How Unique Analyses and Interconnected Workflows Are Transforming the CRE Industry

Given their vast history and expertise with data and analytics, Moody’s Analytics is uniquely positioned to bring fresh insights and innovative solutions to commercial real estate brokers, lenders and investors. Commercial Observer’s Partner Insights spoke to Luis Amador, general manager of Moody’s Analytics CRE, to discuss some of the company’s many distinctive capabilities in the commercial real estate space.

Commercial Observer: Talk about the history of Moody's Analytics in commercial real estate.

Luis Amador: Moody’s Analytics has been in the commercial real estate space since 2010. Through continued investment, we have developed a strong foundation of performance data for millions of properties across the U.S. Our team of experts interprets the data to bring together multiple perspectives, providing actionable insights, trends and forecasting. 

We provide insights to the market in a few ways. Firstly, we consistently monitor properties in the market for changes to rents and vacancies, as well as when projects are coming online. This allows us to provide valuable insights into what is going on with an asset, in the sub-market and the broader market. Then, with every transaction that happens, we do research on information like what the cap rates were and at what levels they would trade. Next, we look at what’s happening outside of the property. We know all the activity around a property that allows investors, lenders and brokers to get a sense of the health of the area. From there, we analyze the tenants and the lease information — what cash is being produced by the leases, could one of the clauses to those leases change things if an anchor tenant leaves, etc. If you’ve made an investment in a property, you want to understand the potential movement from those tenants and the potential for rent growth. And finally, we look at it from a risk perspective — who were the players in the transaction, who are the true owners who issued the debt, things like that. Having a view from every angle is critical to making the best commercial real estate decisions, and it’s what we work to provide our clients. 

Where are you going next? How is Moody’s Analytics continuing to grow in commercial real estate?

Commercial real estate has changed rapidly, and we have seen CRE professionals increasingly embrace technology and analytics to stay competitive. However, we continue to hear that most still rely on narrow data sets, disparate systems and cumbersome manual processes. We are striving to solve those challenges by expanding on the foundation of property data we have built to date. We are investing in intelligent solutions that leverage our unique data and analytics to streamline workflows and surface insights at the point of decision-making. 

We’re also expanding what is considered CRE data. We are leveraging unique data sets from across Moody’s to make it easier for our customers to integrate underlying or external risk factors to help them gain a more complete view of the market.

How does Moody’s Analytics use its extensive data to help clients take a deeper look at alternate dimensions of risk, and then help them mitigate this risk?

I’m lucky enough to spend a lot of time with customers, and I always ask, what are your pain points? One thing I notice is that alternate dimensions of risk have been surfacing in these conversations — factors that will have an impact on the CRE market, but aren’t included or considered in traditional risk models. They’ll say they need to get a handle on things like environmental, social and governance, or ESG, or climate change risk, for example. Or they’ll highlight the importance of being able to weigh the risks of associating or partnering with specific companies, or what we refer to as “Know Your Customer.” 

You have to start modeling during the evaluation process when you are looking at a potential investment, because those are the unforeseen risks that traditional models have not typically accounted for. When it comes to additional dimensions of risk, we feel that they’re all interconnected — ESG risk, climate change risk, supply chain risks, legal risks, compliance risks — these can all impact their cash flow and their ultimate valuation of a property or loan. So, we have analytics that integrate all these risk factors.

What are some examples of how Moody’s Analytics is addressing the specific needs of commercial real estate lenders, investors, and brokers? 

By focusing on crafting integrated workflows, we’re able to create innovative solutions that are designed to streamline processes. Between leveraging technology to automate and digitize workflows where we can and populating our data as a starting point, we can really minimize manual input. That efficiency is huge for our customers. 

On the lending side, we are creating an integrated lending solution designed specifically to support the unique CRE workflow. We are building tools and analytics to better size loans, screen potential applicants, evaluate deals more quickly, and embed risk management controls earlier into the process so lenders can make the right offer to the right customer at the right time.

We’re also developing portfolio management solutions for investors and lenders. Through acquisition and organic development, we now have the ability to support the entire portfolio management cycle from strategy definition to performance analysis to pipeline management. We are integrating data and analytics that help evaluate potential deals, analyze what has changed in the portfolio and compare a portfolio of properties or loans to the most relevant KPIs, or key performance indicators, to support a data-driven decision-making process.

Those are just two examples, but we are doing so many exciting things in this space.

How unique are all of these capabilities to Moody’s, and why is Moody’s positioned to provide them in a way that other companies are not?

For us, it’s really all about finding and forging unique connections between all of the tools we have in our portfolio. When you look at one individual component, there are companies that can serve                   those markets. But we’ve spent a lot of time and effort interconnecting all of these capabilities. Our customers have been loud and clear about how they have to think about unforeseen risks today. There are things that are going to impact them that they have to prepare for now. We are able to integrate all of these analytics from across Moody’s so that CRE professionals can use them more efficiently and gain real insights from all this data. We are also ensuring our solutions can work together to connect the CRE marketplace and improve how lenders, brokers and investors work together through the CRE lifecycle. That interconnectedness is the real value proposition because that is how the industry operates today.