It’s hard to imagine the first case of the novel coronavirus (COVID-19) wasn’t confirmed in the United States until January 21. In the weeks since, we’ve seen unprecedented economic disruption that has many snapping into a defensive operating mode.
However, we know from past downturns that opportunity can be found in crisis, but it is not simple. In a fluid environment, rapid changes in market behaviors eliminate historical models as a basis for decision making.
Adding to the difficulty are certain essential requirements, like maintaining a keen eye on the emerging ‘new normal’ and ensuring basic operating necessities are addressed while simultaneously driving an evolutionary movement into the future to capture opportunities ahead.
Impactful Insights from Advanced Data
Most commercial real estate firms have been anticipating a correction of some type to the cycle of expansion we’ve experienced since 2008. We’re no different.
We anticipated that data would play a critical role in the next cycle turn and so, for the past five years, we have been investing heavily in data engineering, aggregation, enrichment and data science, as well as building analytics and learning infrastructure to create tools that would yield actionable insight that could transform decision making and create a distinct advantage for ourselves and our clients.
Our journey started with addressing the data quality problem, which involved a strategy combining several dimensions, including leveraging data generated as a byproduct of our business operations, consuming and conferring with over a dozen paid sources, cleansing ownership structure, property attributes, debt transactions and other historical events.
This required a diverse team of data engineers, data governors, data aggregators, data scientists and software developers, plus ancillary functions including quality engineering and software build operations to round out the research and delivery capabilities.
Software and computing infrastructure were necessary to ensure our very capable people could perform their duties. We leveraged pure cloud for maximum flexibility and modern compatibility and our software stack included adaptors for data ingestion, aggregators, cleansers, enrichers and a message bus to ensure interfacing with analytics tooling and applications across a wide spectrum of use cases.
A key parallel effort involved building analytics to pull insights from the data, narrowing in on the most impactful insights, as well as the most efficient and capable software stacks, to enable and support both the data governance and the analytics.
Staying Agile Amid Volatile Markets
The foundation we have in place has enabled us to move nimbly to adapt our technology platform to reflect the current market landscape. We’ve gotten creative with scoring, indexing and grouping to derive useful insights from data refreshed with both prior down-cycle comparisons as well as fresh data sources ingesting the current realities of market behavior (delinquencies, etc.). For the multifamily sector, we developed the following indicators based on employment data:
- Industry Volatility: A score between 1 and 5 indicating how susceptible the market may be to a recession based on the projected composition of industries ten years in the future and how those industries rebounded from the Great Recession
- Industry Previous Opportunity Loss: The net difference in the number of jobs that would have existed had each industry within that market grown according to the national average growth rate
- Industry Future Opportunity Loss: The net difference in the number of jobs that would exist ten years in the future if each industry grew according to the national average growth rate as opposed to their local projections
- Job Growth: 1-year and 3-year job growth broken out by blue and white collar
Of course, the real value of the data is how it informs and enhances business operations and decisions. The speed at which any unique and interesting insight is leveraged in tactical business flow and strategic planning is directly proportional to the amount of value gained from the information. These are key to finding the most effective opportunities to transact and operate commercial properties in this most recent turn.
-Darren Wesemann, EVP and Chief Innovation Officer