We developed a practical application of “big data” in combination with sophisticated modeling techniques, providing an automated, machine-based valuation model for the commercial real estate sector. Automated valuation models (AVM) are clearly beating traditional appraisals — the absolute error of the automated model now stands at 9 percent, which compares favourably against the accuracy of traditional appraisals, while the model can produce an instant value at every moment in time, at a very low cost
For real estate developers and investors, finding “the next Williamsburg” or “the next Soho” is often considered the holy grail. But, how to identify what areas (may) gentrify? To illustrate how new, granular sources of data can be used by the real estate sector, GeoPhy developed a simple site selection tool, the “Grapevine Dashboard”.
The Dutch have some experience with water management and resilience -- after all, a large part of the country is built on reclaimed land, the Zuiderzee was turned into a de facto lake, and after a major flood killed almost 2,000 people in 1953, one of the world's largest flood gates was constructed to protect a whole province from the dangers of the sea. Together with UNStudio and Nelen & Schuurmans, we're excited to participate in the The Bay Area Challenge!
Four years ago, we decided to tackle the challenge of how to find the best office space in the Netherlands. We quickly learned that despite the vast amounts of information available, a majority of industry decision makers continued to rely on gut feelings, opinions, personal relationships, and excel spreadsheets. We’ve come across so many excel spreadsheet set-ups driving ridiculously large portfolios, it deserves a special call out. We had a different approach, we believed in letting the data speak.
Distance to the nearest airport is a datapoint that we calculate for all buildings in the GeoPhy database, and its impact on value is an important question for some of our clients. While research on the effect of airports on the real estate market typically focuses on airports as a negative externality -- impacting the housing market through noise and pollution, we recently explored the effects of the distance to Schiphol Airport on the rents and prices of office and industrial buildings that are located within a 10 km driving distance of the airport.
David Short (BBP)
A new report by the Better Buildings Partnership, Beyond Risk Management: How sustainability is driving innovation in commercial real estate finance, sponsored by CREFC Europe, GeoPhy, ING Bank and Lloyds Bank Commercial Banking, reveals pioneering examples of how lenders are incorporating sustainability into their core business activities. This guest blog provides an introduction to the report.
Using a large set of actual transactions, enriched by hyperlocal information on amenities, demographics and economics, GeoPhy has developed an AVM for the commercial real estate market. Automated valuation models (AVMs) are tools designed to value batches of buildings in one sitting, as opposed to one at a time -- the performance of the machine-learning driven AVM beats traditional valuations.
“Big data” has quickly emerged from obscurity into a buzzword, but the world no longer cares so much about how big data is, but rather, what you can do with it. The goal of the GeoPhy is to give the real estate industry the tools provided by boundless swaths of data. Because without application, data is like raw oil without the refinery.
With the divorce proceedings kicking off, we felt that it was time to revisit the research we had done about a year ago into what the impact of Brexit could be on the London office market. The current signals from international companies indicate a footprint shift equivalent to 5 full years of take-up across the city. Interestingly, the vast majority of impacted buildings are owned by foreign investors.
Real estate owners, occupiers, and investors are increasingly setting targets to reduce the carbon emissions from their real estate holdings. GeoPhy has collected detailed information on the current and historical carbon intensity of the grid in more than 54 countries. The result is a timeline of each country’s electricity grid carbon intensity in gCO2eq/kWh from 1967 until 2014, with an additional forecast for the 2015-2020 period. Both the historical numbers and the carbon intensity forecast provide some important lessons for real estate investors, companies and governments setting reduction targets -- the “greening” of the grid should not be an excuse for inaction, but it will get many companies and real estate investors a long way to reaching their carbon reduction goals!
GeoPhy research indicates that property owners will need to invest at least €2B to refurbish all Dutch offices to the minimum required level as per new incoming regulation. This is significantly lower then the €860M assessment by the government. The bottom end of the market will face a tough business case.
Owning the Earth by Andro Linklater explores the shift from communal to individual land ownership and how this has impacted both social and economic relationships.
The Undoing Project by Michael Lewis offers an overview of the collaboration between Amos Tversky and Daniel Kahneman, arguably some of the most influencial minds of the last century. Looking at the world today, we have still not fully integrated their insights into how decisions are made.
Mystery of Capital by Peruvian Economist Hernando de Soto was originally published in 2000 but has not lost its relevance. Set out as an analysis of capitalism from a 'developing world' perspective, it identifies property (and specifcally property rights) as a primary driver for economic development. We couldn't agree more!
Matthijs Storm (Kempen Capital Management) and GeoPhy
Investors can learn much from the likes of Google and Facebook when it comes to processing and integrating an unprecedented volume of data. We believe that the advent of the availability of an ever increasing amount of relevant data, and equally important, the technological means to process this data, is changing real estate investing forever.
Over the past six months, some major investment firms have committed to significant reductions of CO2 emissions in their portfolios. As governments and electorates expect carbon reductions, businesses face a painful period of adjustment. In the front line are producers of fossil fuels, which worry about their oil and gas fields becoming ‘stranded assets’ that will be wiped off their balance sheets under tighter CO2 rules.
Superforecasting by Philip Tetlock and Dan Gardner has a nice bold title, but is really a carefully researched analysis of what does and does not work when forecasting. Fascinating read on an extensive body of research in this space.
The Big Short by Michael Lewis is not just reading in this case, as there is a very decent movie version as well. Great primer material for anyone interested in real estate finance and its capital flows.
Like a ship’s captain, trying to see as far across the horizon as possible and cursing the fog which hides his views of rocks and storms ahead, transparency is highly prized by property investors. Asset managers need to make judgement calls worth many millions of pounds based on the best information they have available; no-one has a crystal ball, but they’ll arm themselves with the best investment telescope they can get their hands on.
Work Rules is a book by Laszlo Bock, who was head of people operations at Google. As one of the great companies of this century and one of the most successful in recruiting and empowering high-performing teams, we love the insights and examples it offers.
From a founder’s perspective, people (user, partner, investor, etc) generally expect you to have a boilerplate response of about 1-2 sentences that clearly labels you in terms they know and understand. The startup bit is easy, but it becomes less clear after that. We use ‘Big Data’ because it at least offers an indication of the underlying tech. We add ‘Real Estate’ to make sure that they can make the link to the correct industry, but is usually translated as ‘new site with vacancy listings’ as opposed to what we actually do
I have always been a fan of the ‘hierarchy of needs’ theory that Abraham Maslow proposed in his paper ‘A Theory of Human Motivation’ in 1943. His key insight for me is the linear order that he proposed, which was famously visualised as a pyramid building (although not by Maslow himself) up from physiological needs all the way up to self-actualisation.
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