Numerous commercial real estate decisions rely on a fascinating mix of thorough research, market experience, and gut intuition. Not just for investors, either; the pricing decisions made by brokers are also informed by this blend of perspectives that stretches well past a simple financial model and comparative property summary.
Gut feelings are critical across most any industry and certainly aren’t about to go away in real estate. But what exactly do they represent, in the first place? While some definitions focus on the gut’s role as a feeling without logical cause, I prefer Webster’s definition: “the basic visceral, emotional, or instinctual part of a person”. That isn’t inherently illogical at all, since emotions and instincts can develop based on experience and observed reality.
So when push comes to shove, gut feelings are really just a shorthand for the sum total of past experience and various insights that defy traditional categorization. And while they are difficult to quantify, they represent a very important part of investment decisionmaking alongside other analytical methods.
But what if there was a way to measure gut feelings, or rather, the plethora of observations and experiences that contribute to shaping gut feelings? It would require not only identifying a huge range of real estate quality factors and then collecting and processing the data for each one. But the reward would be more accurate real estate decision making regardless of industry role.
One firm working to do just that is Localize.city, a New York City-based tech company currently targeting buyers in the residential market. Steven Kalifowitz, President of Localize, recently explained that his company “created AI which knows how to analyze every bit of information about homes, the real estate market, and the built-environment. The result of the analysis is content, also produced by AI, which describes what it will be like to live at any address today and in the years to come.”
Localize.city measures a wide variety of factors in order to determine specific location quality, such as sunlight access, new development in the area, and noise. “We can assess whether or not an apartment has a view that commands a premium price,” Steven added. “We can also assess the potential for new construction nearby to block that view. And finally, our AI can create an insight that in simple terms describes both the view and the potential for it to be taken away.”
Factors like the ones Localize.city focuses on are the sort of things that real estate professionals often judge by feel. Comments like “this neighborhood can’t bear those rents”, “this area has seen a lot of investor interest lately”, and even “this is a poorly-optimized floorplan” are all gut judgments that go back to observations of market dynamics and local geographies. With companies like Localize.city, that information is being democratized to the masses.
There will always be a place at the top of the real estate food chain for experts with deep experience and excellent judgment. Adding a quantitative measurement element to many of the factors often considered qualitative should increase performance for the top performers as well as those below them.