DATA ANALYTICS Deeper insights support better decision-making - A CHANGING INDUSTRY - Property Funds World
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The Future
of Property
IN FOCUS 2021
DATA ANALYTICS A CHANGING INDUSTRY EVOLVING CDO ROLE
Deeper insights support better PropTech, SpaaS, ESG lead Chief data officers critical to
decision-making innovation and disruption business transformation
Featuring CHAOS | PfP Capital
A pioneering approach to placemaking and ESG PfP Capital is an ambitious fund management business, born from a great heritage at Places for People Group. We deliver stable returns and ongoing value growth across our suite of residential-led funds. We pioneer a market-leading holistic approach to placemaking and ESG to deliver quality homes and places across the UK. Find out more today at pfpcapital.co.uk PfP Capital Limited is Authorised and Regulated by the Financial Conduct Authority (FCA) under FRN 775636
CONTENTS
04
INSIDE THIS ISSUE…
04 THE GROWING ROLE OF DATA IN REAL ESTATE
INVESTMENT
By A. Paris
06 INNOVATION, DISRUPTION AND CHANGE IN THE
WORLD OF REAL ESTATE INVESTING
By Alexandra Notay, PfP Capital
08 DATA INSIGHTS TO DRIVE REAL ESTATE TRANSACTIONS
06
By Paloma Bautista, CHAOS
11 DIRECTORY
PHOTO CREDIT: TAPIO AUVINEN
08
Published by: Property Funds World, 8 St James’s Square, London SW1Y 4JU, UK
www.propertyfundsworld.com
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Investment Warning: The information provided in this publication should not form the sole basis of
any investment decision. No investment decision should be made in relation to any of the information
provided other than on the advice of a professional financial advisor. Past performance is no guarantee
of future results. The value and income derived from investments can go down as well as up.
THE FUTURE OF PROPERTY IN FOCUS | May 2021 www.propertyfundsworld.com | 3
OV E RV I E W
The growing role of data
in real estate investment
By A. Paris
L
ike most other economic sectors, property invest- a regular income with the potential for capital growth.”
ment had to re-invent itself in view of the Covid-19 The asset manager notes real estate can provide a
pandemic. As some parts of the market, like hotels stable income potential for capital growth. These assets
and retail businesses, were hit hard, others like data cen- also offer a pattern of returns which differs from those of
tres and large warehouses flourished. As the outlook is traditional equities and fixed income. In addition, BlackRock
becoming more positive given the global vaccine rollout, explains there are dislocation opportunities due to Covid-19,
investment managers should re-assess the resources and “where under-pressure financial markets have not reflected
support they need to succeed in this environment. the quality of a number of properties in their price. We
“Momentum in global office markets remains subdued, believe volatile financial markets and an uneven economic
with Q1 leasing volumes down 31 percent on Q1 2020. recovery have created an opportunity to buy attractive prop-
However, there are now tentative signs of an improving out- erties at prices that do not reflect their true value.”
look with leasing activity in some countries including China In support of this belief, BlackRock is starting to invest
back above pre-pandemic levels. Retail and hospitality, the more in sectors facing a more volatile future, such as
two sectors most directly impacted by social restrictions, bricks-and-mortar retail and hotels. These sectors, as also
are continuing to face challenges. The logistics sector, the highlighted by Jones Lang LaSalle, can deliver significant
standout performer throughout the pandemic, maintained returns as economies slowly start to emerge from restric-
its robust growth in Q1,” says Jones Lang LaSalle in its tive measures.
Global Real Estate Perspective for May 2021.
Despite the difficulties the industry faced as a whole, Data alone is not enough
real estate opportunities remain attractive. BlackRock Although the outlook for the real estate sector is a lot more
outlines the market “offers investors the chance to positive than it was a year ago, there is no denying things
invest in attractively priced properties that aim to provide have changed.
4 | www.propertyfundsworld.com THE FUTURE OF PROPERTY IN FOCUS | May 2021
OV E RV I E W
All organisations, regardless of size, should
include a chief data officer (CDO) or head
of analytics in their data transformation
planning. Data literacy, an essential
component of a data-driven culture, must
become a core competency of leadership
within the enterprise, even if the CDO role
is outsourced.
Linda Isaacson, Ferguson Partners
Isaacson, Ferguson Partners, in an article for NAREIM, the
industry association dedicated to the business and organ-
isational strategy of real estate investment management.
“As the focus shifts to building predictive and pre-
scriptive models for data innovation… All organisations,
regardless of size, should include a chief data officer (CDO)
or head of analytics in their data transformation planning.
“The depth and breadth of economic impact on the “Data literacy, an essential component of a data-driven
real estate sector is uncertain, just as the scale of human culture, must become a core competency of leadership
catastrophe from the pandemic is yet to be seen. However, within the enterprise, even if the CDO role is outsourced,”
behavioural changes that will lead to significant space Isaacson notes.
becoming obsolete in a post-coronavirus environment The role of the CDO is evolving across the investment
seem imminent. management industry more broadly. A paper by Deloitte
“Given the potential for transformative changes, real entitled The evolving role of the chief data officer in financial
estate players will be well served to take immediate action services: From marshal and steward to business strategist
to improve their businesses but also keep one eye on a argues: “The CDO’s job description – for the most pro-
future that could be meaningfully different,” advise Vaibhav gressive organisations – has evolved from its initial focus
Gujral, Robert Palter, Aditya Sanghvi, and Brian Vickery at on data asset gathering, governance, and stewardship to
McKinsey. proactive business enablement, with many institutions even
Technology is one of these key changes the real estate marrying the CDO and chief analytics officer (CAO) roles
industry has had to embrace. For example, real estate into a single senior-level position.
investment managers have been exploring potential loca- “This is especially true for organisations that aggres-
tions virtually and making deeper use of data analytics. sively seek to leverage data science and advanced
Access to data is relatively straightforward. According analytical modelling to generate new insights into the mar-
to CHAOS, the urban forecasting company, the challenge kets and customers they serve, the products they build and
real estate professionals face is figuring out how to lever- price, the risks they assume or pass on, and the means
age data science for maximum impact, bridging the gap by which they operate the business to benefit stakehold-
between scattered data and holistic insights. ers. Organisations today need senior leaders to not only
“Data on its own is not enough. The usage of advanced manage and govern the data, but also to leverage the data
analytics tools that, on top of mining timely data, provide a using emerging technologies that can generate actionable
package of information capturing location and market state, analytical insights and tangible business benefits.”
and produce good predictions, can make a huge impact on In view of this, the role of outsourcing within real estate
ROI and profitability,” the company says. investment management firms is bound to become more
In addition to encouraging real estate investment man- prominent. A survey by Deloitte shows how already in 2019,
agers to build relationships with trusted third-party partners a large number of investment managers were re-thinking
to assist, this trend is also leading to changes in the inter- their operating models, outsourcing strategies, IT tools
nal resources needed within the firm. and investments in technological innovations. This trend
“Having the right people and processes to govern data will have been further accelerated by the pandemic which
and its transformation will determine the long-term win- acted as a catalyst for an increased focus on data science
ners in a rapidly changing environment,” writes Linda J. and analytics. n
THE FUTURE OF PROPERTY IN FOCUS | May 2021 www.propertyfundsworld.com | 5
P F P C A P I TA L
Innovation, disruption
and change in the world
of real estate investing
By Alexandra Notay
Drones and disruption (ESG) metrics that are absolutely core to invest-
The word ‘drone’ has become something of a ment allocation have forced multiple waves of
standing joke with my colleagues, alongside change across every business sector. Larry
‘customer expectations’ and ‘storage’ as a sort Fink’s annual letters to BlackRock investors
of Buzzword Bingo for those poor souls who have heralded that change, highlighting that
have heard me mention them in almost every “climate risk is investment risk” and that finan-
meeting since 2015. I was an early adopter of cial performance without “social purpose” was
mandating inclusion of drone delivery pads in no longer deemed to be good enough.
our larger residential building specifications
and had been giving all sorts of ‘Future of Space as a service and the crystal ball
Residential’ presentations to real estate confer- Real estate investors, developers and opera-
ences from Australia to MIPIM for years so this tors are now grappling with the need to be
was to be expected. One of the many areas of innovators, disruptors and futurists, all the
change in current UK planning policy is around while maintaining successful portfolios and
how to safely accommodate the proliferation growing stable returns.
of drone and other robotic deliveries and their As real estate and technology strategist
related infrastructure as our appetite for deliv- Antony Slumbers notes: “it’s not the case that
eries shows no sign of abating. everything you already know about real estate
It is unsurprising that the wider real estate is no longer important, it’s just no longer
industry has remained stubbornly analogue sufficient.”
until fairly recently. The pre-eminence of a We are now dealing with buildings that are
tried and tested model focussed on ‘bricks still inherently illiquid assets at a time where
and mortar’ assets in core locations delivering flexibility and adaptability are the top priorities
reliable IRRs over long-term leases seemed and the previously rigid lines between asset
utterly dominant, until it suddenly wasn’t. classes are increasingly blurry. Ten years ago
Tech has certainly been a key disruptor the ULI/PwC Emerging Trends survey didn’t
across every real estate asset class; first the even count residential as a major asset class,
threat of online shopping vs in-store retail, instead listing it under ‘Alternatives’ yet now
then the advent of working from home and residential investment is the fastest growth
demand for flexible office space challeng- area with a proliferation of new offers from
ing the historic fixed office model, AirBnB PBSA and BtR to co-living, senior living and
and short-term lets pushing hotels into a a whole range of affordable or shared own-
far more competitive mode and, of course, ership products. A much-heralded ‘wall of
the ultimate curveball of Covid-19 disrupting institutional money’ is shifting across
everything in its path. from traditional office and retail inves-
In parallel the evolution of Corporate tors seeking the stability of residential
Social Responsibility (CSR) and sustain- rental returns – before finding that
ability policies from an oft-dismissed the complexity of dealing with homes
‘greenwash’ sideline to established comes with vastly greater regula-
Environmental, Social and Governance tion, differentiated risks and that
6 | www.propertyfundsworld.com THE FUTURE OF PROPERTY IN FOCUS | May 2021
P F P C A P I TA L
stabilised portfolios up for sale are few and like someone else to go first and address all
far between. the thorny and expensive problems in a swiftly
Operational businesses used to linear land- replicable pilot.
lord-tenant ownership models are trying to This cautionary tale isn’t to put off bold fund
shift to the concept of ‘Space as a Service’ or managers from exploring innovations across
SpaaS; where asset ownership and physical their portfolios but a reminder that too often
products becomes subservient to the moneti- we fail to remember that we use the word
sation of access and services within a physical innovation for too many things. As decades
space. Examples include the move from CDs of academic research has shown, innovation
to music streaming, from fixed office leases to isn’t just technology and seldom follows effi-
flex office space or fully remote teams, or from ciency criteria! AI chatbots, delivery drones
side-stepping the fabled ‘housing ladder’ with and air quality sensors are all brilliant inven-
a punishing mortgage deposit requirement for tions but do not on their own constitute the
the adaptability of a Build to Rent tenancy, ena- innovation and disruption of systems, markets
bling a lifestyle that offers security of tenure and networks that real estate needs. Professor
but absolute flexibility with all sorts of services Marc Ventresca, guru of strategy and innova-
and amenities included. tion management theory at the University of
This expanded range of residential tenure Oxford, underlines that “Innovation is about
types are themselves market disruptions in recombining and repurposing (all of those
the UK but each have distinct viability thresh- products and ideas) to create value.”
olds, return profiles and require nuances in At the moment within PfP Capital we are
approach before you even add in the revelation running some pilots around Electric Vehicle
of ‘tenant as customer’ with an expectation of charging having received numerous queries
good and ever-improving service. from existing and potential residents prompting
So RE investor heads are no longer mim- interesting team meetings where colleagues
icking ostriches in the sand but the crystal ball discuss the merits of their own hybrid vs.
that fund managers have to look in is murky at all-electric vehicles. However, discussions with
best when considering exactly how to future- any engineer lead to dire warnings about the
proof portfolios. lack of capacity to actually support an all-electric
revolution across buildings and cars, and others
Fun with future proofing point to the rapidly improving pilots of hydro-
One example I’ve used repeatedly is that gen-fuel as the true sustainable future. Would
“everyone wants to be the iPod, not the mini- it be better to wait for hydrogen technology to
disc”. The latter was a technologically perfect be perfected or might that risk an exodus of
piece of kit, still adored by many music afi- residents, or us not meeting our commitments
cionados but the tactile design, overwhelming around sustainability and working towards Net
ease of utility and futuristic aura of the iPod Zero Carbon? What other ways could we sup-
led to its dominance being quickly asserted. port sustainable transport in our communities
Compare this to the bold future proofing efforts without creating accessibility issues for disabled
of one multifamily developer who toured me residents who don’t want pavements blocked by
around an 800 unit scheme on the East Coast, charging cables? There are a multitude of ques-
shamefacedly pointing out an unusual ‘candle tions we are working on across our residential
nook’ recess near the entrance of each apart- funds and I for one find it endlessly fascinating,
ment. It turned out that they had designed in so intend to keep on droning on! n
an iPhone docking station into every single
apartment at quite significant cost; which Alexandra Notay
initially proved to be a popular selling point Placemaking & Investment Director, PfP Capital
to tech-savvy renters. Yet just three months
Alexandra Notay is Placemaking and Investment Director at PfP Capital, the fund
after the building opened in 2012, Apple and asset management arm of Places for People Group, overseeing a UK-wide
suddenly launched their new Lightning port residential strategy. She is an internationally recognised expert on build to
rent, placemaking and sustainable urban development, with 16 years’ strategic
charging cable with the iPhone 5 and subse-
advisory and investment experience to private sector, government and third
quent handsets, rendering what had been a sector organisations across four continents. She is also a non-executive director
market-leading innovation an expensive redun- of Essensys plc, Sound Diplomacy, SouthWest Board Member for LandAid and
dancy across the asset. Ideally we would all trustee of the SunScreenIT Foundation.
THE FUTURE OF PROPERTY IN FOCUS | May 2021 www.propertyfundsworld.com | 7
C H AO S
Data insights to drive
real estate transactions
By Paloma Bautista
T
raditionally, the real estate industry has taken invest- world, different players in the RE industry need to continu-
ment decisions on a case-by-case basis based on ously monitor the market pulse.
limited data, such as that from transactions, prop- “In addition to the traditional macro-level insights, action-
erty owners, or type of investment, and that from personal able micro-level insights at a neighbourhood level are
networking. The insights produced in this case-by-case crucial to get a comprehensive market overview that ena-
model easily become outdated in a constantly changing bles sustainable decision-making,” says Valeri Tsatsishvili,
ecosystem. PhD, Data Scientist at CHAOS
The current pandemic has impulsed digital transforma- Data on its own is not enough. The usage of advanced
tion around the globe and forced the adoption of methods analytics tools that, on top of mining timely data, provide a
that deliver fact-based responses in a timely manner. package of information capturing location and market state,
Decisions based on outdated data and personal knowl- and produce good predictions, can make a huge impact on
edge are not sustainable. We need to look forward, detect ROI and profitability. To illustrate this, below we explain some
trends and understand how the world, its citizens, and their examples from our experience in working with real estate
needs are changing. investors and developers to provide such business impact.
“At the heart of CHAOS we believe that insights driven
by demand — in other words, people — provide more accu- Case 1: Identifying the investment opportunity – what
rate predictions and forecasts to support decision-making and where to invest?
in real estate,” says Natalia Rincón, PhD in Smart cities and Advanced analytics can be used to support your market
CEO at CHAOS. analysis with a quick yet detailed view of an area and its
Today, there is more than enough information that can investment opportunities, including:
be analysed together to better understand the performance • Demographic forecasts and population density – The
of specific locations. Yet, the challenge that real estate pro- property demand of a specific location can be esti-
fessionals face is figuring out how to leverage data science mated more accurately by forecasting the changes in
for maximum impact, bridging the gap between scattered the demographics of the area (e.g. age, gender, income,
data and holistic insights. unemployment rate, and generation cohort). It is also
crucial to know how specific demographic segments are
Bridging the gap between data and business insights concentrated in the city and where your target client
In order to stay ahead of the curve in a fast-changing group is located (see Figure 1).
Figure 1
8 | www.propertyfundsworld.com THE FUTURE OF PROPERTY IN FOCUS | May 2021
C H AO S
• Market performance – The finan- Figure 2
cial value of an area can be
understood by looking at the aver-
age value of the transactions in the
market and getting a quick over-
view of its rent levels (see Figure 2).
• Attraction points – Understanding
people’s daily use of the built envi-
ronment will reveal what are the
most vital places at micro level
(activity hubs) where people are
spending time outside working
hours (see Figure 3).
Case 2: Insights for a profitable
rental property – measuring the
attractiveness level of your property
During or after an investment has
Figure 3
been done in a rental property, a
closer look at the area helps to plan
a long term profitable property. To
maintain a high occupancy rate, a
neighbourhood needs to be attractive.
We suggest the attractiveness level of
your property to be measured at least
according to its location’s following
parameters:
• Living Convenience – Matching the
service provision, the reachability,
and the type of tenant group lets
you know how convenient to live in
an area is.
• Growth opportunities – Under
standing how the area will develop
in the future is a critical insight to
help plan rent levels. CHAOS dashboards provide a potential in support of your proposal will reduce the risk
growth level score based on the new and approved of your investment and development decisions. Measuring
development by the municipality. the current and upcoming competing property supply in
• Economic development – Healthy income and job the area and finding out how the area compares to other
opportunities are signs that a neighbourhood is expe- potential sites based on its accessibility, service provision,
riencing growth. For example, a high-income area and attractiveness will enhance your project’s feasibility. n
can indicate that its residents and those who want to
become one have enough purchasing power to rent or Access CHAOS’ market insights and forecasts
buy high-class assets. www.chaosarchitects.com
Big data insights and forecasts play a fundamental
PHOTO CREDIT: TAPIO AUVINEN
role in acquiring a comprehensive understanding of Paloma Bautista
COO & Co-founder, CHAOS
locations in relation to project feasibility
Predicting demand based on socioeconomic attributes at Paloma Bautista provides leadership and vision to ensure
a neighbourhood level enables real estate investors, devel- the business has effective people, operational controls, and
administrative and reporting procedures in place. She actively
opers, architects, and other agents, to understand their
pursues sustainable urban development powered by technology,
property segment targets to better plan residential and data, and people, as the key to creating liveable cities for
commercial investments. everyone. She holds a Master’s in Architecture and worked for the
Moreover, understanding a location’s character and consultancy company serving Spain’s Ministry of Development.
THE FUTURE OF PROPERTY IN FOCUS | May 2021 www.propertyfundsworld.com | 9
D I R E C TO R Y
CHAOS is the urban forecasting company for real estate investors and city developers. Our
AI-platform solution provides a better understanding of cities’ complexity in an easy and intuitive
map-based dashboard. We process urban data and crowd insights to forecast city investments
and development which create more liveable cities and ensure high-value deals for our customers.
With our indexes and machine learning models, we identify those emerging trends impacting
real estate decision-making, from city to neighbourhood level (macro to micro-level). Through
deep analysis of crowds, urban environment, and customer assets, CHAOS detects investment
and divestment opportunities, rentability possibilities, neighbourhoods’ attractiveness and
living convenience, and character of areas, among others. Our indexes are accessible through
on-demand licenses to our multi-stakeholder dashboard.
www.chaosarchitects.com Contact: Natalia Rincón | natalia.rincon@chaosarchitects.com | +358 40 9359 824
PfP Capital is a fund & asset management business established by Places for People Group.
Its objective is to create a suite of residential funds, raising equity and investing in regeneration
and rental property across all tenures including established PRS, Build to Rent, retirement and
affordable homes.
Leveraging Places for People Group’s expertise in placemaking, property management and social
value, PfP Capital adds FCA-regulated fund management expertise to offer investors stable returns
and ongoing value growth
Contact: Chris Jones | chris.jones@pfpcapital.co.uk | +44 (0)20 7429 0441
www.pfpcapital.co.uk
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