Grace Hill

Kendall Pretzer

Benchmarks are an incredibly powerful tool for making data-driven decisions in commercial real estate (CRE). The ability to level-set, compare and track property performance against industry standards, like GRESB (Global Real Estate Sustainability Benchmark) for example, is essential for increasing property performance over time. Benchmarking provides key insight into the most crucial areas for improvement by property, allowing for specific, measurable action plans.

The Importance of Data in CRE

Data has become a key component in the success of any industry, and commercial real estate is no exception. In an industry as complex and multifaceted as CRE, making decisions based on gut instincts or guesswork simply isn't enough anymore. Instead, data must be harnessed to drive better, more informed decisions.

But data alone is not enough; you need benchmarks to contextualize that data. Industry benchmarks provide a framework for evaluating performance against competitors, for highlighting strengths and weaknesses and for identifying trends over time. Benchmarking enables CRE professionals to understand where their property stands relative to others, how well their operations are performing and where they need to focus their attention to improve.

When properly harnessed, data and benchmarks can empower CRE professionals to make curated decisions about everything from acquisition and development to leasing and property management. A data-driven approach can help organizations gain a competitive edge, spot trends early and take proactive measures to stay ahead of the curve.

Establishing Internal Benchmarks

One of the most important aspects of making data-driven decisions is establishing internal benchmarks. It's important to keep in mind that these benchmarks are not static. 

As your organization grows and evolves, so too should your benchmarks. You may need to adjust your targets over time to ensure that they remain relevant and achievable. By setting performance targets that are specific to your organization, you can better measure your progress and make optimal choices about your investments and operations.

Understanding Performance Through Competitive Benchmarking

As important as it is to establish internal benchmarks, it's equally important to look beyond your own data and understand how your property is performing compared to others in the market. This is where industry benchmarks come into play. These are typically used to assess the performance of properties based on factors such as location, size and age. They're a useful tool for gaining insight into the broader market, identifying trends and patterns and evaluating the strengths and weaknesses of your property. By identifying areas where your property is performing well compared to the market, you can leverage these strengths to attract tenants and improve profitability. Similarly, by identifying areas where your property is lagging, you can focus on making improvements to close the gap.

Gathering Data for Benchmarking

Let's talk about how to gather the necessary data for effective benchmarking. The first step is to identify what data you need to collect to capture the specific aspects of your operation that you want to evaluate. The more challenging aspect of the benchmarking process is actually collecting the data needed. Typically, CRE organizations look to capture data in the following areas:

1. Internal Data: This is data that you already have access to, such as property management software that tracks occupancy rates or financial statements that show revenue and expenses.

2. Public Data: Some benchmarking data can be found online, such as average rent prices in your area or market trends. These sources can include government data and real estate publications.

3. Surveys: You can conduct surveys to capture unbiased feedback from tenants or employees, providing a better understanding of what is needed across your portfolio and in individual properties.  Industry-specific surveys can be useful for gathering quantitative and qualitative data on NPS scores, tenant satisfaction, renewal intent, or employee morale.

4. Third-Party Benchmarks: CRE-specific market benchmarks offer important metrics to gauge your performance against peers.  Ensure that your industry benchmarks match your specific property characteristics, thus providing an apples-to-apples performance comparison.

It's important to note that gathering and analyzing data can be time-consuming and challenging, especially for organizations that have a DIY approach. If done right, the insights can be invaluable for making data-driven decisions in CRE. By knowing where you stand relative to your competition, you can set realistic goals and make strategic decisions that will help you achieve your business objectives.