In commercial real estate, bad data equals bad decisions

Collecting accurate data is highly valuable for businesses trying to make profits from commercial property. At the same time, so many sources of inaccurate and generalised data exist that companies which get the most detailed information can get an edge on competitors.

In a world derailed by Covid19 metrics such as vacancy numbers, average rentals and yields often change, and accurate and detailed data is all the more paramount.

Will Harris, founder of Gmaven, a commercial real estate software and data services provider, says the role of good data and up-to-date technology is helping landlords and tenants across SA to manage the pandemic.

He spoke to Business Day about how well-equipped businesses, and what datafocused work has revealed about the industry.

What does Gmaven focus on?

We manage property funds’ and brokerages’ data and automate process flows. By using tech to automate human actions, steps can be done in seconds and button clicks, instead of the hours and days it took previously.

How important is accurate commercial property data?

It’s critical. Data is the oil that commercial real estate (CRE) runs on — and bad data in equals bad decisions out. Talking specifically to businesses in SA: tenants, when they are evaluating their leasing options for a relocation or lease renewal, they need a skilled adviser, with access to complete and well-structured data. Such data enables meaningful comparisons, and ensures they avoid missing ... the best deal.

Landlords, in turn, need reliable data to understand where rentals are priced relative to the market, and what the demand and supply pressures are. This example talks to almost R100bn worth of transactions a year.

Equally important is education of the customers of the commercial property industry — the occupiers. For example, unlike residential property there are no mandates on vacant space. Those signboards you see about town

— all lease options are available to all brokerages or advisers, on the same terms. In this regard, evaluating and selecting the right brokerage or adviser, who, incidentally, works on risk, is critical to the success of a tenant’s transaction.

How important is accurate commercial property data in a Covid-19 world?

Equally critical. Landlords, especially now, are being required to make a high volume of very complicated decisions, in very short time frames. It is extremely difficult for these decisions to be fair without reliable, well-structured data.

Has the workload of Gmaven increased suddenly since Covid-19 broke in SA?

Indisputably yes.

Are landlords clued up on how technology can help them to be more productive in SA?

Not yet. But SA is not unique here. Commercial real estate as an industry, globally, is a tech laggard. This is because of the complexity of the asset class, geographical idiosyncrasies, and technical difficulty implicit in solving complex industry problems. Up until a certain point of tech solution maturity, landlords and any other user of tech is better off using pen and paper, instead of tech. Further, many landlords have been burnt by tech, and their trust eroded. As CRE technology becomes objectively better than traditional pen and paper and Excel solutions, those onceburnt and later adopter landlords will act accordingly.

Is the listed property sector in good hands?

We have more of a coalface lower altitude perspective compared with analysts. Because of what we do, we are deep in the data and process “guts” of this industry. Thus, talking to our admittedly blinkered world of operations efficiency and tech, we have seen listed funds make illogical and frankly financially wasteful decisions.

On the good news front, we are also seeing listed funds that are taking powerful, positive actions for their shareholders —

and here we can say indeed, at least from our operations perspective, that these businesses are in good hands.

LANDLORDS, ESPECIALLY NOW, ARE BEING REQUIRED TO MAKE A HIGH VOLUME OF VERY COMPLICATED DECISIONS

Is there a dearth of talent in SA’s real estate industry?

Using the traditional definition of talent, and comparing CRE, for example, to the financial services industry, yes. Talking generally, bright children are diverted from school into the study workstreams of engineering, finance, law, insurance, medicine and technology.

It is not clear to outsiders how different residential property and commercial real estate are, and thus CRE is not the venerated industry it deserves to be. Therefore, CRE, for reasons ranging from poor marketing to reputation challenges, has not traditionally been a bright light that attracted the talent.

Should we relook at remuneration policies in commercial property?

Transparency in remuneration is key for any industry or organisation. As the saying goes: “Sunlight is the best disinfectant.” Across the board, intentionally or otherwise, commercial property is characterised by opacity. For any organisation where management and shareholders are not the same, fertile grounds for conflicts of interest exist. Improved shareholder education and activism is a start, but this needs to be supported by proactive policing by the exchanges who make money by facilitating transactions and public sector bodies.