I like Big Data, I cannot lie
By: J. David Chapman/September 22, 2016
In the very competitive commercial real estate brokerage marketplace, what sets real estate brokerage firms apart from one another? Today, the broker with the most complete, accurate and current information is likely to have the edge.
This information comes from what is referred to as Big Data. Big Data is a phrase used to mean a massive volume of both structured and unstructured data that is so large it is difficult to process using traditional database and software techniques. Big Data can be analyzed for insights to make strategic business decisions.
The value of Big Data has been documented in industries and organizations such as government, education, retail and heath care. Recently we have seen Big Data make inroads into the commercial real estate industry.
Commercial lenders were the first in real estate using Big Data, crunching numbers using risk algorithms analyzing huge amounts of data from public and private data sources to help commercial real estate finance managers produce risk scores for real estate to make better lending decisions.
More recently real estate brokerages have learned to leverage Big Data, transforming the data into information to create a strategic competitive advantage for their brokers. Two companies, Xceligent Inc. and the CoStar Group, have been busy trying to gain market share in this lucrative real estate brokerage industry. Both companies essentially sell subscriptions to the data they accumulate.
Commercial brokers use this data to research basic information such as recent sales, detailed leasing information of property, physical building characteristics and availability of property for prospective clients.
Competition between these data gathering companies is increasing and resembling an arms race.
The CoStar Group has begun using aerial surveillance and technology similar to that deployed by the military in Iraq and Afghanistan to map construction sites, giving brokers the latest data on new product entering the market.
These companies are investing millions of dollars into technology to build the best, most complete, accurate databases, including video and photography that requires more sophisticated computer hardware, software and storage capability. Higher education real estate programs are well-aware of the requirement for new brokers to use this newfound information and are forming strategic partnerships with companies such as Xceligent and CoStar to ensure that the new generation of brokers has the ability to leverage the information.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).