The Company Providing Commercial Real Estate With ‘Game-Changing Data’

Imagine a fund manager spent $100M amassing a varied industrial portfolio five years ago. Since then, the market has changed — the volatile economy of the last two years has impacted performance and valuations. How can they make the most astute decision about whether to buy, sell or hold, or how to value it accurately?

The answer is to use data effectively, MSCI Head of Real Assets René Veerman said. MSCI has spent the last 40 years innovating a global suite of commercial real estate indexes and datasets that provide the information investors need to benchmark asset and portfolio performance. 

“To be a successful investor, you need clarity and comparability, which can’t come from a jumble of datasets you put together yourself,” Veerman said. “You need to understand what’s happening in the market by looking at consistent data that puts assets in the context of global market segments. That’s what MSCI provides.”

MSCI collates global data across more than 30 real estate markets, gathering information on transactions, valuations and performance at the asset and fund levels from sources that include managers. All of this data is verified by the company's team of analysts. 

Clients can then access portfolio insights, which provide a holistic view across investments. They can run analyses across regions and portfolios to compare, test and evaluate strategies and understand how well a portfolio or fund is performing relative to an appropriate group of peers. 

“Presenting these findings are often the most interesting meetings we have,” Veerman said. “We can show that while a manager is good at identifying the right sector to acquire in, the actual performance of assets they have acquired compares badly to peers. This suggests that they need to improve their selection skills.”

It is this vastness of data that has allowed MSCI to become a world leader in real estate indexes since 1986, Veerman said. It also enables the company to provide other datasets, such as its gold-standard global transaction, lender, investor and property-level data obtained through the acquisition of Real Capital Analytics in 2021.   

Internally, the company uses this data to innovate, creating solutions aimed at helping investors navigate changing investment cycles. For example, MSCI’s Price Expectations Gap was created in response to low transaction volumes in 2023, bringing in data on transaction volumes and pricing.

“If the Expectations Gap is small, there is little disagreement on asset pricing and lots of trades occur, but if the Expectations Gap is large, few trades occur,” Veerman said. “It is more important to make sure you pick the right asset, as there is greater uncertainty between the buyer and seller as to where the asset should be priced. To those looking to invest, the high level of distressed assets could provide interesting opportunities — if they are armed with the information they need to make a calculated decision.”

Following a period of sharp interest rate increases, knowledge of such market indicators is even more important, Veerman said. The UK’s commercial real estate sector has reacted quicker than some markets to reconsider valuations in part due to the dominance of open-ended funds, but many property sectors still lack clarity, which is clear in the wide bid-ask spread.

The changing nature of commercial real estate adds to these complexities, which is why using MSCI's suite of indexes, datasets and other insights needs to be backed up by a deep understanding of each segment, Veerman said.

“Do I need to transact or manage the asset better?” he said. “Asset management is particularly important in the current market. There’s a big dispersion in valuations, and a well-managed building will command a much higher rent than a badly managed one, while sustainability has a big impact on values.”

As sustainability has become a pivotal concern for investors, MSCI has honed its climate solutions to evolve with clients. The company's tools calculate both the physical risk to an asset, analyzing the likelihood and potential severity of events such as floods or fires occurring, and the transition risk, the impact required decarbonization could have on values. This information is then translated into a dollar value.  

As most large asset owners now have a net-zero or similar sustainability pledge, understanding the cost is important, Veerman said. MSCI's solution shows the cost of conforming to this pledge and the amount of money an investor could lose due to the impact of climate change.

“Large asset owners around the world tend to use MSCI’s climate solutions to have a clear way to compare assets,” he said. “You can determine how much risk you want to take on in your portfolio. They show the cost you would incur of aligning with the Paris Agreement of a maximum 1.5-degree rise, for example.”

Once investors are armed with these monetary values, it is up to them to make decisions that impact climate change, Veerman said. MSCI seeks to provide clarity through data, translating this sort of information into a meaningful measure.

Overall, MSCI’s goal is to provide clarity across all elements of commercial real estate. The more information the company can provide to investors, the more efficient the industry can be, Veerman said.

“A lot has changed in the last five years in real estate, which has forced people to use data more effectively,” he said. “The market is becoming more consolidated and professional, and investors require and rely on data to make long-term strategic decisions with confidence. Now more than ever, we're dedicated to providing that game-changing data.”

This article was produced in collaboration between MSCI and Studio B. Bisnow news staff was not involved in the production of this content.

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