Where’s The Refined Data? CRE Firms Lack Benchmarking Data To Track Investment Performance

There was a lot of industry buzz surrounding real estate’s separation from the financials sector in the S&P 500 earlier this year.  

Economists gave the move a nod, saying real estate’s reclassification would give REITs more exposure and boost their value as an asset class and a portfolio diversifier. But how are money managers gauging that value and the success of their property investments in relation to their peers?

A recent study conducted by Altus Group and International Data Corp revealed a big lack in CRE firms’ tech investments needed to turn raw unrefined data into something of value for investors to benchmark their performance and boost shareholder value.

There is a wealth of crude data available, but the real estate industry has been slow to invest in tools needed to provide clear, usable data for investors in real time.

“Even if the property itself is doing well, unless you’re benchmarking your performance against your peers, you’re sort of blind to how well you’re really performing,” Altus EVP Raj Singh tells Bisnow. “This is one of the big trends in the industry. As firms that have invested in other asset classes like stocks and bonds start to invest in real estate, they’re asking themselves, ‘How are my real estate portfolio returns comparing to returns I would get otherwise if I put this money in a more traditional asset class?’”

For example, money managers can look at a stock and see how it's performing compared to the Dow Jones Index.

Additional investments must be made by CRE firms to modernize the available raw data so the information can be used to assess asset, portfolio and investment performance, Raj says.

In surveying 300 C-suite executives at CRE investment firms across the globe, all of which have at least $500M in assets under management, Altus found 89% of respondents are struggling to collect and utilize data to make more informed decisions, while 83% of respondents said making these data-integration improvements would greatly benefit their benchmarking performance. All firms involved said investing in tools to process and make use of unrefined data is high on their priority list.

“The good news is there are a lot of data companies and CRE tech companies that have started up in recent years who are making it easier for these real estate companies to get access to market data, and in many cases they’re actually creating benchmarking data themselves as a service,” Raj says. “As the report makes clear, all the firms who are surveyed have increased their spending in data warehousing and a lot of them plan to continue increasing their spending in a lot of these areas.”