innovation

How modelling helps towards better decisions for returns on real estate

4 August 2017 • 3 min reading time

Being able to see at a single glance whether, how and at which locations care-sector and other real estate can be made profitable or investment decisions can be taken. ‘Care on the map’ makes it possible. A second platform is under development. Five questions about these applications for TNO’s Henk Sijsling and Andrew Koster.

1. What is ‘Care-sector real estate on the map’?

Henk (senior real estate researcher and financial engineer): “‘Care-sector real estate on the map’ is an online map to which data and models can be linked. For example, there is a model that contains data about the building, the types, costs, bank repayments, lost revenues, interim renovation work, and re-use. Data about the finances of care bodies, the quality of care, the consequences for real estate of policies for allowing people to live longer at home, and demographics at regional level is also included. The useful thing about this application is that the results from whichever model can be highlighted interactively on a spatial chart and that a wealth of data about care-sector real estate can be made available in one place.”

2. What can you do with this application?

Henk: “The models’ results are accompanied with spatial information. This could produce results that are very different to initial expectations. It is therefore a good means for predicting the future.”

“It is a good means for predicting the future”

3. How did ‘Care-sector real estate on the map’ come about?

Henk: “In 2015, the Ministry of Public Health, Welfare and Sport was faced with a claim of 2.2 billion euros. TNO was given the task of shedding light on this claim, and used ‘Care-sector real estate on the map’ in the process. The facts, figures and information that this produced led to a reduction of the claim, to 200 million euros. The purpose of ‘Care-sector real estate on the map’ is to acquire, in an efficient manner, supporting information for real estate decisions by the Ministry and local authorities.”

4. What impact is ‘Care on the map’ having?

Henk: “In the Netherlands, it is the Randstad region where investors have traditionally set their sights. However, research shows a wider picture. After all, there are triple A locations in the Achterhoek area as well. Statistics show that the working population is very highly qualified there. The region is also experiencing economic growth, and incomes per person are on the increase. Despite this, non-local investors are not interested in the area. Larger investors such as pension funds do not have enough time to study the range of investment opportunities in depth. They use information supplied by local authorities and developers. This has not proved to be reliable. So they invest elsewhere. Almost always outside the Netherlands. That is the reason for developing a follow-up to ‘Care on the map’: ‘Assets on the map’.”  

“Decisions can now be based more readily on facts and less on political considerations”

5. What is the idea behind ‘Assets on the map’?

Andrew (senior business development manager in buildings and infrastructures): “What applies to care-sector real estate also affects the whole real estate sector, including banks, pension funds and investors. That is why we are now making a follow-up application specifically for the real-estate sector.”

Henk: “‘Assets on the map’ incorporates demographic data, data about the built environment, scope for expenditure, mobility, the regional economy, and cultural developments. It can assist provincial governments, local authorities, real estate owners and housing corporations in their decision-making processes. Together with the Noorderruimte knowledge centre, TNO has used ‘Assets on the map’ to carry out research into the effects of economic contraction, home insulation, and liveability on a neighbourhood in Emmen. The area in which the corporation sought to improve home insulation appeared to have relatively poor prospects with regard to value creation. The homes were not very sought-after and investments were unlikely to bring about much change. Investing in more popular neighbourhoods would be a more realistic option.”

Andrew: “We can say that ‘Assets on the map’ and ‘Care-sector real estate on the map’ can help increase the value of care-sector real estate by predicting the future with well-underpinned models, rather than simply by extrapolating ‘feelings’. Decisions can now be based more readily on facts and less on political considerations.”

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