Innovation in CRE benchmarking is ushering in a new era of data-driven decision making

Unlocking opportunity with benchmarking

There is an age-old adage that insists, “you can’t manage what you can’t measure.” While this wisdom can be applied to countless scenarios, it proves especially poignant in the world of commercial real estate (CRE). CRE is a data-driven industry, within which performance must be carefully tracked and measured, and opportunities for improvement and informed decision-making must be sought out relentlessly.

Benchmarking in CRE provides precisely this opportunity, allowing owners, investors and operators to keep their finger on the pulse of key performance metrics, identify inefficiencies and opportunities for operational improvements, adapt investment strategies, manage risk, and remain resilient in ever-changing market conditions. From regulatory compliance to cost control and strategic planning, benchmarking isn’t just about comparison; it creates the conditions for CRE professionals to make informed, profitable decisions in any market.

In the first installment of our new CRE Innovation series, James Harkness, Sr. Director at Altus Group sat down with Matt LaHood, Head of Platform, Data & Analytics to delve into the state of CRE benchmarking – including how benchmarking has been used historically and the tremendous amount of innovation we are seeing today.

Why is benchmarking so integral to CRE?

Benchmarking is essential not just in commercial real estate but in any investment decision. “Just as individuals assess a 401(k) or investment fund by comparing its historical performance and risk profile against a benchmark, CRE investors benefit from the same approach,” explains LaHood. “However, the industry still lacks widespread access to robust benchmarks, making their value even greater.”

Ultimately, benchmarking helps to tell the underlying story of what’s going on in a portfolio, and consistent performance evaluations over time help drive smarter, more informed investment decisions. “Given CRE’s reputation for inconsistent data quality, a well-defined benchmark with a strong data foundation enhances transparency, provides standardized metrics, and fosters trust with stakeholders,” adds LaHood.

Historical challenges in CRE benchmarking

As LaHood noted, the CRE industry has long grappled with inconsistent and fragmented data, often spread across multiple financial and valuation systems. The lack of standardization and associated challenges in qualifying data relevancy at scale has historically made benchmarking in CRE difficult.

“Before investors can even evaluate against a benchmark, they must first aggregate and connect their data at the portfolio level — a process that is often manual and cumbersome,” notes LaHood. “In the past, this work has typically been done in Excel, which becomes increasingly problematic over time. Managing large, unwieldy spreadsheets quarter after quarter introduces inefficiencies and a high risk of errors, making the need for more streamlined, automated benchmarking solutions clearer than ever.”

Data availability is another major hurdle for CRE stakeholders, according to LaHood. “Clients often struggle to find a single, comprehensive data source that meets the depth and breadth of their analytical needs. As a result, they’re forced to piece together information from multiple providers or repurpose data from sources never intended for performance analysis.”

In the world of CRE, a fragmented approach often leads to disjointed asset or portfolio performance, creating inefficiencies that can cloud the reliability of the insights needed to make informed decisions.

Has CRE benchmarking reached an inflection point?

Industries thrive when they have the right data to measure performance. With advancements in data availability and computational power, CRE is finally positioned to embrace a more sophisticated, analytics-driven approach to benchmarking.

CRE stakeholders can now model and share data automatically, allowing them to analyze portfolios without doing all the manual prep work that used to weigh down the benchmarking process. At the same time, the increased granularity in modern benchmarking metrics allows firms to break down performance data (and uncover deeper insights) without relying exclusively on high-level metrics. "It’s not just about overall performance; it’s about understanding why performance differs, whether it’s yield, cash flow, or even asset-level performance," LaHood elaborates. With the help of machine learning-driven outlier detection and structured business rules, firms can ensure their data is not only consistent but of high quality, injecting much-needed precision into their performance evaluations.

What’s more, benchmarking today allows for both real-time and historical comparisons. Firms can now access multiple years of data to compare current performance over the past 20 quarters. "You can filter by property type, geography, or to specific assets within your portfolio, and make trend analysis much more immediate and insightful." Access to historical and real-time data enables more proactive decision-making across various organizational teams.

It’s also important to note that the mindset around benchmarking CRE has – finally – evolved to focus more on clean, standardized, and frequently updated valuation models, which are essential for accurate insights. "A dedicated data science team is critical for ensuring the data is accurate. Machine learning techniques are helping detect anomalies and refine business rules to ensure consistency,” explains LaHood.

To remain ahead of the curve in CRE benchmarking, you must adopt solutions early

When it comes to establishing or simply refining benchmarking strategies, it pays to be an early adopter. The earlier you get in – the better off you’re going to be, as this enables more efficient and strategic choices across the board. “The sooner firms begin refining their models and integrating data, the more they position themselves for success,” notes LaHood. By getting in early, firms can not only improve their current processes but also forego any risk of being left behind in an increasingly competitive – and often volatile – landscape.

“When firms know what's going on at the asset level, they can apply that understanding to evaluate their portfolio's performance in real time,” adds Harkness. “By examining how individual assets contribute to overall portfolio performance, firms can quickly transition from a walk to a sprint in terms of competitive advantage.”

CRE stakeholders must also become more proactive with data-driven decision-making, and when selecting a solution, it’s crucial to ensure that it truly unlocks analytics and streamlines the data consolidation process. “You really want to look for a provider and a tool like our Benchmark Manager add-on for ARGUS Intelligence that will help take some of that heavy lifting away so stakeholders can spend most of their time on the actual analysis that drives portfolio success,” shares LaHood. Ultimately, the goal is to minimize the time spent merging and aggregating data, allowing firms to focus on what matters most.

Conclusion

When firms leverage technology to enhance their approach to relative analysis, they eliminate the inefficiencies of traditional data processes and effectively empower their teams to thrive. "It's not about taking hours to assemble data, check data, or back-test data, but instead about having that data readily available in the platform, linked to specific assets. This allows teams to focus on analyzing that portfolio to truly understand the drivers behind performance, whether they're tied to property characteristics or management factors,” adds Harkness.

This shift represents a significant innovation in the industry that will effectively reshape the way CRE firms approach decision-making, providing them with the tools to not only keep pace with the competition but to gain a meaningful advantage in their strategic initiatives.

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