We see everything that happens: 5 real-estate execs explain why data is changing how we live and work
This article originally appeared on Business Insider.
While other industries are jumping into machine learning and artificial intelligence and data scientist has been dubbed the best job in America, real estate still has a reputation for handshake deals and decisions made on gut instinct.
But companies that revolve around real estate are quickly finding ways to adapt to a digital world. Where before documents lived in a file cabinet, they're becoming digitized. Zillow, Redfin, and other so-called iBuyers are closing on homes within a week of the application. Venture-capital money is flooding into "proptech" startups that marry real estate and technology.
The first step is collecting better data and finding ways to actually use it.
Business Insider talked with executives at companies ranging from short-term-rental firms to commercial real-estate brokerages about the ways that data will change how we work and live and the way that real-estate professionals do their jobs.
Many acknowledged that the process of capturing enough data to pull out legitimate trends can be cumbersome. Some said that for short-term rentals at least, higher turnover may help produce more data than house sales do.
There are also worries about potential regulatory issues that could hem in the growth of some startups and the data they can collect, as well as the ever-present challenge of selling people on change.
And finally, some said that real estate still requires a level of human interaction and judgment that evades traditional data analysis.
Andrew Kitchell, Lyric co-founder and CEO
Andrew Kitchell, co-founder and CEO of Lyric, has been working to marry real estate and data for almost 10 years. He worked in business development at Movity, a housing data company that was acquired by Trulia in 2011, and was the CEO and founder of Beyond Pricing, a company that used data to price vacation rentals. He also founded and still runs Wheelhouse, another company that prices vacation rentals and Airbnbs. Kitchell is a data missionary for the real estate industry.
"Data is going to continue to eat real estate," Kitchell said.
Lyric, which operates designed short-term rentals focused on business travelers, says it relies on data for most of the decisions it makes. This can be data about the local markets they're looking to operate in, or it can be data about their guests' stays."Not only can you use data to inform where you should buy, but also what people want in those spaces and how to design those spaces," Kitchell said.
Lyric's chief experience officer, Ravi Hampole, told Business Insider about their comprehensive end-of-stay survey, which covers typical topics like general satisfaction and NPS as well as providing feedback on the design of rental units. While the company emphasizes storytelling and the artistic side of design, it takes a close look at the customer satisfaction data. Capturing those feelings accurately can have another upside - customers will be more likely to share their experiences on social media, Kitchell said.
Nick Romito, VTS co-founder and CEO
Nick Romito's VTS is rapidly becoming the dominant leasing and asset management platform in commercial real estate. According to the company's most recent estimates, VTS tools are used in between a third and a half of US commercial office buildings, giving it access to a huge amount of data.
The company has raised more than $190 million from backers like Brookfield Ventures, GLP and Tishman Speyer, and proptech VC Fifth Wall, and is planning to launch Truva, a commercial leasing marketplace, later this year.
Romito says he came up with VTS out of necessity. He used to work in real estate, and was sick of using spreadsheets to communicate between different companies and data sources. When he looked for a solution, he realized that no one had created it. So he did.
"Amazon for example - you see what you could buy," Romito said. "You know how much it costs. The minute you hit purchase, we know where it is in getting to you. And that exists for anything else in the world right?"
While Romito is fully focused on Truva's launch, he is also particularly impressed by some of the automated valuation model companies that have found ways to use third-party data to price buildings. These algorithms can be tied to all sorts of data, from typical indicators like building locations and sales price to more demographic information.
Romito thinks real estate has embraced data in recent years because it has become a lot easier and cheaper to build technology. Still, the challenge ahead lies more with "people and process change" than the actual challenges of building tech.
"You can build the fastest race car on the planet, but if people don't know how to drive, or don't want to drive, its worthless."
Harvey Hernandez, founder and CEO at Newgard Development Group, Niido and Natiivo
Data is not only the realm of young, tech-forward startups. Traditional real estate is getting into the game. Some are simply using data to give their own businesses an edge. Others, like Harvey Hernandez, the founder and CEO of Miami-based development company Newgard Development Group (NGD), are creating their own proptech ventures.
In 2017, Hernandez founded Niido in partnership with Airbnb. NGD had noticed that some of their tenants were renting out their apartments on Airbnb, which created tension in their buildings between tenants and building staff and left NGD vulnerable to potential legal and regulatory violations. Hernandez decided to create a full community dedicated to Airbnb under the Niido brand, where renters are encouraged to rent to others and the company provides hotel-like amenities, like a concierge and cleaning surfaces. Shortly after, Natiivo launched, which replicated the Niido model but for condo-purchasers.
As Hernandez continues to develop these two businesses, he's also getting access to more and more data. For one, the company's partnership with Airbnb gives it access to information about each unit's utilization and demand. Niido also collect data on the utilization of all of the amenities they provide, everything from the concierge to their partnership with smart lock company Latch. The effect is a panopticon-like view into the patterns of both their tenants and their tenants' guests.
"We manage the behavior, we see everything that happens — what people want, and what doesn't work," Hernandez said. "There is a tremendous amount of intelligence that we acquire in our communities."
Both Natiivo and Niido are still young, so Hernandez estimates that they'll be able to use the data more productively to help it make business decisions in a year or so.
Hernandez told Business Insider that the patchwork of local and state regulations around have slowed their ability to expand and gather larger amounts of data. Natiivo's approach is to actually acquire a hotel license so that the company can operate in municipalities with strict short-term rental laws.
"Technology goes very fast, but it's not the case with legislation," Hernandez said. "I think at the end of the day, that has been what has been holding back real estate's adoption of some of these new ideas."
Jim Underhill, Cresa CEO
Jim Underhill now helms Cresa, the largest tenant-focused commercial real estate firm in the world, but he's been working in real estate since the 1980s; most recently he was the CEO of Cushman & Wakefield's America's division. He's been following trends in real estate for a long time, but in his new seat, he's excited about technology that can boost tenant and employee engagement in an office.
"Gone are the days when a few people at a large company would decide for everyone the office lighting, temperature, seating arrangements, amenities or even work hours," Underhill told Business Insider via email. "The app solutions we are deploying provide management with the continuous data they need to make workplace arrangements that reflect the needs of their employees."
These apps collect data about the office-building environment that can be compared against employee productivity, allowing employers to find the optimal settings for themselves. Some of the applications actually allow employees themselves to control their workplace.
Underhill is also interested in apps that game-ify work by creating competitions on everything "from reducing their environmental footprint to encouraging desk sharing." While these competitions might not appeal to all employees, he says they can motivate and excite certain employees. By opening segments of a building's data to workers, these competitions turn data, and business goals, into a game with easily quantifiable winners.
Will Silverman, Managing Director at Eastdil Secured
Will Silverman, a recently hired managing director at real estate investment bank and broker Eastdil Secured, says there is an abundance of data out there that can help enhance what brokers have already been doing in their heads when making snap judgements.
"I kept on having this suspicion that there was all of this qualitative wisdom in the marketplace that wasn't being quantified," said Silverman, who focuses on real estate sales at Eastdil.
"Intuition is really drawing on the database in their head," he said. But while clients may be willing to make decisions off of a broker's reputation and intuitions, the inclusion of actual data can help the buyer better rationalize the transaction.
"Pricing reflects risk, risk reflects the absence of information," Silverman said.
While some data programs are building a "spaceship," with buzzy features like predictive capability and machine learning, Silverman emphasized the impact of smaller fixes. There is still a lot of data out there that needs to be compiled and cleaned.
But lease files, and the information they include about tenants' employer, are an example of data that Silverman says can easily to make decisions. With this information, a landlord can find out what industries are most prevalent among a building's tenants, and then design the building's amenities based on what fits their lifestyles.
Silverman gave the example of a building full of early-career lawyers — there's probably demand for a good gym and access to drycleaning, but there's probably not a need for a large lounge with free coffee and wifi. If the building is full of students or freelancers, however, the lounge could be a hit.