A new C-suite role gaining traction in recent years is the Chief Data Officer or CDO. This position oversees a wide range of data-related activities at an organization. According to Gartner, by 2021, the office of the CDO “will be a mission-critical function comparable to IT, business operations, HR, and finance in 75 percent of large enterprises.” The CDO position is also becoming responsible for revenue generation, as the use of data gives organizations a critical competitive edge. One-third of respondents of Gartner’s Chief Data Officer survey noted increasing revenue as a top three measure of success. The CDO no longer only handles risk mitigation; this position now brings higher revenue to businesses.
CDO’s are spearheading digital transformations in companies across numerous industries. For commercial real estate firms who historically have relied on data, analytics, and financial information, the position is becoming even more mission-critical.
Commercial real estate agents have been using data for decades, but the increase in the availability of data is shifting the industry. All commercial real estate agents use property data such as asset type, location, building size, number of units, etc. as a fundamental. Transactional data determines the value of the property, so any investors, appraisers, banks, or brokers involved will review this data. Agents may also need to review loan and lender data, pre-foreclosure data, market data, commercial tenant data, and more. And given that there is now much more data in each of these buckets, CDO’s are needed to set precedents on how agents use data. What data is useful? And what data can provide actionable insights?
Commercial real estate agents use data to analyze client portfolios and offerings at a microscopic level. Both big data and small data, agents use these figures to craft a client strategy. Adding a layer of machine learning, all of this can be done using algorithms, taking the burden off the agent. Answering certain questions, such as whether or not the client is paying too much for a property, can be done quickly using benchmark studies. The manual labor of data analysis is eased with this technology, allowing agents to focus on other client tasks.
Data can also help firms decide what other services to offer clients. By aggregating data on most-requested services, companies can prioritize which offerings to launch, creating additional sources of revenue.
One might argue that instead of a chief data officer, commercial real estate firms could build a team of data scientists. And while a team of data specialists certainly gives a competitive edge, the CDO role is increasingly important in real estate to ensure communications stay open between C-suite executives. Even with a team of data scientists, a CDO will still be useful to ensure that initiatives align with organizational directives.
Across organizations, data governance previously lived under the CTO or CIO office; however, there has been a shift in how data is used, creating the need for another c-suite position. Data can now be used as a company asset, so finding someone who can harness the power of that asset is crucial. Furthermore, as hackers advance, someone needs to take a proactive approach to data security, rather than reacting after breaches happen. At commercial real estate firms, privacy and security are even more complicated. Not only do real estate firms have to worry about consumer data, but they also must work with financial institutions that have security measures in place over their data as well.
Commercial real estate firms will benefit from a single leader who can move the company towards a data-driven approach from the top down. Someone who can focus on strategy, leadership within the organization, and drive change while asking the right questions: Is this the data we need? Is this data compliant? Will this data offer strategic value to commercial real estate?
The need for chief data officers is clear, but finding candidates to fill this position is a problem across almost all industries. Finding a candidate that not only can meet the technical needs but also has a background in real estate is likely near impossible. And those commercial real estate firms that can find that unicorn will be competing with other firms to hire that person.
What some commercial real estate firms are doing is finding someone with a business, analytics, and technical background and bringing them up to speed on the real estate market. Alternatively, firms could re-train some internal team members that have an aptitude for data and analytics, utilizing the plethora of bootcamps and training programs to create a CDO internally.
Now, commercial real estate firms do absolutely need CDO’s to stay competitive. Harnessing the massive amounts of data is key for growth and for maintaining customers. While residential real estate firms may not need to fill this position quite yet, it should certainly be on the horizon for any company in this industry.
What’s more, consumers are becoming more wary on how their data is used. Commercial real estate firms house a lot of data, which means that they not only need to keep it secure, but they also need to be transparent in its use. More and more regulations on data are coming down the pipeline, and a CDO is well-equipped to understand and change best practices as data regulations roll in. This position can ensure the company avoids hefty fines and penalties that come with not meeting specific requirements.
No matter which route commercial real estate organizations take, it’s clear that firms should start the hunt for a CDO early; this role will likely take much more time to fill than other executive positions.