Real estate data science: are we there yet?
The real estate market is placing even greater challenges on management, especially, in the fields of financing and valuation. Analyzing the data registered for this industry, we can say that it has evolved in 2019 and it is becoming more and more complex, as it begins to assume the important role it plays within the society.
The companies have a complex structure, especially when we consider significant assets and debt funding (the remains of the economic crisis), alongside peculiar contractual arrangements, which are not very easy to be reflected within the financial year.
For instance, real estate companies reporting revenues under the International Financial Reporting Standards – IFRS 15 “Revenue from contracts with customers” – have a major impact on the profile of revenue and profit recognition due to the new complexities introduced by the abovementioned standard.
In particular, real estate companies have to consider:
- whether revenue should be recognized over time or at a point in time;
- the extent to which distinct goods or services are supplied, which should be accounted for separately;
- whether particular costs relating to obtaining a contract must be capitalized;
- whether revenue must be adjusted for the effects of the time value of money;
- how to account for contract modifications; and
- the impact of new guidance where pricing mechanisms include variable amounts.
At Mazars, we understand the unique circumstances of the real estate industry which is why our assurance solutions are specifically tailored to be more relevant and focused on the real-estate industry-specific issues.
Although the regional real estate top is dominated by companies with foreign shareholding, there are many companies with Romanian capital that had exceptional results last year, the most intense activity being registered at the national urban level. According to CBRE Research data, in the first nine months of 2019, about 290,000 sqm of offices were leased in Bucharest, with almost half of the demand coming from IT&C companies.
The digitalization of the real estate sector pushes recent constructions to incorporate equipment and connectivity, thus optimizing their use and maintenance.
From an advisory perspective, some aspects of real estate, like asset valuation, visual due diligence and data rooms should be automated, requiring a more consistent approach to data.
Mazars has released in 2019 a study of listed European construction companies. An interesting takeaway from the report is the fact that there has been a growth of more than 6% of leading construction companies in Europe, which was driven by several factors like healthy order, the prolongation of big projects and successful international development.