Not All Data is Created Equal

It’s hard to believe, but ‘tis the season, already. The end of the year is approaching and for most organizations, large and small, this typically means holiday parties, vacation schedules and the obligatory end-of-year trends analysis and forecasts which warn you of coming changes that might impact business. But in a constantly evolving world of technology, buying behavior, pricing and competition – how much value should we be placing on these reports and predictions?

It depends. It is always good to have some idea as to how the economy or market trends might impact your business, but you should know how to interpret those reports. Listening is one thing but understanding and interpreting is something else, entirely. Interpretation of the data is the important part.

Here today, gone tomorrow

Many trends analysis are often written based on historical data. The problem is that these days data fluctuates at lightning speed, so relying only on forecasts derived from this historical data, especially anything older than one year, is risky. Take real estate, for example. While information itself travels at lightning speed, it takes weeks and months for real estate trends to develop. So, when making real estate decisions, it is important to understand the time considerations related to the real estate trends you’re using as part of the decision making process. Keep in mind, few companies can survive business decisions based on a trend that proves to be inaccurate. You need to make sure the data you are reading is appropriate to your business today.

Not all data is created equal

In today’s digital age, there is a lot of data readily available with the click of the mouse. There are studies, surveys and statistics for almost every industry providing an endless supply of data but there can be large variations in the information presented based on how the data was captured and reported. Keep this in mind: Incorrect data, from online analytics programs or in house databases, can easily throw off an entire forecast. It is critical to understand the data, what particular portion of the data applies, what market the data applies to and how your business might be impacted.

Don’t make a commitment

Trying to narrow data into a specific long-term trend is difficult even under the best of circumstances.  In the real estate industry, as commercial real estate becomes more specialized by product type and submarket, the large-scale macro trends can become more homogenized. A great example of this is the annual ULI Emerging Trends Survey which provides a snapshot of investor preferences in the major US markets. While this is generally considered one of the better sources for Commercial Real Estate conditions and trends, even with this ‘bible’ in your hands you must know that national trends are not always the same in your specific sub-market. Variations in occupancy, construction costs and cap rates vary from market to market and often times are not consistent with the macro view. What this means is that from year-to-year, many factors can change just one piece of the prediction, throwing off the entire forecast.

Focus on what’s trending now

Trends reports and forecasts are also based on a complicated series of mathematical and scientific equations that can prove to be useful to the success of your organization. However, you can’t assume that all the information can be neatly wrapped up once a year. Even the Farmer’s Almanac publishes four editions a year. In this era of technology, we need to make the switch to real-time trend reports that make short-term predictions based on more reliable and timely information.

So if we continue with our commercial real estate example, it’s important to understand that in order for forecasts to make sense for the overall health of your company, you must understand that real estate spread throughout the country – and sometimes throughout a large city – will not follow the same trends necessarily. You must understand and interpret on a property-to-property, market-to-market basis. And, in addition to reading the printed reports you should be talking with a professional who works in, and understands, the markets in which your individual properties are located.

Here’s a final thought. Trend reports and forecasts can add huge value to a business in terms of inspiring innovation, supporting good strategic decisions and keeping you sharp. They can let you know that change is coming, and that you need to be ready for it. But that doesn’t mean transforming your business today on a promise about tomorrow. It means making your business sufficiently agile to respond to change when it comes. Like all other aspects of good business practice, where you rely on accountants and lawyers for advice, if real estate is a part of your business, you should have the real estate professional sitting at that Board table with you.

About the Author

Lou Battagliese is a Founding Partner of Jackson Cross Partners, LLC, a commercial real estate company headquartered in King of Prussia, PA. The company has developed a Knowledge Based platform to support corporate portfolio management and strategic transaction execution. Mr. Battagliese leads a cross-functional team that has developed processes for data integrity for workplace management solutions and analytics related to anticipated changes related to accounting for leases. Click here to contact Lou Directly.