The real estate market in the Asia-Pacific region is a sector with massive potential — it is estimated that by 2025, nine of the world’s top 15 income-producing metropolitan areas will be in the Asia-Pacific. Many are already setting aside capital and looking for opportunities, with the majority of investors thinking that volumes will start to increase on or before the first-half of 2021, and an estimated amount of $40 billion in capital ready and waiting to be deployed in the sector.
This growing demand for real estate has also led to a growing demand for real estate information and analysis. Many investors, corporate occupiers, and brokers want up-to-date and actionable insights to guide their decision-making and maximize their returns.
At the same time, many still depend on traditional methods of information gathering such as physical visits to properties, email or phone conversations, and labour-intensive analysis of vast and complex data reports. This is the problem that OfficeBlocks is hoping to solve.
Using AI to Guide Real Estate Investing
Launched in October 2020, OfficeBlock is a Singapore-based company that is applying Artificial Intelligence (AI) and Machine Learning (ML) to commercial real estate data to produce accurate estimations and actionable insights for their users.
The company is a 50/50 joint-venture between JLL, a leading professional services firm specializing in real estate and investment management, and Risk Integrated, a leader in delivering advanced analytics to leading financial institutions active in investing in real assets such as commercial real estate and infrastructure finance. OfficeBlocks aims to synergise the two areas of expertise, marrying the AI and ML capabilities of Risk Integrated with the extensive data resources of JLL.
“There is an urgent need to bring greater transparency to commercial real estate decision-making and to enable more effective leasing and investment decisions,” says Roddy Allan, Chief Research Officer, Asia Pacific, JLL, and Director of OfficeBlocks. “[We have] developed sophisticated analytical tools to empower users to make smart business decisions – reducing risk and maximising return on investment.”
These tools aim to provide investors with an efficient method of performing the initial rounds of due diligence when contemplating a new property deal.
Combining Extensive Data with Intelligent Analysis
OfficeBlocks draws their data from JLL’s Online Market, which shows available commercial space for lease within the search vicinity, and JLL’s Real Estate Intelligence Service (REIS), which has been the industry’s leading source of real estate data for over 25 years. The REIS dataset comprises over 2 million data points across 14 countries and 50 cities, and includes estate marketing indicators such as financial and physical evidence, as well as indexes and transactions gathered by over 170 commercial real estate brokers across the Asia-Pacific.
This data is then fed into OfficeBlock’s AI and ML training algorithms, which employ a combination of Random Forests and Deep Neural Networks to recognise building attributes such as building age, grade, and size, from photographs and model, and create a model that predicts rents to high degree of accuracy.
According to Dr Yusuf Jafry, Managing Director of Risk Integrated and Director of OfficeBlocks, their rent prediction models have demonstrated a generalised performance with an accuracy on the order of 10% on average, depending on the location, based on validation testing (using holdover data subsets) and puts it on par with the accuracy of human domain experts.
Furthermore, these models are constantly improving. “With the power of AI coupled with cloud computing and automation, our models are extremely agile, constantly learning and improving as new data becomes available on a daily basis,” says Dr Jafry. “Moreover, our technology development approach enables us to listen to our clients’ needs, and rapidly fine-tune our products to their explicit requirements.”
A Suite of Tools
To meet the diverse needs of their clients, OfficeBlocks has developed four different products.
The first product is the Market Intelligence App, which allows users to take a picture of a commercial building and immediately gain access to property information such as its rental value and availability for commercial leasing. This data is obtained through an image-based AI and ML analysis to understand the age, grade, and size of the building. Whilst the app can be used in any of the cities that OfficeBlocks covers, the free version only provides users with data within 2km of their location.
For desktop users, OfficeBlocks has the Market Intelligence Platform which is fully integrated with their mobile app. This desktop version allows users to generate reports via a visual mapping application to record information, place pins on buildings of interest, and receive comparison. A range of collaborative tools is also available to allow teams to share notes and information with one another through the platform itself.
The third tool available for users is the Portfolio Intelligence Platform, which looks at the overall risk and return of owning a particular set of properties by showing the impact of investments and disposals. This allows users to understand the risk profile of their current portfolio and make strategic decisions on the sectors or locations for further acquisition or divestment. This is done by measuring the expected returns, historical variance, and market correlation amongst the properties in the portfolio. Once the platform has evaluated the user’s portfolio and suggested possible strategies, you can also link your portfolio to the Market Intelligence Platform to find specific properties to fit your needs.
The fourth and final product is the Risk Intelligence Platform, which provides in-depth analysis on specific properties to identify and assess the risks involved. This platform uses a Monte Carlo analysis of detailed cash-flow models to provide investors a full picture of the risks involved, projecting up to 20 years into the future. This is especially important due to the complexity of Commercial Real Estate deals.
“For many of these deals, there is more than one investor, multiple banks, and many other layers of complexity, and this complexity has only increased during COVID as investors seek to minimise the risk of deals,” shares Dr Jafry. “Our Risk Intelligence Platform has been designed specifically to counter this challenge by analysing all the variables involved in the transaction – from structural details of loans and leases across multiple assets, counterparties and currencies – to uncover the commercial feasibility of a deal. This takes in all the information that a human could not possibly contemplate, and analysis it in a way that provides important insights.”
Current Launch and Future Plans
Thus far, OfficeBlocks has launched in five cities across the region, namely Bangkok, Hong Kong, Seoul, Shanghai, and Singapore. However, the company has already completed beta testing with around thirty of the top global investment companies and international wealth funds last year, with the feedback and improvements being already built into the latest version of its products.
Dr Jafry shares that they are also in discussions with a range of occupiers, investors, and brokers to share the functionality and benefits of the tool, together with a live demonstration of their platforms. Moving forward, OfficeBlocks has plans to bring its services to more cities across the region, including those in Australia, India, Japan, and the Philippines.
“Technology is shaping the future of real estate and tech-enabled companies will capture market share over the next ten years,” predicts Anthony Couse, CEO, Asia Pacific, JLL. “OfficeBlocks is a continued demonstration of [our] commitment to deliver the best technology to the industry and put it into the hands of users.”