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Algorithms, Predictive Analytics, Market Rates and the Elimination of the DeathStar.

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By Definition.

Algorithms: a process or set of rules to be followed in calculations or other problem-solving operations, especially by a computer.

Predictive Analytics: Predictive analytics is the practice of extracting information from existing data sets in order to determine patterns and predict future outcomes and trends.

Market Rates: The market rate (or “going rate”) for goods or services is the usual price charged for them in a free market. If demand goes up, manufacturers and laborers will tend to respond by increasing the price they require, thus setting a higher market rate. When demand falls, market rates also tend to fall.

Basic Business.

You and I can understand these three basic principles pretty well.

Ironically two of the three have been around just about since the (minus computers) dawn of time.

What makes these three particular things so important today and how will they kill off a DeathStar?

Let’s start with the algorithm.

What does that mean for commercial real estate? It means data. Big data.

The ability to create a mathematical problem and process to calculate manipulate mine and influence data with a computer.

Think of the possible algorithms out there now. There must be thousands and thousands.

Think about the ones just in your head. How about the ones that have not yet made it into any programs yet?

How about this?

Automated Computer Algorithms Now Carry Out 70% Of The Trades On The US Stock Market.

Source: Medium 2014

Who controls that (or so they think) BIG Commercial Real Estate Data Now?

Next let’s look at predictive analytics.

Take that big calculated manipulated mined data and use it to predict future trends and possible outcomes.

Future trends and possible outcomes based on what again? Big Real Time Data.

Let’s use the city beautiful Chicago as an example. Right now what are the market rates for A/B office space downtown in the south loop and river north?

What if you had access to all of that right NOW? You do don’t you?

How about what those rates will be in 3/6/9/12 months?

If you are a broker that information means what? How about a building owner? How about a potential tenant?

What are the possible uses of just THAT DATA?

Which brings us to Market Rates.

Use algorithms predictive analytics and Big Data to create a Fair Market or a Fair Market Rate.

Wait, did I say Fair Market or Fair Market Rate?

What I should have said was a Fair and Transparent Market.

Which then will create a Fair and Transparent Commercial Real Estate Market Rate.

Based on———Big Data.

How this works.

It is started by pulling in massive amounts of data.

This data comes from where? Answer: Everywhere.

The actual buildings themselves, traffic, economic conditions, usability, timing, utilities, efficiency and on and on and on.

Which allows what?

A more quantitive accurate decision about the market and not a wild ass guess based on (shitty) data made up and “verified.”

It also helps create how the actual decisions are made.

Companies compete better in free transparent market place.

They make better decisions based on the data and become more efficient and dare I say it profitable, because of those decisions.

This eliminates the “I am the smartest and highest paid straight white male in the room so this is the market” mentality. (The data still comes from where today?)

That big data allows the market and the market rates to be predictable.

A predictable commercial real estate market.

We already have that now do we not?

Trends analysis and data combined= the market today.

I’m not talking about copy cat trends bullshit made up numbers and “going rates.”

I’m talking about DATA DRIVEN market analysis predictability and actual market rates.

How about a trend or data driven decision that is two or three weeks ahead of the actual market?

What is the competitive advantage? You and I both know the answer to that.

The DeathStar is weak.

There is not on fucking thing they can do about this.

Oh yeah, they could create their own algorithm. So what. Who in the hell is the DeathStar anyway?

They sure as hell are not brokers, you know the people actually creating the transaction.

The transactions that actually define the REAL Transparent Data Driven Market.

Everyone thinks the DeathStar always wins in real life.

We all know they can not must not and will not ultimately win——– ever.

Algorithms, Predictive Analytics, Market Rates and the Elimination of the DeathStar.

 

 

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  • Brian O’Flanagan

    So when do the brokers stop feeding the Death Star and free the data?

    • Duke Long

      They have already started.

  • CREOutsider

    Someone told me that they don’t think this way, but you have to wonder if the Death Star understands this and it has something to do with their last buying spree. If they manage their web properties right, they’ll be able to have a data stream that no one else has. But there will definitely be more competition. Just be a matter of whose analysis is the best.

  • TenantRex

    Good post Duke. Do you receive our monthly updates?