Survey: Ever-Growing Demand for Virtual Data Rooms

11. November 2015

The booming real estate market in 2015 has seen demand for virtual data increase exponentially

Frankfurt am Main, 11 November 2015 – The German property market is expecting records to be broken for commercial real estate transactions in 2015: the volume of transactions is set to rise to approximately EUR 55 billion by year-end, which would exceed even the record year of 2007. This development has triggered a rapidly increasing requirement for virtual data rooms which offer the necessary security, efficiency and speed to transactions. According to a structured survey of 100 German real estate industry specialists and managers conducted in October 2015, 61% of companies involved in real estate transactions are already using virtual data rooms in their dealings – and this trend is rising! The survey findings are documented in a recent report entitled “Commercial Real Estate Transactions 2015/2016” by the secure cloud provider Drooms.

Competitive advantages offered by virtual data rooms

Nearly three-quarters (73%) of the real estate industry specialists and managers surveyed by Drooms see at least partial opportunities to leverage competitive advantages by using virtual data rooms. However, just over one third (34%) were absolutely certain that this would offer significant market benefits. Just under a quarter (24%) of respondents opined that virtual data rooms are irrelevant in processing business-critical transactions, while 26% and 23% stated that the use of virtual data rooms is important or very important, respectively.

Jan Hoffmeister, Managing Director of Drooms: “The use of virtual data rooms has long been standard practice for M&A transactions, and we are now seeing similar developments for commercial real estate transactions during this boom phase. Efficiency, time, security and huge cost savings – the main advantages offered by virtual data rooms – are now playing an essential role in quickly and successfully completing projects. Anyone who has previously experienced the efficiency of working with a virtual data room will never again want to miss out on the speed and cost benefits.”

Standardisation versus lack of efficiency

According to the survey, it seems that there is above all still a general lack of efficiency in commercial real estate transactions on the German property market. A total of 45% of the industry specialists and managers surveyed rated current market activity as relatively or totally inefficient, with a mere 16% assessing the industry as very efficient. Introducing measures to standardise real estate transactions could at least partially increase market efficiency, according to 85% of experts surveyed by Drooms. Nevertheless, 30% of companies intend to gradually implement the recent recommendation from Gesellschaft für Immobilienwirtschaftliche Forschung (gif) e.V. aimed at establishing a standard data room index. A further 51% are still yet to make a decision. Drooms forms part of a small circle of seven companies from approximately 1,300 gif member firms to have jointly developed the new recommendations for data room standards.

Jan Hoffmeister urges efficiency in handling large data volumes to be taken into account alongside functionality when selecting a virtual data room. He provides an example: “In general, highly paid architects and lawyers are the ones accessing the data. Consequently the transaction costs are directly affected if large documents take a long time to load, especially if hourly rates apply.” According to Hoffmeister, many systems appear highly functional at first glance. “However, these functions are often unusable on a day-to-day basis, as they perform inefficiently; large databases simply take too long to load. Ultimately, this often means that these apparently fantastic functions remain unused. Ensuring the efficiency of virtual data rooms in dealing with large volumes of data should therefore be given utmost priority,” Hoffmeister adds.