Tailored data intelligence focuses for greater outcomes in the living sector
18 / 08 / 25 - 5 minute read
It was a story that captured the imagination around the world. It spawned a book and later, a film starring Brad Pitt in the main role. That story was the innovative use of data analytics used by Oakland Athletics in the early 2000s to revive the ailing Major League Baseball team.
Battling widespread scepticism by those in the game, the club’s faith in the unconventional approach taken by its general manager Billy Beane ultimately ends up paying off with improved performances on the field and convinces other teams to follow suit.
The use of data analytics in sport is now widespread, so much so that the analytics route can even be the preferred pathway to active engagement on the playing side. For example, promising youth footballer Will Still decided to pursue coaching based on his experience of playing the Football Manager computer game and initially secured video analyst roles before making a name for himself as a first-team coach.
Just as with this example from the sporting world, all industries and sectors have gone through their own transformations, to a greater or lesser extent, relating to data analytics over the past few decades. Use of data to inform and augment decision-making is now commonplace.
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Data analytics in real assets: A crowded space
Data intelligence to inform real asset investment decision-making has been through its own evolution over the past decade.
PATRIZIA has always been focused on the gains provided by technology and started sharing its data-powered insights a decade ago.
“Ten years ago, very few competitors were sharing their data insights with the market,” comments Dr Marcus Cieleback, PATRIZIA Chief Urban Economist.
“We were very much a first mover in this respect when sharing our own insights then. Now, everyone is doing this.”
So how does PATRIZIA maintain its data intelligence edge in this crowded space?
Dr Marcus Cieleback, PATRIZIA Chief Urban Economist
A tailored approach
Antonio Marin-Bataller, PATRIZIA Head of Investment Management Living
Aside from keeping a close eye on the latest and greatest cutting-edge technology, as well as developing its own proprietary tools, PATRIZIA’s data-led interrogation very much falls in line with client interest. Should there be a desire for clients to gain more detailed insights on a target sector or investment opportunity, PATRIZIA can put its digital tools to use to provide this. In keeping with the heritage of the first data-inspired research, much of this is concentrated on the living sector.
Take the recently launched PATRIZIA Student City Index, for example. In addition to the trend for investors to favour purpose-built student accommodation (PBSA) in Europe as an alternative investment subsector, clients have shared their desire for more granular, city-focused analysis to help with their strategies.
“Institutional investors need more than macro-level guidance because PBSA performance is shaped by highly localised factors,” Marcus explains. “Our Index gives them a reliable framework to identify not just where the student population is growing, but where the conditions for sustainable investment returns are most favourable.”
In addition to the publicly available insights provided in the research report, PATRIZIA clients also have access to the full suite of insights generated by the company’s Investment Strategy & Data Intelligence team, building a knowledge base for the investment manager and its clients.
“This research supports smarter capital deployment by highlighting where strong fundamentals align with liquidity, and is why a city-by-city lens is critical for success in this dynamic market,” adds Antonio Marin-Bataller, PATRIZIA Head of Investment Management Living.
Data intelligence at PATRIZIA
And where exactly do these data insights come from?
“There are several types of technologies and methods, including machine learning, that complement the transaction process,” PATRIZIA Head of Investment Strategy & Data Intelligence Dr Marcelo Cajias comments.
“Our flagship tool is the Amenities Magnet algorithm which guides us as to a location’s attractiveness according to AI.
“The technology collects important details relevant to cities and real estate investing. On top of this, we create algorithms to test live deals and this all feeds into our digital knowledge bank.
“At PATRIZIA, we have perhaps one of the largest real estate data lakes in Europe. And we love using open data. I think the world of open data and downloading data that is outside of the real estate radar opens an important source of data for benchmarking assets.”
Dr Marcelo Cajias, PATRIZIA Head of Investment Strategy & Data Intelligence
A hub of insight for different usages
Marcelo and his team also help with pricing assessments and analysing returns on assets based on their sustainability credentials. A large proportion of this work is centred on the living sector.
The Amenities Magnet acts as a hub of information with the area of focus changeable according to where there is a need for greater knowledge or at least a computer-driven second opinion.
“We know, for example, that the closeness to schools in some UK cities can negatively impact net operating income due to the increased noise and volume in cars, so people tend to avoid those locations,” Marcelo highlights. “In Madrid, for example, residential assets close to cafes can increase your returns by a few basis points due to the positive cultural position of cafes in the city.
“This is all very location-focused, but we also interrogate larger pools of information for holistic insights. For example, we undertook some research relating to sustainability initiatives linked to EPC ratings. What our research told us is that there is already a green premium to be had for those investing into the highest quality, most sustainable residential assets, while the sector is experiencing a brown discount on assets at risk of stranding based upon upcoming EU and wider European legislation.”
Expert-led quality control
When it comes to PATRIZIA’s decision-making, the data insights essentially act as an additional resource in combination with the expertise and knowledge which exists within the company. This makes for a thorough process, helping to avoid any unforeseen issues, with the close cooperation enhancing both the real assets teams on the ground and the data itself.
“Collaboration and building up an understanding with colleagues is essential,” Marcelo explains. “The AI is not always successful. It can’t always account for intangible information. For example, the data told us that a location within a city in Europe was a very bad location from an amenities perspective.
“But when we're speaking to the to the local expert, he told us: ‘no, what you're buying here is not the access to amenities, but you're buying prestige. This is a location in which people want to live because of prestige.’ This, of course, sits outside of our data analysis examining the local natural environment, whether there is a police station nearby, how close it is to a bus station or kindergarten, for example.
“So the machine was right saying that the location is not well supplied, but there is an intangible aspect that our people on the ground identified and told us that this is a core location, not even value add, as I might have surmised from the data.”
Strategy-testing and scenario-building
“Where we are in our AI journey today is testing all our algorithms,” continues Marcelo. "That means we have the performance history of our assets that can be in Madrid, in Dublin, in Tokyo or in Helsinki. We assess with machine learning techniques why we did well, when we did well and most importantly, what the market conditions were like, as well as returns analysis at an asset level.
“We test strategies and back-test this with live data and I think that is one of the benefits that we have at PATRIZIA, that we have market data for live deals on a European scale.”
So while the innovation play belongs to the past, bespoke client-focused data enquiries and deep pools of accrued insights available quickly and reliably, and balanced by local expert judgements, reflect a smart approach securing home runs in the living sector.
This article is taken from the digital version of our thought leadership magazine, estatements. Take a look at the magazine here:
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