,” she said.
One of the trends Fink has noticed is that, with commercial valuations in flux, investors sitting on dry powder are gravitating toward debt plays and prospecting for portfolios that may be over-leveraged, underperforming, or suffering under the weight of some other form of distress. But that level of insight requires data which, until now, most investors, whether individual or institutional, didn’t have access to.
“There’s only so much an individual can investigate on their own,” said Reonomy chief data scientist Maureen Teyssier.
Going the third-party route is currently the only way to access, process and make sense of the kind of information Teyssier and Fink say can better shape commercial investment decisions. (Reonomy, for example, accesses information from tax assessors across the country, resulting in millions upon millions of data points in need of management. It’s a monstrously complex endeavor.) Rather than simply tracking a single property’s location and performance, or the fundamentals of the neighborhood it is located in, investors now have the ability to investigate the portfolio it belongs to in a deep and meaningful way. In a more efficient and timely manner than ever before, investors can identify entire portfolios that may be available at a discount.
Fink explained that the same kinds of data can be used in commercial lending. Rather than starting the underwriting process blind and evaluating a single asset, lenders can get a holistic picture of a client’s portfolio and better assess the risk involved in a potential transaction.
“That changes your day-to-day,” said Teyssier. “And, over the long-term, it changes the volume of business that you can handle.”
Fink said access to portfolio data, still a relatively new development in CRE intelligence, is already influencing investor behavior. Commercial investors used to rely on bankers, advisors or even brokers to present them with an opportunity to nab a struggling portfolio. But now that the process can be streamlined through the use of data, they are clamoring for intelligence that can help them evaluate multiple portfolios at once.
“They want to do that a lot more rapidly, and at a much higher scale, right now because of the opportunity the current environment may be presenting,” she said.