Having an edge by transforming real estate data into decision-making tools
CAMBRIDGE, Massachusetts: The unprecedented amount of commercial real estate information being generated today presents new opportunities for analysts to develop models that translate masses of data into predictive tools for investors.
Recognising that potential, the MIT Centre for Real Estate (CRE) has launched the Real Estate Price Dynamics Research Platform (REPD Platform) to explore models and analytics that can lay the foundation for providing real-world solutions.
The platform builds on CRE’s earlier work in the field of commercial property price index development.
The lead researcher for the platform is postdoc Alexander van de Minne, with David Geltner, professor of real estate finance, serving as principal investigator. Geltner is the lead author of “Commercial Real Estate Analysis and Investment,” a standard graduate textbook in the field.
“Real estate investment has always been a world with a lack of good empirical data,” says Geltner, a pioneer in the development of transaction price based commercial property price and investment performance indices over a decade ago. “But with the digital revolution, there’s an explosion of data aggregators, information companies, and other sources of empirical data relevant to commercial real estate investment.”
In addition to the increase in data availability, Geltner says, the other crucial component for the REPD Platform has been the advancement of econometric capability to handle the new data. Econometrics, a toolkit of statistical methods used by economists to test hypotheses using real-world data, provides a means to turn enormous quantities of data into actionable information.
The aim of the platform, whose research and analysis will be available to the public, is to advance real estate investment-related analytics in such areas as price and rent indexing (how prices change over time) and automated valuation models. These can ultimately have a real-world impact by improving investment and management decisions.
One feature that distinguishes the REPD Platform from most other property investment research is the application of Bayesian techniques, as distinguished from classical statistics. By employing Bayesian econometrics, researchers are able to use prior knowledge and economic theory to help inform the statistical analysis, which Geltner says makes the analysis more efficient. — MIT News