The low quality and transparency of data is holding back the real estate industry compared to other asset classes, panelists at PERE’s annual Investor Forum in Amsterdam said Tuesday.
“It is a private, illiquid business and people may not be prepared to share. There is a really long way to go and I doubt if it will happen during my career.”
– Philip Barrett
During a panel session titled “Mitigating risk and future proofing investments,” the topic moved from political and leverage risk to the subject of data – or more accurately, the lack thereof.
The panel, moderated by Peter Stoll, managing director and partner at Carlyle Group, featured a number of experts in the field of real estate risk including Howard Radley, managing director of Radley Associates; Hauke Brede, chief risk officer at Allianz Real Estate; Vincent Vinit, chief risk officer at Generali Real Estate; and Philip Barrett, global chief risk officer at PGIM Real Estate.
“One of the most common misconceptions in the real estate industry is that risk should be assessed with intuition rather than logic,” said Radley. “Many assessments, whether it is valuation or otherwise, do not use data, but simply a gut feeling, and that is where problems arise.”
Part of the problem, the panel agreed, was the lack of availability of cutting edge, useable data.
“Things will get better,” argued Brede. “But at the moment real estate is so outdated; some people are still using an old PDF to value an asset. But we are just at the beginning of using data in a more professional way. The traditional method of valuing assets over and over again each time they are sold will gradually disappear.”
But the key, he added, is getting the right data. “Data itself is meaningless if you don’t have the right data or use it properly.”
Another factor preventing data transparency is the lack of willingness to share it, the panel heard.
“People forget about the nature of real estate,” said Barrett. “It is a private, illiquid business and people may not be prepared to share. There is a really long way to go and I doubt if it will happen during my career.”
“The problem with data sharing,” added Stoll, “is that once it’s ‘out there,’ you can’t take it back.”
Barrett noted, however, that the wider technological revolution – the ‘internet of things,’ for example – will transform data provision.
Stoll concluded the discussion by suggesting that the entire industry – including investors and managers – can benefit from a more collegial approach to data. “If we get it right, we can help the industry offer better risk-adjusted returns to investors, compared to other asset classes.”
“A lot of work is being done to change things. We need to get involved, be more transparent and share. It seems the asset class is trying to get better,” he added.
The PERE Investor Forum is being held at the Krasnapolsky Hotel in Amsterdam and runs from October 17-18.