Real estate analytics have come a long way in the last 10 years. Chain facility operators (retailers, restaurants, service businesses) are now embracing the tools that financial services and other industries have used to make RE investment decisions since the ‘80s.
However, the growing use of “science” in decision-making has led many to ponder the role of “art” in real estate planning and site selection. Let’s consider the ways that chain operators apply art and science in their real estate decisions.
Science is objective and well-defined by its very nature. Whether it’s a map of the market showing key information such as store locations and competitors or a mathematical model that predicts sales, it’s still data and equations that can be exposed at the finest level of detail for all to observe.
Art is much harder to define, but for real estate analytics we can focus on two types using the analogies of pottery and paint-by-numbers.
Pottery art is practiced by experienced real estate field people who have learned to identify the key factors in successful sites from years of driving around retail markets, sitting in real estate committee meetings, and seeing first-hand which sites worked or failed. It is “Pottery” art because they apply their intuitive knowledge of the “dirt” (clay) to the observed facts (photos, site plans, and their new favorites Google Earth and Bing Maps). Most of the time they do a good job picking winners and losers.
Analysts use Paint-by-Numbers art to estimate the potential sales of a site. After years of generating trade area data using rings, drive times, or hand drawn boundaries, they can “feel” the patterns in the numbers and set thresholds for acceptability that are similar to keeping the paint inside the numbered areas of a coloring book picture. The good ones can be very reliable, but they often disagree with the Pottery Artists because their approaches are so different.
The most successful chain operators combine these different types of art in their decision processes on a foundation of fact-based predictive and visualization tools to maximize their profitability. In the coming months we will be exploring this topic in more detail to gain practical insights into the question of blending art and science in real estate planning and site selection.
We welcome your thoughts and comments on this journey!
Jim Stone
Good article
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