Is alternative data infiltrating real estate?

Enrico Faccioli, chief operating officer, Gyana There is no doubt that the alternative data industry is booming. With over 12 terabytes of data generated every second globally, companies are finding innovative new ways of harvesting and making use of this previously untapped source of information. Online sentiment from social media, satellite images, credit-card transactions, and weather reports, are just some of the non-traditional data sources out there. These sorts of data are becoming more common among finance professionals – with the 2019 Dataminr survey showing that nearly 80% of traders are already using alternative data sources. But are there specific datasets that should be of interest to the real estate community? Human mobility data Location data from mobile phones – part of the alternative data family – has been receiving a lot of attention lately. Firms around the world are now starting to aggregate and anonymise data coming from millions of devices and use it to understand how people move in the real world. This space is expanding: Bloomberg expects the location analytics industry to grow to $15bn (£11bn) by 2023, roughly double what it’s worth today. But this data is far from perfect. It is noisy, biased and it’s big, by definition – real big. This is why only recent advances in big-data infrastructure, cheaper cloud-based graphical-processing units (GPUs) and artificial intelligence (AI), have now made it possible to extract meaningful insights from this type of data. But why is analysing patterns around people movement so important in real estate? Real estate about real people Megatrends are shaping our lives, in one way or another. Rapid urbanization is impacting how and where humans live and is re-defining urban mobility. Millennials – highly unpredictable compared to previous generations – are now the largest living adult generation in the US. They are embracing new ways of shopping (e-commerce) and working (space-as-a-service) – which are having significant impact on the real estate sector. All these transformative, global forces share a common denominator: they are driven by individuals. Understanding how people interact with physical spaces is becoming essential to better design, manage and operate assets and cities. Being able to spot trends before it’s too late and answer fundamental questions in seconds rather than months would de-risk investments in an uncertain world, where relying on static and outdated datasets no longer guarantees success. “What kind of people visit this area?” – “Where else do my customers shop?” – “How has this town centre changed over the last year?” – “What would be the best office to relocate to, based on my employees’ commuting patterns?” – “Which properties are losing their loyal customer base?” Businesses around the world need answers to these questions, and human mobility data can help get them. More data, more responsibility The data generated globally is going to increase exponentially: 90% of the data in the world has been created in the last two years alone. Better connectivity – 5G being up to 1,000 faster than 4G – is promising to supercharge the Internet of Things. A significant portion of data will be mobility data from autonomous vehicles, drones and electric scooters, that will help tackle challenges in our cities. However, with more data comes higher cyber security and privacy risks. Regulators and companies in the space share a responsibility to make sure personal data is used in a compliant fashion and does not result in breaches (for example, in the Facebook/Cambridge Analytica case). In Europe, important progress has been made with the General Data Protection Regulation (GDPR) and the US is starting to move in the right direction with the California Consumer Privacy Act (CCPA), with more states expected to take action soon. Similarly, big data companies need to proactively embrace data privacy and act ethically, making sure data is anonymised, secure and used for legitimate purposes. Tech is not evil and the opportunity of making good use of alternative data sources is too big to pass on. Transparency, ethics and dialogue will be vital to make sure technology is really just science put to purpose.