Oli Farago, Co-Founder and CEO of Coyote Software.
Commercial real estate remains a highly sought-after asset class, and the way I see it, best-in-class investment teams are the ones that increasingly leverage technology to pencil deals at a faster rate than their competitors.
Even after the economic turmoil and market disruptions the real estate investment community experienced in the past year and a half due to the pandemic, certain commercial real estate assets are still deemed safe and desired investments for acquisition teams in search of long-term yield.
New research from Real Capital Analytics reveals that U.S. apartment real estate transaction activity in May 2021 exceeded 2020 levels and returned to pre-pandemic averages, signaling continued strength and investor appetite for this resilient asset type.
While investors continue to proceed with caution as the market recovers from a tumultuous period of disruptions and unknowns, competition seems to be heating up among institutional investors, fund managers and acquisition teams vying for similar assets within high-growth markets that are experiencing strong migration patterns and a substantial boost in population growth.
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To stay ahead of the competition, investment teams often employ software that powers machine learning and data analytics to store and evaluate market data. To clarify, access to data is not the problem. Investment teams typically have a wealth of data at their disposal — everything from asset pricing information, broker contact information, rent roll data, tenancy data, property locations, occupancy and vacancy rate information, asset photos, maps, brochures and much more. Deriving true value and insights from the information already within their grasp is the true challenge.
I can’t count the number of times I’ve spoken with peers and industry professionals throughout my 12-year-long career who felt they were spending too much valuable time combing through countless emails, scouring pages of comps data in spreadsheets and researching public property records to capture the current state of a submarket in order to determine if an investment deal will pencil out.
Having access to key market insights that are actionable and allow investment teams to execute on deals with immediacy is vital. I’m finding that more and more real estate teams are taking ownership of their own data by building a database of proprietary market intelligence that isn’t accessible to competing firms.
Most real estate teams have access to similar resources of lease and sales comparables data through subscriptions to listing services. Building atop that tech stack with a layer of wholly proprietary data can be profoundly advantageous.
Making Real Estate Data Management More Accessible
Busy workloads and a lack of tech-savviness can keep even the most earnest tech advocates from fully tapping into the wealth of knowledge and proprietary market intelligence that crosses their paths on a given day. As a result, some firms have taken to outsourcing the logging, organization and management of their teams’ data to third-party software providers.
Prior to the pandemic, our team at Coyote Software recognized these external pressures that were preventing investment teams from logging new deal introductions. By working with a handful of clients, we were able to address the underlying issues that were preventing investment teams from cataloging transactional comparables and developed a data concierge service.
Partnering closely with investment teams in the U.S. and Europe was critical throughout the development of the service, and I want to share some learnings that could help real estate professionals better navigate their own journey of engaging a software provider.
Keys To A Successful Partnership
A clear set of objectives is critical for success in any project, and your potential partner needs to be on board with those objectives from the get-go. Defining key milestones will help to keep those objectives on track, particularly throughout lengthy or complicated projects.
Don’t be afraid to challenge the value that any software partner is promising. Sure, a feature that helps to expedite an internal process might sound great, but what objective does it enable your business (or you) to hit?
One thing often overlooked is the power of a dedicated post-project team. Technology (on its own) isn’t a magic bullet, so appoint key people to adapt internal processes and ensure ongoing adoption. From my experience, the teams that succeed quickly with internal adoption are the ones that see the greatest impact on their business in the shortest time.
The world learned a lot about technology adoption in 2020. McKinsey estimated that in the first eight weeks of the pandemic, the U.S. advanced five years in consumer and business digital adoption. The pandemic forced traditional commercial real estate teams from behind their mountains of paperwork and antiquated processes and propelled them into the 21st century.
What started as a matter of pandemic-induced business preservation has since evolved. Many of today’s real estate teams are tapping into the value of software that enables firms to collect and aggregate disparate information, pulling in data points from multiple documents and spreadsheets into one platform and analyzing that data to offer up valuable market insights.