One thing to be clear about from the start – investing in general, and real estate investment in particular, has always relied on data to develop effective strategies. At least, any financial professional who has any sense will do it.

Before committing their money, most people will perform the due diligence of looking at past trends in the market they’re considering investing in, assessing how robust the underlying structures of the stocks or the project they’re looking at are and making an informed decision on what they think will happen next.

Real estate investors will look at the performance of similar projects in the area, at the changing demographics of the people who might one day live and work in their buildings, and at the big picture of how far, how fast and in which direction the market is moving. Now, as in the past, good investors have always done their research.

A transformative force

The difference in 2018, we’d suggest, is the level of research and data-gathering that is now possible thanks to rapid advances in technology. By improving the way that companies are able to gather huge amounts of data on what their customers do – whether it is through tracking social media activity or other kinds of online behaviour – and then understanding how that translates into the real life purchasing behaviour of those customers, companies (and potential investors in those companies) can see a far bigger and more accurate picture than ever before.

Big data, big potential

There are certainly plenty of exciting possibilities that are being opened up by this explosion in the quantity and quality of the data available – particularly for the real estate industry.

One area is in the development of software that will match properties to customers according to their online behaviour and preferences. The use of the huge amounts of data that drive accurate and relevant search tools for customers is also an incredible opportunity to provide an experience for customers that is better tailored to their needs. In other areas, big data now allows real estate professionals to make more accurate estimates of the value of properties that they are looking at. For investors this is a huge advantage, in that it takes much of the guesswork out of any potential financial commitment.

Ultimately, for investors the real potential for the big data revolution lies in the mitigation of risk. Of course, any potential investment – real estate or otherwise – is inherently risky. But the opportunity presented by the big data revolution is that potential investors are now better able to assess these risks effectively, and make more informed decisions about what they are prepared to take on.

Analysis is key

Of course, it is clear that the most important point about big data is not that it exists, or that potential investors are discovering more and better ways to access this kind of information. Instead the biggest differentiator between those investors who will be successful, and those who won’t, is how they use all that data in the first place. Information – no matter how much is available – is nothing without accurate analysis, and we’d argue that actually it is the quality of this human interpretation of big data that is what ultimately sets the best investors apart.

At a recent industry event, one prominent speaker underlined this feeling that humans will always have the last say in investment decisions. Speaking at the PERE Asia Summit in Hong Kong, keynote speaker and successful Hong Kong property investor Goodwin Gaw simply said this: “I just can’t see robots making investments.”

There are quite possibly a lot of different factors that go into developing this kind of assessment of the potential of big data – not least this particular human’s highly successful track record in making his own investment decisions. But it also possible that humans have an in-built prejudice against the idea that machines are capable of making better decisions that they are.

Just consider the kind of criticisms you hear against the use of big data in the real estate industry – that it is always backward looking, rather than truly predictive, and that it isn’t capable of spotting the kind of random opportunities that human instinct prides itself on being able to see.

Maybe so – but we’d argue that there are still many more areas of the real estate business where big data and increased automation can have a hugely positive impact. In the areas of developing accurate pricing models and predicting future customer behaviour, we’d suggest that the more information you can build into the decision making process the better.

Of course, the quality of the human beings making those final decisions will always be central to the success or failure of any investment strategy. And ultimately, it will be the behaviour of our fellow human beings – future homebuyers and business people looking for new premises – who will dictate whether those investments succeed or fail.