As the United States slowly begins to reopen the economy, it’s clear that the COVID-19 pandemic has changed consumer behaviors. While it’s uncertain how long these changes will last, it is certain that all of this has had a big impact on the economy and real estate investments.
While many of these impacts are clear—such as eviction bans and commercial tenants falling behind—there are some less obvious trends that can affect the bottom line. By comparing non-traditional data sets with some of their traditional data sets, real estate investors can:
Make strategic decisions for current portfolio holdings
Assess whether they should divest or capture value
By harnessing the power of big data, investors can understand data within its societal context and gain insight into trends, outliers, and other indicators, which is especially important in a time when consumer behaviors are shifting rapidly. Here are some non-traditional data sets to consider.
Non-Traditional Data Sets to Help Real Estate Investors Budget Better During COVID-19
Proximity to Points of Interest
As we mentioned in a previous blog post, prior to COVID-19, information like how close a property was to a Starbucks or Dunkin’ was a way for investors to see their value go up. Between 1997 and 2013, residents near Dunkin’ locations had their property value appreciate 80% versus the national average of 65%. However, as retail sales this past March saw the biggest decline since the government started tracking such data in 1992, it’s clear that the way consumers define points of interest has changed. For many, the most valuable points of interest (POI) data is now accessibility to delivery and courier pickup as opposed to how many shops are in an area. According to Adobe Analytics, click-and-collect (or curbside pickup) increased by 208% during April 1-20 compared with the same period last year. This is a trend that many feel is likely to stick.
Investors can create reports from their traditional data sets in the MRI Analytix Portal and cross-reference with POI data to make more nuanced budget decisions or understand outliers in their reporting.
In 2017, researchers in England found that disconnecting a property from high-speed internet access would depreciate the value by 2.8%, and in 2019, researchers found that single-family homes with access to 25 Mbps broadband had a 3% higher value than similar neighbors with 1 Mbps. According to The Counselors of Real Estate, in 2019, infrastructure was the leading concern among issues that may impact real estate investments.
A recent McKinsey report notes that “home is recast as the new coffee shop, restaurant, and entertainment center” as a result of lockdowns. For consumers, this means an even bigger focus on digital/internet use, and it’s a behavior that is predicted to remain, far into the future. It’s no surprise—our lives have shifted to remote work, telehealth visits, distance learning, and changes in how we get our entertainment. As digital continues to grow, infrastructure will become even more important.
Using MRI’s Budgeting & Forecasting Residential Management Workbooks allows users access to detailed data, including amenities. If there are unpredicted shifts or outliers in the data, examining them within the context of non-traditional data like infrastructure or examining how integrated your investments are with the Internet of Things—the use of smart technology at your properties—is a great way to contextualize the data, allowing you to make strategic decisions for your investments moving forward.
Decline in Retail Spaces = Rise in Warehouses
As many people found themselves in various stages of a shutdown, online sales continued to grow. As a result, companies are building up “buffer stock”to meet the changing needs of consumers. In terms of real estate, this means a demand for warehouse and storage facilities. In fact, the first quarter of 2020 saw a three-year high in industrial leasing, which accounts only for the beginning of the pandemic. Additionally, as we continue to see supply chain issues, reverse globalization is occurring, which means industrial spaces for production will rise.
By understanding behavior shifts through consumption databases along with traditional inputs, like benchmark performance indicators or rental rate history for surrounding submarkets found in Yardi Matrix, investors can create models and understand their reporting in a more strategic way.
Through open-source websites, reviews, and social networks, big data can provide investors predictive information on their current and potential investments. This information can help investors understand their own data in order to attract and retain tenants and create insights for long-term planning.
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