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EXPERT REACTION | TECHNOLOGY | UK & IRELAND
Over to you, RICS – we’ve got to talk about how tech can improve valuations
Tech is making valuations faster and more precise – but the Pereira-Gray report ignored it completely.
3 May 2022 by Michael Molloy | Guest Writer
When the RICS initiated the Pereira-Gray Independent Review of Real Estate Investment Valuations, there was a clear instruction in its terms of reference to examine what role tech could play in making investment valuation methodology more fit-for-purpose. It stipulated that the report should consider the question: “Can professional valuers make better use of technology to deliver high-quality valuations?”
While the final report and its recommended shift to discounted cash flow (DCF) methodology has been widely welcomed, you will search in vain for a section on how tech can play a role in this brave new world.
In fact, the word ‘technology’ appears nowhere in the main body of the 52-page report. What you find instead is a rather underwhelming comment from Pereira Gray on the topic: “Ultimately, I make little comment on artificial intelligence here, which is not to say that it will not gain significant followers as a feature within the valuation industry in years to come.
“It might in fact become preeminent, but I judge that it is not yet the answer to improving confidence in property investment valuations. I would encourage RICS to keep this developing area of practice under close review.”
This is the sound of a can being kicked down the road and couldn’t be more disappointing in terms of how tech can be integrated into what is the pivotal mechanism of the commercial real estate market.
As a business which has created an AI-powered app that brings speed, precision and super-fast sharing to assessing IRRs and creating DCF appraisals, this ‘old industry’ attitude was somewhat depressing and begs the question as to when will be the right time to talk about tech and its role in the future of property valuations?
Ample scope for leadership
The report appears to be unaware or unmoved by the practical opportunities generated by technology. How can you be indifferent to the way tech finds and removes errors effortlessly? Or how it can speed up manual work so that a half- day of arduous effort becomes a matter of minutes. And what about the way tech automates reasoning and resolves the complicated logics inherent in DCF analysis?
The aim of tech has never been and never will be to remove human judgement. The goal is rather to allow us to be unhindered as we proceed to choose appropriate assumptions and focus on issues of strategy and priorities in DCF analyses.
There is ample scope for leadership from the RICS to bring the dynamics of tech development and software use into policy thinking and standard-setting. Indeed, it’s difficult to see how almost any policy these days can be properly formed without considering the tech dimension.
Fortunately, there is a growing band of enlightened institutions, property consultants, propcos and private equity houses who ‘get tech’ and are stealing a march on their peer group in terms of how they use it to appraise real estate. The speed and precision they enjoy puts them ahead in the race to capture assets on the right terms.
There is little doubt technological progress can help drive safer, more robust, highly consistent, shareable, auditable and more transparent DCF investment valuations. Not in a distant future, but today, and by continuing the technology journey that is now intrinsic to all commerce. This is not the time to park technology when striving to improve the quality and confidence in the investment valuation profession. Over to you, RICS.