Using Data For Commercial Real Estate Forecasts

Real estate forecasting is always a challenge, especially as chief economists warn about slowdowns, price declines, and rate hikes. Commercial real estate (CRE) forecasts are further complicated by the changing workplace landscape, including hybrid work and new flexible seating arrangements. These changes make it harder for CRE professionals and decision makers to forecast future space needs, increasing the importance and complexity of real estate forecasting.

Companies across various cities need to layer multiple data sources to prepare for the future and adjust to rapidly changing circumstances. This article explores real estate forecasting, focusing on how companies can future-proof their offices and make better real estate investments for the future of work.

What is real estate forecasting?

Real estate forecasting involves collecting and analyzing real estate analytics to make better decisions for a real estate portfolio. It’s about making informed predictions for all real estate holdings using every available tool. Forecasting is also about managing the consequences of being wrong, ensuring agility and productivity regardless of economic downturns, rapid growth, or unexpected events like a global pandemic.

In the housing context, forecasting focuses on fundamentals such as home values, demographics, supply chains, foreclosures, home prices, and mortgage rates. In the office sector, it’s about understanding how factors like office density and space utilization impact facility planning and strategic space management. CRE professionals use workplace analytics to link real estate goals to overall business goals, improve employee experience, and optimize the bottom line. This often involves layering multiple data sources and aligning with headcount planning and workforce strategy to ensure employees have the right space to be productive.

Forecasting in hybrid or flexible work environments demands advanced workplace analytics and a willingness to test, iterate, and follow where the analytics lead.

What are the top trends in the corporate real estate market?

The workplace is evolving, and so is corporate real estate management. The future of work is expected to be more hybrid, flexible, and dynamic. Companies need long-term hybrid real estate strategies to use space effectively, even as occupancy rates fluctuate.

Adjusting portfolios, not just shrinking them

The goal of CRE forecasting is to rightsize portfolios as needed. While reducing excess space is important, having too little space can also be problematic. For example, Peloton used forecasting tools to manage rapid growth, analyzing usage trends and space allocation to confidently procure needed spaces for expanding teams. Rightsizing may involve introducing flexible new work environment types, such as agile working, activity-based working, and working neighborhoods, rather than simply cutting square footage.

Using space to drive collaboration

The pandemic highlighted the importance of face-to-face collaboration. Companies are now using flexible working options and improved collaboration spaces to encourage voluntary office attendance. The right location and amenities can attract employees back to the office. Commercial real estate forecasts play a key role in these efforts by providing insights into how to outfit offices for collaboration and what incentives are effective.

Relying on new technologies

A significant trend in CRE forecasting is the adoption of new hybrid workplace technologies. The pandemic exposed shortcomings in digital capabilities, prompting many companies to develop technology roadmaps. This includes cloud-based lease management systems, smart buildings with IoT, occupancy sensors, and employee badge data. These technologies should be integrated into overarching space management software that provides real-time workplace reports and analytics. The more companies can collect and use workplace data analytics, the greater the impact of technology in the workplace.

Why build a commercial real estate forecast for the future of work?

Companies that lack a real estate plan risk negative impacts on branding, workplace experience, talent retention, and attraction. Rising uncertainty in the commercial real estate market, including concerns about declining office values, underscores the need for data-backed real estate forecasting. Workplace wellbeing and employee empowerment are increasingly important in planning workplace transformations. The biggest trend is the need to right-size portfolios using data-driven forecasting.

How to build a commercial real estate forecast for the future of work: 3 critical factors

Adopting a hybrid work model is not enough. Companies must consider three critical factors to create effective commercial real estate forecasts:

1. Account for dynamic space utilization

Occupancy in a hybrid office is dynamic, varying by industry, company, department, and even time of day. Space planners need to understand fluctuating space utilization rates and the reasons behind office use. This requires layering multiple data sets, including employee surveys, to create a comprehensive picture of office needs.

2. Use multiple data sources smartly

Collecting data is easy, but using it effectively requires robust analysis and integration of multiple data sources. CRE professionals should synthesize data from desk bookings, room bookings, wifi logs, employee surveys, IoT sensors, request management software, manual office censuses, CRE data, facilities reporting, and space utilization metrics. Relying on a single data source or unstructured data is no longer sufficient.

3. Economic factors

CRE professionals must consider broader real estate trends, such as rising office vacancy rates due to remote work and potential declines in office valuations. Economic factors like inflation, workforce management, cyber risk, and regulatory action also impact revenue and preparedness. Despite challenges, there are still opportunities, especially in industrial properties. Forecasting is about preparing for the future using historical and real-time data, rather than trying to predict it with certainty.

What are the best ways to forecast real estate?

The most reliable way to forecast real estate for office use is to layer robust data from a wide variety of sources, including internal testing. Successful workplace teams break down data silos and use their data to explore new space configurations.

OfficeSpace provides data and reporting tools to simplify corporate real estate forecasting.