At VTS Accelerate 2024, our panel on predictive analytics brought together industry leaders to discuss the transformative power of real-time data in commercial real estate. Hosted by Ryan Masiello, the panel featured deep insights from:
- Scott Rechler, CEO of RXR
- Max Saia, VP of Investment Research at VTS
The discussion covered the current state of the market, the impact of investments in AI, and the cultural shifts required to fully embrace these technologies.
Shifting Focus from the Rearview to the Front Windshield
Scott Rechler opened the discussion by highlighting the slow adoption of technology in real estate. Historically, the industry has relied on backward-looking data—what Rechler referred to as "the rearview mirror."
This approach is becoming obsolete as the pace of change accelerates. "We've had the luxury historically to see what had happened to guide where we're going. Now, we really need to be able to see what's in front of us versus what's behind us," Rechler emphasized.
From Obsolete Data to Real-Time Clarity
Rechler elaborated on how real-time data from VTS helps RXR determine tenant demand and investment opportunities, especially in the volatile office market. "The best way to do that is to actually look at where's the activity in that submarket, where's the activity in the transit, cell service, retail sales, restaurant sales, the showings of spaces that we can get from VTS of . . . similar spaces – so you knew if you have a good building, with a good capital structure, there's actually tenant demand there."
Max Saia echoed these sentiments, noting that COVID-19 was a critical forcing function that revealed the inadequacies of backward-looking data. What worked in the past simply doesn’t work now.
Investing in AI to Transform Business Processes
The panelists discussed how AI is reshaping their operations, specifically regarding tenant retention. "We can actually do predictive analytics as to whether someone's gonna renew their lease or not renew their lease, and it's over 80% accurate today," Rechler explained. By analyzing thousands of data points—such as interaction frequency with the concierge and mailroom activity—RXR can better manage vacant units and push for higher rents.
Giving AI the Work No One Wants to Do
Rechler shared how AI is used to fill out due diligence questionnaires and abstract leases. "The best thing about artificial intelligence is it's taken away a lot of white-collar manual labor. That was what I was calling the soul-crushing part of the job," he said. This shift allows employees to focus on more value-added activities.
Saia emphasized the importance of merging internal and external data. "Forget about going out on the market and buying all these new cool sources of information. If you can't compare that accurately to your ongoing operating day-to-day, you're just not gonna get as much value out of it."
Looking ahead, while back-office jobs might decline, the demand for knowledge workers in areas like AI and cybersecurity is expected to increase significantly.
Overcoming Resistance and Cultural Shifts
Adopting new technology in a conservative industry presents challenges, particularly around data governance. Rechler and Saia stressed the need for a commitment to continuous improvement and rigorous data management to mitigate human error.
The Necessity of Integrated Data Teams
Saia pointed out that successful AI integration requires top-down intent and cross-functional collaboration. At RXR, data scientists are integrated directly into the investment and asset management teams.
"I look at this data science part of it just like I would look at our architectural team, our construction team, our leasing team. They have to be integrated as part of that team, not in isolation," Rechler stressed. This ensures that technical solutions are relevant and effective for real-time needs.
Build Smarter Strategies with Predictive Analytics
Predictive analytics and AI are no longer optional—they are essential tools for success. Moving forward, the ability to harness real-time data will define market leaders, enabling them to predict trends, manage assets, and improve tenant experiences. By embracing these changes, firms can maintain a competitive edge and sustainable growth in the industry.
FAQs
1. How accurate is AI at predicting lease renewals?
As shared by Scott Rechler, RXR’s use of predictive analytics can currently determine whether a tenant will renew their lease with over 80% accuracy by analyzing data points like mailroom activity and concierge interactions.
2. What does it mean to move away from "rearview mirror" data?
It means shifting from historical, backward-looking reports to real-time indicators. Instead of looking at what happened six months ago, leaders now use data like transit activity, retail sales, and current tour volumes from VTS to see what is happening now.
3. Why must data science be integrated into leasing and construction teams?
According to Rechler, data scientists shouldn't work in isolation. By being part of the core asset management team, they better understand the practical challenges of leasing and construction, allowing them to build AI tools that solve real-world problems.
