Aggregation and analysis of open data—that is, information that is freely available via the internet—are revolutionizing fields such as science and government. But it is still anathema to many in the real estate industry, where many still see information on property availability as a proprietary resource that should be kept close to the vest lest marketers lose their competitive advantage.
But that closed-data mind-set is on the way out because open data ultimately will create far more value, panelists predicted in a discussion at the ULI Fall Meeting in New York City on increasing real estate bandwidth.
“You have to be able to spread that data to the wind,” said Joshua McClure, founder and chief executive officer of RealMassive, which provides data about commercial real estate space availability to anyone wishing to use its platform.
McClure, who also evangelizes on behalf of open data as a blogger for Entrepreneur.com, said providing availability data for analysis actually benefits property owners, because it has the potential to jack up yield occupancy, a key metric for profitability. “If you can fill up a space, you can raise the rates,” he explained. “The last 10 percent of a building to be rented has a huge impact upon yield. It’s that last 3,000-square-feet [280 sq m] deal that determines it.”
At present, though, the dearth of open data stalls those profitability-raising small deals because brokers who cannot see the opportunities are inclined to prioritize bigger spaces.
McClure described the magnitude of the potential impact of open data on the real estate industry—whose efficiency is still hindered by antiquated technology and fragmented, stale data—as “incomprehensible.”
McClure said one key strength of open-data platforms such as RealMassive is that unlike conventional listings, they use an algorithm that provides the ability to do relevance-based searches. He compared this with the difference between craigslist and Google.
Jake Seid, president of another open-data site, Auction.com, said providing such information benefits all players in a marketplace through what data theoreticians call the “network effect.”
“The ability to aggregate data benefits all the participants, especially down-market properties and smaller brokers,” he said. For that reason, he expects to see resistance mostly from bigger players, but predicted that it will be overcome when participation reaches a critical mass. “People are used to using proprietary info as a weapon, but if the industry goes in that direction, they will, too.
“When six of ten small guys are in, the other players start to feel left out,” Seid explained. “It’s death from below. When small guys work together, they’re not so small.”
But the panelists, who also included Chris Palmisano, senior account manager of key accounts for Google, cautioned that provision of open data is not the same as indiscriminately dumping personally identifiable information in the public domain, which would not be in the interests of property owners. McClure said RealMassive encrypts tax or litigation-related data that it gathers and only provides the information on an aggregate basis for analysis. And not all data are valuable or needed for analysis.
“The comp is not necessary,” McClure explained. “But the bid/ask spread aggregated over a city block is valuable. You’ve then got boundaries for the negotiation, and you’ve added value.”
In general, open data must strike a balance in terms of being granular, panel participants agreed. “If it’s too aggregated, it’s not useful,” Seid explained. “But if it’s too detailed, people aren’t going to be comfortable with that.”
McClure said access to open data will free up resources for property managers, whose staffers can focus on providing more services to customers. But Seid predicted a “huge opportunity” for property managers in gathering and analyzing tenant information for strategic insights. Data on customer loyalty and sentiment on nonlisted properties, for example, could enable them to get a better idea of where to put their next building.
“You can understand what will happen in your marketplace with analytic predictions based upon statistics,” McClure said.
Google’s Palmisano said the shift to open data will not be entirely painless. He predicted shortages of data analysts and real estate executives with the know-how to use data to run a business. “But when there are challenges out there, there usually are opportunities,” he said.
Another key issue for open-source data is its reliability, which is influenced by what players provide. RealMassive has a department that scrutinizes data and “scrubs” questionable information. Another check-and-balance tool is input from participants who notice that data seem out of line with their own information, he said.
“It is also crucial for open-data players to feel that they control their own data,” McClure said. In comparison to closed, premium database services of the past, RealMassive’s terms of service allow players to decide what information they make available, he said. In the long run, though, they benefit from providing more data. “If you hold back that $32-per-square-foot price, that’s going to keep you from showing up in searches,” he said.