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Aug 23, 2019

Posted on
Feb 27 2019

As of Spring 2019, Kellogg is pleased to offer a new half credit course in Real Estate Technology. The course will be taught by Mark Oei, Founding Principal of Redwood Coast Capital, formerly of Sequoia Capital and a member of the Kellogg Real Estate Advisory Council, along with Denise Akason, lecturer and Associate Director of the Kellogg Real Estate Center.

Real estate decisions are analyzed along two dimensions: the property, and its financing. For example, for real estate developers the property is at the core of the analysis while banks and investors tend to focus on structuring the financing of such properties. Most of Kellogg’s real estate curriculum is structured around these two types of analyses and their various interactions. But the nature of properties used in real estate and their financing practices are now changing as a result of major technological innovations. These changes pertain to the nature of these properties, their location and their routine management and maintenance. Likewise, financing of properties is changing as systems that rely on big data and artificial intelligence are integrated into the financial underwriting process. The purpose of this course is to review these innovations and their implications for the real estate industry.

This course explores two unique ways in which technology is changing and interrupting real estate markets. The first effect that technology had on real estate is in changing the nature of traditional properties. For example, the transition from brick-and-mortar stores to online retail led to a decline in the demand for retail properties while it increased the demand for properties that can host technology infrastructure such as data centers and server hubs. Similarly a consumer electronics company such as apple that traditionally used mostly office buildings as its main real estate now uses technology to enhance the work experience for its employees (Apple Park) as well as being a direct distributer of its products through its owned Apple Stores.

The second effect of technology on the real estate industry is through the dissemination of operational data and the use of such data in real estate development, financing and operation. Unlike financial markets, real estate markets tend to be highly illiquid with only a few repeated sales and smaller amounts of data. Real estate specialists historically carried out most real estate operations , and technology played a less significant role in such decisions. For example, transactions were conducted based on personal relationships and maintenance and leasing were operated through onsite property management teams. But technology is now disrupting these markets. New data sets relating to property development, finance, property management, investment and lending are now available. There are several technology firms that specialize in data-driven management and development of real estate properties. For example, technology is used to better underwrite values with newly developed automated valuation models (AVM) that use econometric forecasting, hedonic pricing, comparable matching, machine learning and artificial intelligence.

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