The valuation profession is undergoing rapid change in terms of technology, the services provided and the valuation professional's role. But what is driving the change? And what are the consequences?
Global events such as the Global Financial Crisis (GFC) and the COVID-19 pandemic have added to the profession’s complexity, and advances in technology, availability and quality of data and client expectations are placing new demands on the industry.
We have identified ten innovations and disruptions that will impact the valuation industry in the future. Some of them are already adopted by the sector, and some have barely seen the light of day yet. However, common to them all is that they will be at the core of the industry’s future and critical for business success
Top ten innovations and disruptors that will impact the valuation industry in the future
- Evolving client requirements
- The role of the valuer
- Sustainability
- Big data
- New market entrants
- Intelligent valuation platforms
- Data
- Automated technologies
- Specialisations
- Global cities
1. Evolving client requirements
Valuations will play an increasingly critical role in risk management and improving the financial stability of markets and industries. Combined with client focus shifting from current market value to long-term value of buildings, forecasting will take on a more prominent role going forward.
Fueled by more rigorous regulatory requirements following the GFC, the valuation standard offering will be replaced by a broader and more dynamic range of services providing clients with a better understanding of current and future asset value.
We will also see clients asking for faster delivery of valuation products without compromising on accuracy and quality, which adds pressure to the valuation service providers. The full report covers how new technology and automation play an essential part in meeting future client needs.
2. The role of the valuer
The role of a valuer is evolving from interpreters of historical data to forecasters of future trends. Along with new technologies that will expedite parts of the valuation process, the valuer's role is changing.
In the future, appraisers need to be able to understand increasingly complex data and use a wide variety of sources. Therefore, the valuation workforce will be diverse and include data analysts, statisticians, programmers and other industry-specific specialists to serve more complex client needs, including asset optimisation and sustainability gap analysis.
The question is: will the valuer role be an automated, data-driven function at the expense of the human judgment and reasoned conclusions? We believe that the nature of commercial real estate will necessitate human valuers, but we will see valuation teams of a very different nature in future.
3. Sustainability
Sustainability and workplace wellness, including health and hygiene protocols, are likely to be included in new investment strategies. The change stems from occupiers placing more emphasis on building specifications to attract and retain talent and improve employee comfort.
As a result, the valuation industry needs to develop services to incorporate the value of sustainability, and there will be a requirement to supplement and enrich data to capture sustainability KPIs. To advise property owners and investors wisely, clients must be advised on how sustainability can protect and drive the value of their properties and competitiveness.
In Europe and the Nordics, we are currently re-shaping our databases to capture specific building sustainability KPIs to report on value impacts going forward. We are also establishing a bespoke advisory team to advise on sustainability strategies and investment impacts on existing property portfolios to ensure our clients’ future success.
4. Big data
Using Big Data to learn about patterns and trends is another change that will impact the valuation industry. Landlords and tenants will have access to detailed data about human behaviour and interactions ranging from foot traffic and crime to energy efficiency and environmental hazards.
However, having access to the data is not enough. Knowing how to apply and interpret the information will be the game changer – and the enhanced transparency opens up for a potential closer partnership between landlord and tenant.
Expanding consulting services to include forecasting on the back of big data is not only about understanding the value today but understanding the elements that will shape the value to come. At CBRE we are engaged in bespoke consulting assignments to provide feasibility reports and forecasting using a combination of big data, CBRE accumulated data and inhouse experts to process, analysis and interpret the information and provide informed forecasts.
5. New market entrants
Specialist property valuation providers are expected to face growing competition from other companies powered by software backed solutions. However, many of these new entrants lack first-hand property data, market knowledge and talent possessed by real estate services firms together with an accumulation of decades of property experience.
Despite this, new market entrants will push valuation professionals and real estate firms to pick up smart technology and analytics tools at a faster pace to remain competitive and deliver results, but importantly without compromising on quality, accuracy and valued insights.
6. Intelligent valuation platforms
Intelligent valuation platforms are already becoming an indispensable support application for valuation professionals because they enable them to perform accurate and efficient valuations across markets and asset classes.
Automating phases of the valuation process benefit the efficiency and, in time, it may be able to leverage vast volumes of historical and current property data collected. One of the outcomes will be greater clarity on the attractiveness of a potential acquisition which tops many investors wish lists. But even though intelligent valuation platforms may assist in providing an underlying assessment of property value, it could also entail negative impacts, which are described in the full report.
7. Data
Obtaining reliable and validated data can be a challenge – especially in emerging markets. However, data is essential in valuations, and there are high demands as to how data is stored, categorised and used to support clients.
This leads to a need for improved standards internationally and cross-border and a need for platforms that can collate and interpret the data to deliver reliable appraisals.
8. Automated technologies
To some extent, automated technologies like Automated Valuation Models (AVMs) have been adopted by the valuation industry. However, AVMs are only as accurate as the quality of the data it uses, and unfortunately, the level of information is often opaque. Therefore, the need for eligible professionals who validate data and communicate findings to clients in a trusted way is still apparent.
In the Nordics, CBRE has already started using AVMs: they are rolled out for the multi-family sector (residential) in Finland, and we are in the process of activating them in Denmark and Sweden. Using this new technology, we can provide bulk valuations for large portfolios where we need to compare with the vacant value of single apartments, and as our in-house valuation experts validate the data quality, we can offer precise data insights and information to our clients.
9. Specialisations
Alternative asset classes will open new areas for the development of valuation services. Investors are now looking into co-working, data centres, cold storage and senior housing as the yields for the office and retail sector are currently at low levels in many markets.
Investing in new property classes calls for a deeper understanding of key drivers and players in each alternative sector to take advantage of the new opportunities.
10. Global cities
Real estate development and investment will continue on a global scale, and more investors will build global property portfolios. This means that valuation firms must be able to serve investors with local knowledge and data. It will also highlight an increasing need for standardised reporting across borders to ensure that their reporting is in compliance locally and globally.
What lies beyond?
Valuation providers must embrace and respond intelligently to these ten phenomena to create a service offering that aligns with future needs. It includes further adoption of technology, stronger data standardisation and attracting and retaining talent with the right skills to navigate and succeed in this landscape.
In ‘Building a Smart Future - Identifying, Understanding and Leveraging Property Valuation Disruptors’ CBRE Global Research in conjunction with CBRE’s Valuation & Advisory Services Group elaborate upon the ten innovations and disruptions and how they will impact the valuation profession around the world
Please don't hesitate to contact Chris, should you wish to know more.
