Data, data, data

COVID-19 caught the world by surprise. But some countries were better prepared than other and have had demonstrably better outcomes.

As the arguments over how and when to re-open the economy reaches a familiar fever pitch in the United States, South Korea never had to shut down in the first place.

The key difference: South Korea has had bad coronavirus outbreaks in the past. As recently as 2015, the country came to a standstill during a MERS outbreak. 

This experience taught them an important lesson. To avoid having to drop the hammer of lockdown measures, they needed to invest in data, in the form of testing and contact tracing, so they could act faster and with more precision.

Undoubtedly, the stakes of a viral outbreak are higher, and the data is different, but this is a universal lesson that commercial real estate owners and operators should heed.

Still flying blind

Whether it's viral outbreaks or building operations, without data, small issues tend to continue unaddressed until they, seemingly out of nowhere, become serious problems.

After that, there's no choice but to direct resources to emergency responses, which are often an order of magnitude more expensive than the investment in data would have been.

Of course, the emergency measures don't solve the root cause of the problem, they only allow business-as-usual to continue until the next emergency.

This eats up resources and starts a cycle of unexpected emergency, costly response, lack of time and budget to invest in data, and unexpected emergency. 

Like governors currently stuck between not enough testing to make an informed decision and severe economic pain cause by lockdowns, this vicious cycle offers only "least bad" choices, instead of those that drive value.

Owners and asset managers want to assume this isn't happening at their assets, but the research would indicate otherwise. The question is, how can the cycle be broken, especially when revenues and falling and resources are more constrained?   

The best time to plant a tree

They safe the best time to plan a tree was 20 years ago. The second-best time is now.

When stay-at-home orders were enacted, many operators were left flat footed. Even as occupancy dropped to 10% or less, many ran their buildings in the exact same way, wasting OpEx when budgets most need to be controlled.

A few "dropped the hammer" and shutdown all systems in the building, leading to a host of secondary problems around stagnating air and water in the critical systems.

Some properties though, like South Korea, had invested in granular and real-time building data that allowed them to be targeted with which systems to shutdown and which tenants to communicate with.

Of course, concerns about cash flow are immediate and there's no point in looking backward at what should have been done.

It's never too late to start ramping up data capabilities. However, it does require triage to understand where to start.

Are there virtual operations capabilities, with access to all the files and information necessary to everyone in the organization? Are simple processes still outsourced to third parties when they could be brought in house? Can indoor air quality be measured and made accessible for operators and tenants? 

Fool me twice, shame on me

The long-term effects of COVID-19 remain to be seen. Hospitality is going through a very tough moment, but other sectors could face their own existential challenges down the road.

Some office portfolios are bracing for a world where remote work becomes the norm. One recent study found that 69% of corporate real estate professionals plan to downsize their footprint. Another found that 74% of CFOs expected to reduce the number of people that came into the office each day.

This crucible will require excellence at every level of the organization to get through. Gone are the day of covering for wasted expenses with continuously rising rental rates. Financial models are changing, as are tenant expectations.

Data, in the form of static documentation brought online, integrations with legacy software, and from IoT sensors, in addition to driving value directly, should be recognized as an insurance plan against the unexpected. In order to do that, it needs to be in the cloud and accessible, even from mobile phones.

Simply put, it's the only cost-effective way to make sure that small problems don't grow into emergencies and that decisions in a tough environment can be tactical, fast and free of unintended consequences.

Stay safe.