Real Estate Industry Is Finding Technology Accurate and Timesaving

Article excerpt

The real estate industry is being profoundly influenced by sophisticated technology. Massive quantities of data are now readily available to real estate professionals, and the business is benefiting significantly from this new electronic age.

There is tremendous demand in this business for modern and efficient products, and the supply side is reacting with such innovations as space age energy systems that produce the most comfortable environment in buildings. Advanced security systems reduce payroll costs while greatly enhancing building safety. And, of course, modern elevator systems take people to the top of our tallest skyscrapers with speed, efficiency, and safety. Outside of the building, leasing and sales brokers maintain detailed computer files which are programmed to quickly match the prospective tenant or buyer with the right property.

If you don't believe that the age of technology has arrived, just listen to how our language is being infiltrated by technology's buzzwords. We deal now with correlation coefficients, decision trees, sensitivity analysis, valuation models, and multiple regression.

Modern technology generates massive amounts of information for real estate professionals, and appraisers and consultants must keep up to date if they want to continue delivering the best advice. While both hardware and software permit easy access to data, the real challenge is to translate all the information into meaningful conclusions. Investment Analysis

The approach to property valuation has been altered significantly by the computer. Computer programs that enable appraisers and investors to analyze multitenanted office buildings on a multiyear cash flow basis (tenant-by-tenant) have greatly increased the accuracy of investment analysis at a time when this form of analysis has become a more exacting exercise. Several factors have caused a rise in what can best be described as the difficulty index for investment analysis.

Rampaging inflation of the late 1970s, and to a degree today as well, is one factor. Both the revenues generated from real estate and expenses incurred in operating property tend toward greater fluctuation when there is inflation in the economy. An accurate and ongoing comparison of income and expense with market rents is absolutely necessary. Property values are also influenced by lease turnover--a point in time when leases that are below market value can be converted to the market rent.

The traditional approach to investment analysis, while theoretically designed to handle these fluctuating factors, was in reality rather cumbersome, too time-consuming, and plain old-fashioned. …