Ever since ChatGPT took the world by storm in 2022, talk of artificial intelligence (AI) has been everywhere. But what exactly is AI, and how can it drive innovation in the commercial real estate space?

Benefits and challenges of AI in commercial real estate

Artificial intelligence is a technology that uses data, algorithms, and computational power to perform tasks that typically require human intelligence, such as learning, reasoning, understanding natural language, solving problems, and making decisions.

Benefits

By outsourcing tasks that could previously only be performed by humans to AI, commercial real estate professionals stand to benefit from:

  1. Increased efficiency and productivity: Tasks that may have taken a CRE professional hours to complete can now be done by AI in mere seconds. As a result, real estate AI adoption can lead to major improvements in efficiency and productivity.
  2. Enhanced accuracy: Humans are prone to error. A slight miscalculation can impact key real estate metrics, resulting in poor analysis and decision-making. In contrast, AI can be more reliable at performing complex calculations and data collection.
  3. Improved customer service: While AI chatbots can’t quite replicate the human touch, they can handle many customers at once for a fraction of the cost of human agents, raising the floor on customer service quality by ensuring every inquiry gets a custom answer.
  4. Better decision-making: Because it can consider and analyze millions of data points simultaneously, AI is often better at making informed business decisions than humans, who, by contrast, have limited ability to store and process data.

Challenges

Of course, adopting AI has its commercial real estate challenges: 

  1. Data privacy and security: AI collects, stores, and processes copious amounts of data. However, this can create data privacy challenges. Real estate professionals who use AI must invest in cybersecurity measures to ensure stakeholders’ data is kept safe.
  2. High initial costs: While AI can help lower ongoing operational costs, it tends to have a high upfront cost. This is because the technology is still new, and setting up and implementing it can be expensive in the short run.
  3. Resistance to change: Older generations of real estate professionals (and the commercial real estate industry as a whole) may resist AI adoption because they are used to legacy systems and processes. Convincing them to transition may prove challenges as a result.
  4. Ethical considerations: Some AI uses can create ethical dilemmas. For example, if an AI algorithm collects data from third parties by scraping the web, this may infringe on copyright claims and create complex legal challenges.

Using AI in commercial real estate: Real-world applications

Now that you have a general overview of the benefits and challenges of AI adoption in commercial real estate, here are some specific use cases to consider: 

  • Acquisitions. Use AI to scan online property listings and identify potential acquisition opportunities that meet your criteria or use it to automatically review legal and financial documents during the due diligence process.
  • Investor relations. Set up AI chatbots to answer common investor questions in real-time, or use AI to help write and tailor investor communications based on their profiles and preferences.
  • Business support. Leverage AI to automate routine administrative tasks, such as data entry and report generation, or have it summarize lengthy documents.
  • Asset management. AI can help optimize your CRE portfolio performance by suggesting proactive tenant retention strategies based on leasing patterns or by monitoring building and utility systems to boost preventative maintenance and energy efficiency.
  • Finance and accounting. Use AI’s computational power to track proprietary data and run data models to project cash flow based on historical data and other inputs, or use it to detect irregularities in financial transactions to limit the risk of fraud.
  • Property valuation and pricing. AI-powered Automated valuation models (AVMs) can estimate current and future property values based on comparable sales and other market factors in real-time. This can help you set rental rates, price properties for sale, and make competitive offers.
  • Customer experience. Use AI to power chatbots and virtual tours. That way, potential tenants and buyers can study and explore a property before ever setting foot in it, enhancing the overall customer experience.
  • Investment analysis. AI can help collect and analyze real estate market datasets to help you more accurately analyze potential investments and improve commercial real estate risk management via stress tests.
  • Site selection and development. Custom AI models can analyze geographic and demographic data to identify the best locations for new developments based on foot traffic, population growth, and other trends. They can also help you gauge development feasibility by analyzing zoning laws and other land use regulations.

Key trends in AI-driven commercial real estate

While AI has many applications in commercial real estate, here are four key trends driving AI adoption in the commercial real estate industry:

PropTech

PropTech is short for “property technology” and refers to the digital transformation of the commercial real estate sector. It encompasses everything from smart thermostats that automatically adjust building temperature to rental analytics software that helps landlords optimize rental and occupancy rates. 

According to the Wall Street Journal, PropTech investment reached over $9.5 billion in 2021, fueled by accelerated demand by property owners during the COVID-19 pandemic. While PropTech investment has tapered since then (with the rise of interest rates and the accompanying increased cost of capital), PropTech solutions are here to stay. 

Remote property management

Property management is typically a very hands-on job requiring regular property visits, tenant communication, and physical maintenance. However, real estate AI can relieve property owners and managers of some of these tasks.

For example, AI-powered smart cameras and Internet of Technology (IoT) sensors can help owners monitor properties from afar. Similarly, AI chatbots can handle most tenant questions 24/7, minimizing the need for property managers to constantly be onsite.

Data security

Since AI relies on vast amounts of data, data security has become a serious concern. In 2020 alone, the FBI estimated over $4 billion was lost to cybercrime in the U.S.  

However, AI can also be used to thwart cyberattacks and improve data security. For example, AI can help detect unusual patterns in data access or financial transactions in real-time and review documents to help ensure commercial real estate professionals comply with data regulations such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA).

Sustainability

With the rise of climate change and natural disasters, sustainability has become a growing concern among policymakers. Fortunately, AI can help CRE owners reduce their carbon footprint and comply with important environmental restrictions.

For instance, AI-enabled HVAC systems can minimize energy consumption across a building’s lighting, heating, and cooling systems based on occupancy data and weather conditions. Furthermore, AI-enabled IoT sensors can track a building’s emissions to ensure they stay below regulatory limits.

Top AI technologies and tools in commercial real estate

Interested in trying out some AI tools tailor-made for real estate companies? Consider the following:

1. Machine learning

  • EliseAI: Machine learning company with an AI assistant for property managers to automate customer relationship management and scheduling via email, text, chat, and phone.
  • Cherre: Data management platform that helps you collect and organize real estate data from thousands of sources to automate workflows.

2. Natural Language Processing (NLP)

  • ChatGPT: Large language model by OpenAI that can generate human-like text responses to questions. Custom ChatGPTs tailored to CRE tasks are also available.
  • LeaseLens: AI lease abstraction service that automatically extracts relevant data from leases for $25 per lease export.

3. Computer vision

  • Matterport: Virtual tour service that lets you create 3D renders (aka “digital twins”) of any property with the help of specialized cameras and AI engine processing.
  • C3.ai: AI-powered property appraisal service that automatically analyzes visual and other data to streamline property valuations.

Conclusion

AI offers numerous opportunities to enhance and streamline your commercial real estate business. Companies that fail to embrace this technology risk falling behind their competitors. Now is the time to explore how AI can be integrated into your operations to increase your investment returns and stay ahead in the evolving market.