Luxembourg Times, 19 September 2018
Harnessing the power of data and the business insights that stem from it is imperative for real estate companies. The ability to do so will play an essential role in helping companies conduct deals for investment, better mitigate risk, more comprehensively understand tenants and their needs, make smarter, quicker decisions and open up new profitable possibilities.
Imagine these scenarios. Number one, you are either an asset manager or owner and your competitor or an investment analyst has more insight about some of your portfolio assets than you do. Number two, a technology provider or one of your peers is able to undermine your fee structure because you have not yet learned how to properly manage data, perform analytics, create visualisations and finally, harness insight.
Kees Hage, Real Estate Digital leader and Arnaud Brive, Real Estate Transformation both of PwC Luxembourg agree that in order to thrive in a complex and changing business environment, leaders increasingly have to make quick but informed decisions. If data availability was a challenge in the past, today we are confronted with a tsunami of data from different sources that need to be considered accurately and in real-time.
“If historically a real estate agent’s mantra was, ‘Location, location, location’, says Kees, “Now, in our hyper-connected world it is also, ‘Data, data, data’. The market is growing more and more competitive and Real Estate players have to deal with a decline in capitalisation rates and total returns, shorter leases, increasing interest rates and other factors. This results in slower growth perspectives and a continuously changing environment where investors’ demands constantly evolve. Data will be key for distinction.”
“The processes within the Real Estate (RE) industry are still largely manual (e.g., the subscription and redemption of fund units),” says Arnaud. “These will be completely transformed and simplified by, for example, blockchain processes, although that is still in the future. The key for RE organisations in the coming years will be to implement efficient and cross-organisational solutions where disruptions caused by new technologies in the business model will come from the reduction of intermediaries.”
“Data is totally changing the way organisations in the RE industry are operating. An efficient data intelligence process for real estate players is the main challenge any organisation will face in the coming months/years. The benefits and leverage that could be gained from data are multiple for everyone involved and can roughly be categorised as either efficiency improvements or added-value and distinctiveness.”
Valuers and brokers gain better access to relevant and broader property data. This is really advantageous as properly handled data helps them to stay on top of trends and changing market conditions allowing them to swiftly act upon the most relevant transactions and pinpoint the best comparative data using a wide range of factors. They can see new players entering the market and track their properties and transactions and then easily generate graphs, charts that can be inserted in any report.
Investors and their asset managers can identify investment opportunities, stay on top of trends across markets and property types, get instant knowledge of changing market conditions, form new partnerships, identify and evaluate potential joint venture (JV) partner and raise funds. The list of benefits goes on and on. Additionally, with real time data investors can better identify the active players and truly be in the middle of deal flows. Correct handling of data will help them negotiate deals with full knowledge about the property.
“Asset servicing is done by organisations that deliver custody, (fund) administration, and transfer agent services,” say Kees. “In other words, operational processes related to underlying assets including corporate actions, reconciliations, compliance, and performance measurement. Using Data can help service providers stay on top of trends and changing market conditions for their clients and understand developments. They can and should assist their clients to better identify opportunities and understanding their position in the market and provide other value add activities.”
A challenge for existing players in the RE industry going forward into this new data-driven world will be to keep their relevance. Luxembourg offers clear advantages for its players, and has made huge inroads into positioning itself as the data hub for Europe.
“Luxembourg is already a well-known centre of excellence for delivering services for RE Funds,” says Kees. “Technical expertise and deep real estate fund industry knowledge have developed over the years here where services cover the whole lifecycle of entities and focusing on certain parts of the value chain. In addition, cross-border structures have provided the opportunity to Luxembourg players to become a unique point of contact for our clients. This creates a unique opportunity for understanding and addressing the needs and challenges for the whole value chain of our industry: from client through employees to investors.”
“Our observation is that there are changing demands in the role and value of service providers that are relevant when seeking a service provider that would be able to offer cross border services directly from Luxembourg. The combination of existing knowledge and leveraging the value of data collected, used and presented is key if you want to be relevant in the future role.”
“Although Luxembourg is behind its European neighbours in terms of volume, the country punches far above its weight in terms of data centres,” say Arnaud. “For example, 25% of all European Tier IV certified data centers are located in Luxembourg, a big statistic for our relatively small country. The Grand Duchy currently has 21 data centers of which 30% are Tier IV, ranking the country in first position in terms of Tier IV density in Europe. This is a clear differentiator and part of a national investment strategy to position Luxembourg as the European data hub. This ensures that Luxembourg has an up-to-date infrastructure that can offer network stability, eliminating service interruptions.”
The appetite for re-shaping the way organisations are interacting with their data is here to stay. “As evidence,” says Arnaud “is the way our Tax Technology and Transformation department has already accompanied some of the key players of the Real Estate industry in this discovery journey of the full power of data.”
“Currently we are still in a phase where systems applied are not always sufficiently integrated within our industry,” says Arnaud. “Data quality and integrity between systems is a key trend in terms of requests for assurance to be obtained. As a matter of example, the integration of data collected by property managers into the model run by the external appraiser is often still a manual process where inconsistencies between reports are observed. Integrated solutions mitigate this risk and can provide appraisers and ultimately investors with real-time and reliable information, based on better data.”
“Looking to the future,” says Arnaud, “New technologies will continue to impact business models, particularly on strategies, customer engagement, operational needs, people and compliance. This in turn will lead to new products, more extensive communications, increased efficiency, new requirement profiles and further regulations. Artificial intelligence and blockchain will have a much stronger effect on portfolio management in the medium and long term. Mobile technologies and the IoT will greatly influence investor behaviour.”
“Distinctiveness,” says Kees, “so critical in competitive markets, will be demonstrated in the ability to take decisions faster than competitors, anticipate trends and through innovation by proposing new ranges of services fueled by data you are collecting.”
Naturally, it is important to note that, even if “data is the new oil”, any initiative in relation to data processing needs to comply with changing environments and regulations, such as that of GDPR, regarding data protection and client confidentiality for data collected and how it will be stored.
For more information visit the website: www.pwc.lu