Archives for September 2021

Businesses are looking at how to better tap the potential of big data and PropTech as data is becoming an indispensable aspect of decision making in commercial real estate.

Leasing automation, centralized leasing departments, providing customer service through bots, smart-home IoT devices and using mapping technology to replace spreadsheets are among the forward steps the apartment industry has been taking to handle data since the pandemic.

Yet many companies are facing challenges in gathering, analyzing and using data. Oftentimes datasets provide an incomplete picture, limiting the value of insights gleaned, while setting up systems across different countries can be a regulatory minefield.

“Without good data practices that result in high-quality data and insights, companies are at a disadvantage when it comes to reducing costs, preparing for risks and finding opportunities,” Michael Thompson, Head of BI & Data Analytics, Americas, at JLL Technologies, said.

Here are some common hurdles that businesses are facing when making the most of PropTech, according to JLL’s Transform with Technology report. A few available solutions are included, too.

1. Outdated Systems

Many companies use legacy tools such as spreadsheets to collate data, risking not only manual errors but also keeping other relevant data separate. Such data silos often make it harder for teams to share and use information, ultimately impacting the quality of insights.

“Quality of information and the completeness of datasets are common problems,” says HoChun Ho, Head of Enterprise Data Governance at JLL. “To embrace the Internet of Things, companies have to be able to process large volumes of data, which requires machine learning and automation tools.”

Establishing a data governance policy – and hiring for data governance skills – is key for employees to know how to collect and understand data, and where to access it. “Data governance enables companies to know they can trust their data,” Ho says.

Tools from companies such as Engrain are making data processing and interpretation easier by displaying it more visually rather than via a spreadsheet. Asset Intelligence, a technology provided by Engrain and built on Unit Map, is an interactive mapping API that acts as a foundation for other property technology. Unit Map is made available at no charge to any property management company that wants to use it for their own dashboards or within their other vendors’ products.

Asset Intelligence places data about pricing, apartment units, floor plans and overall floors onto a visual map that helps leasing staff and prospective residents get a visual presentation of data and important trends. It’s designed to make the task more intuitive, easily understood and efficient.

2. Limited Data Skills

A lack of staff with the right skills is a common limitation in collecting and analyzing data efficiently.

For example, many companies use dashboard software that assimilate and analyze all data collected across a company’s operations. But employees often require training to get the most out of such tools.

“The practice of gathering and using data needs to be integrated into workflows,” Thompson says. “While hiring data specialists supports the shift towards more data-centric decision making, good data practices rely on all employees being able to use data in their daily work.”

Management companies such as Catalyst created its own Catalyst Innovation Lab. It is focused on incubating, piloting and scaling innovative solutions, tools and partnerships that drive operating margins, building efficiencies and portfolio sustainability throughout the multifamily sector. The lab comprises more than a dozen young companies.

Hiring for data analytics is also on the upswing. Crystal Martin, Director of Operations, Leon Capital Group, said her company is seeking analysts who can come in and aggregate the data and present it in actionable ways on dashboards shared portfolio-wide with the team.

3. Inconsistent Standards

Companies in the midst of digitizing operations often have varying processes for collecting data in different teams. This can result in incompatible data formats, requiring time-consuming standardization that stymies information sharing, analysis and adoption of the new technologies.

For businesses starting to invest in PropTech, the wide array of IoT devices and vendors can also appear a minefield, with potential incompatibility issues a barrier to further investment.

Some companies such as Madera Residential have created proprietary IoT systems, using advancing technology that saves money and is more reliable. Companies such as iApartments has developed an IoT system that does not require a dedicated network, which also saves owners a great deal.

4. Complex Privacy Regulations

PropTech data, which provides insight into human behavior, is subject to data privacy regulations that differ between jurisdictions, from general data protection laws in Europe, Brazil or Singapore, to varying U.S. state privacy laws. For companies trying to comply with requirements in multiple countries, this can be a major roadblock.

“All these different technologies have to be able to support increasingly strict privacy requirements, while different systems within a company’s network may contain more private data that needs greater protection,” Ho says.

Projects often stall because stakeholders are unsure about compliance around data collection that would drive decision-making, adds Thompson, highlighting the need to train – or hire – for expertise in data privacy law.

5. Lack of a Holistic Data Strategy

With an expanding range of technologies that monitor environmental, occupancy and operational data, integrating all these data points can be a challenge. Fortunately, many newer property management companies such as AppFolio and Knock are creating and refining their CRMs (customer relationship management) platforms that simplify this process for onsite staff.

Companies require a holistic strategy that defines every data stream and how it interacts with other building data, says Thompson. “A robust data strategy needs to define, check, organize and distribute data to the places it needs to go,” he says.

By investing in datahub tools like dashboards that assimilate information across different departments, and even with the office space itself, companies can gain insights into how to improve every aspect of their business.

“Every company needs to understand data to create their competitive edge,” Ewert says. “Occupiers are now focused on how to enable the right hybrid workplace, and investors on how to revamp existing buildings to meet future demands. Good data empowers these decisions.”

Bot technology is helping to deliver unmistakably consistent answers to apartment prospects’ questions, through pre-programmed, AI-driven data that the bots use when interacting with a website visitor.

UDR has found that using virtual leasing assistants such as ACE from LeaseHawk is a first step toward centralized leasing offices, which are gaining some momentum in operations. It’s a component of “autonomous leasing,” whereas the bots can handle many of the functions that previously were the responsibility of onsite leasing staff from looking to leasing to living.

If a prospect schedules a tour through the bot and takes it, the bot can ask, “How would you rate your tour?” If it’s a 4 or higher on a 5-point scale, the bot can ask, “Would you like me to send you an application?” Or, “Can we do a credit check with you?” This is on top of the bot already confirming and reminding the leasing agent about the appointment.

Source: “How to Solve the 5 Big Data Challenges Holding CRE Back“

A well-respected trio discuss apartment and office fundamentals, supply chain management, the labor market, and more.

Right now, people are not moving back to NYC and renting so they can “work from home.”

That was one of the quips from Ryan Severino, Chief Economist, JLL, as part of an economic roundtable held Wednesday at the MFE Conference in Las Vegas, hosted by Zonda.

Mixed opinions and forecasts about the state of the economy and the apartment market highlighted the outspoken session that included moderator Ali Wolf, Chief Economist, Zonda, and John Sebree, Senior Vice President, National Director – Multifamily, Marcus & Millichap.

Following are 13 of the more interesting comments made in a discussion spanning supply chain management, the labor market, office occupancy and even “Shark Week.”

Supply Chain Management & Labor Markets

Severino: “COVID-19 is raging in many of the areas of the world that produce our goods.”

Sebree: “One developer I spoke with was going around to every Home Depot he could find and buying every refrigerator and appliance that was available.”

Sebree: “The labor shortage is hurting onsite operations; you hear of maintenance techs who are making $22 per hour and are leaving to go work for Amazon at $27 per hour.

Severino: “We had a labor shortage going even before the pandemic hit. The Boomers were aging out of the workplace and the younger generations weren’t enough to replace them. So, technology investment by companies is way up – it has to be because they have no choice to fill that productivity gap.”

Severino: “There’s a very low chance for a recession in 2022.”

Office Space Occupancy & Employment

Severino: “On the work-from-home and urban vacancy phenomenon: We have to get past this hesitancy to work in urban areas, and we will. People aren’t moving to markets like New York City and San Francisco so they can work from home. They’ll be back in the office.”

Severino: “Concerns you hear about the lack of office vacancy are not as real as many say. We’re seeing job growth and that leads to office demand. Employees miss coming to the office. Companies’ policies are showing on average that workers must be there about three days a week. And given health and safety concerns, offices are needing more square footage to help provide that separation of workers.”

Sebree: “Look, Salt Lake City even added jobs during the pandemic’s earlier rough spots.”

Apartment Living

Sebree: “There’s enough apartment demand for as much as we are able to build.”

Sebree: “Moveouts from the city during the pandemic were the result of many who lived in the city because they loved it, they loved the nightlife and action. Pre-pandemic, younger people and young couples kept saying that ‘one day they’d move out.’ But they didn’t. They kept putting it off until 1) when they married; 2) when they had kids; 3) when their kids started to go to school. So, when COVID hit, it became a reason for all who kept putting it off to leave at once.”

Eviction Moratorium

Sebree: “The eviction moratorium didn’t affect most markets, but it did in areas that were anti-landlord, and where the politicians were fanning the flames against owners. I spoke to one San Francisco apartment operator who told me his residents woke up every morning, went to work, and never paid their rent.”

Severino: “What bothered me about the eviction moratorium was where the government was choosing sides and picking winners. Their policies would hurt the owners, then the banks, and then trickle down to someone else based on who they favored and who they wanted to stick it to. They should have tried to make everyone whole. When the government decided to throw billions of dollars into a solution, you think they could have figured that out.”

Infrastructure

Severino: “Right now, it’s like every week is ‘Infrastructure Week’ on Capitol Hill. It seems like there are more of these weeks than there are of “Shark Week.” But this is so important. There is so much creaking and antiquated infrastructure out there and it’s affecting production – maybe not where you live, but that doesn’t matter. It’s affecting all of us.”

Source: “13 Observations From CRE Economists You Need to Hear“

A Ways and Means Committee proposal for tax changes takes out much of the sting the Biden administration wanted.

Recent moves in Congress and the White House seemed to close doors on tax benefits for commercial real estate. But while a new proposal from House Ways and Means Committee chair Richard Neal does mean higher taxes, it would also temper some potential pain.

“With the reconciliation markup process underway, one thing is certainly crystal clear at this point, tax rates are going up,” Nicole DeRosa, senior tax manager at Wiss & Company, tells GlobeSt.com. “Long term capital gain rates are currently slated to increase from 20% to 25%, or 28.8% including [an additional] net investment income tax, which to some might see as a relief since the original proposal had indicated these rates would increase to ordinary rates for high earners.”

Ordinary rates meaning a top 39.6% for individuals making more than $1 million a year that the Biden administration had proposed.

Another softening came for the carried interest tax break. Carried interest is a share of a private equity or fund’s profits that serve as compensation for fund managers and is taxed at favorable rates. Although private equity and hedge fund operators are typically mentioned as the target of the tax changes, real estate fund managers and developers are also sectors that benefit from the treatment.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) and committee member Sheldon Whitehouse (D-RI) filed legislation in August that would have eliminated the measure.

“We are seeing a potential scale back for carried interest as the proposal is to generally require a holding period of five years, up from three years, in order to reap the benefits of preferential tax rates which were rumored at first to be tied to ordinary rates,” DeRosa adds.

But as Howard Gleckman, a senior fellow at The Urban Institute, noted at Forbes, the average holding time for such gains is six years.

“Essentially they are just looking to close the ‘carried interest loophole’ by extending the holding period,” notes DeRosa. “For the average RE professional, it shouldn’t negatively impact them much, assuming they were holding the investment for the average time period.”

A third area where CRE professionals might be hit more is in the additional 20% deduction allowed for a pass-through entity’s qualified business income under the 2017 Tax Cuts and Jobs Act.

“High earners filing jointly who have qualified business income will no longer be able to claim a deduction in excess of $500,000—$400,000 for single taxpayers—after December 31, 2021,” DeRosa says.

Something to remember, though, is that any such proposal is just that. With the need to pass the measure in the House, where some of the softening may not be popular, and to reconcile that version with the Senate, there’s no way to tell yet what might happen.

Source: “House Tax Plans Lessen Pain for CRE Investors“

U.S. advance estimates of retail and food service sales for August 2021 increased from the prior month. Retail sales recorded a seasonally adjusted total of $618.7 billion in August, a 0.7% increase from July. Retail sales in August increased after a contraction in July despite ongoing supply chain disruptions. Supply chain disruptions weren’t the only issue affecting retail sales as the Delta variant, inflation, and other variables came into play. Although consumer confidence declined in August to its lowest level since February 2021 with concerns over current economic conditions, short-term growth, and COVID, consumers did not curtail their spending in August. Despite these headwinds, consumer demand prevailed.

The increase in retail spending in August reflects the continued strength and perseverance of retailers and the U.S. consumer, as consumers continue to be the driving force behind a continued recovery despite diminished government stimulus. Sales in August increased adjacent to an unconventional back-to-school shopping season where some school districts have in-person learning, while others remain virtual or delayed until further notice.

On a year-over-year basis, overall retail sales were up 15.1% from year-ago levels. Furthermore, retail and food service sales have increased year-over-year every month since June 2020, although there were some month-over-month declines realized throughout that same period of time. Total sales over the past three-month period were up 16.3% over the same period a year ago.

Retail sales for August were up in all but three retail categories on a month-over-month basis: motor vehicle and parts dealers; electronics and appliance stores and sporting goods; hobby, musical instrument, and bookstores; these were at -3.5%, -3.05%, and -2.7%, respectively. Despite those three retail categories experiencing a decline on a month-over-month basis, sales on a year-over-year basis were up in every category, led by increases in clothing and clothing accessory stores, gasoline stations, and food services and drinking places at 38.8%, 35.7%, and 31.9%, respectively.

Source: “Instant Reaction: Retail Trade Sales September 16, 2021“