How AI Will Impact Commercial Real Estate

Having radically transformed the computing, auto, health and creative sectors in just a few short years (and with unfathomable changes still to come), artificial intelligence (AI) has slowly seeped into the everyday doings of the commercial real estate industry.

What is Artificial Intelligence?

At its simplest, AI describes the ability of computer systems and algorithms to imitate intelligent human behaviour, including the capacity to process language plus various types of data – including text, numbers, images, audio and video – and make decisions.

Top 10 Ways AI Will Impact Commercial Real Estate

Today’s early tech adopters in CRE are already using AI to increase productivity by automating copywriting for everything from client emails and social media posts to listings and property descriptions. They’re analyzing the data hidden within images to tag, describe and score a property’s condition and quality for more accurate CRE investment valuations and enhancing customer experiences by combining online maps, floor plans and video to create virtual flyovers and property tours.

And even so, they’ve only scratched the surface of AI’s ability to revolutionize the CRE industry by making it more efficient, profitable and responsive to stakeholders’ needs.

The top ten ways AI already is and will continue to impact commercial real estate include:

1. More Efficient and Effective Marketing

In today’s rapidly changing media landscape and faced with unprecedented consumer skepticism and limited budgets, it can be hard to know how to make the most of your marketing dollars.

With a simple scan of an agent’s website, AI software can help create marketing materials and templates agents can use for everything from business cards, brochures and property listings to banner ads, email newsletters, blogs and social media posts. Auto resizing ensures every piece of content fits the channel it’ll be featured in, while other tools keep your brand identity and message cohesive.

Once your creative is out there, AI algorithms help determine which type of advertising works best (text, banner ads, photos or videos) and in what channels (email, display, social media or search) so you don’t waste time with creative, tactics or media that doesn’t produce the leads you’re after.

Once prospects are acquired, marketing software embedded with AI can score them so agents can focus on those most likely to convert. Based on what stage a prospective client is at, AI can also recommend the type of content (educational) or engagement (email, voice or chatbot) needed to convert the lead into a full-fledged client.

2. Administrative Assistance

A variety of industries use chatbots to bolster customer service and provide answers to customer questions. In commercial real estate, this can mean responding to queries about real estate terms, properties, financing, etc. Numerous AI technologies work together with chatbot applications to accurately interpret a customer’s intent and generate the proper response.

But bots can also act as administrative assistants, taking over many routine tasks, including:

• • Researching and creating market reports
  • Delivering real-time updates on listings
  • Collecting contact information and routing prospective leads to commercial real estate agents
  • Booking appointments and property tours
  • Managing meeting calendars
  • Sending follow-ups and reminders for appointments

3. Strategic Location and Market Analysis

In the blink of an eye, AI can parse population growth, demographics, traffic, property value, rent, pricing and competition data and return reports on location and market analysis tasks that would otherwise take agents days or weeks.

4. Property Search and Matching

AI can streamline property searches by coupling buyer or lessee preferences concerning listing, pricing, location and budget with past search behaviour and other inputs to create personalized recommendations. By matching the right buyer or renter with the right property, AI can help reduce vacancy rates and increase property income for owners and landlords.

5. Virtual Tours, Space Visualization and Utilization

Helping clients see the potential of a property using two-dimensional photographs and floor plans can be challenging. Once a client is interested, coordinating schedules to deliver in-person tours can be just as difficult. If a potential buyer, lessee or investor is located far away from the area under consideration, it could entail significant travel costs or be nearly impossible to pull off.

AI technology solves these problems by creating realistic and immersive three-dimensional representations of properties that allow clients to virtually explore spaces or instantly re-imagine them according to their unique needs.

6. Financial and Loan Modelling

Financial modelling uses mathematical models to simulate the probable financial performance and profitability of acquiring, adding value to or developing a commercial real estate property. Once a time-consuming and manual process, CRE agents can now do financial modelling quickly and efficiently using artificial intelligence.

AI algorithms analyze historical data such as cash flows, costs, capital expenditures, debt, market trends and economic factors to anticipate risks and rewards. And because AI can analyze several properties simultaneously, investors can easily compare outcomes and then use the data to support their applications for loans and financing.

7. Due Diligence, Risk Analysis and Property Inspections

AI can perform zoning and title checks and assist with legal due diligence by automating document review, contract analysis and compliance checks. AI can also identify potential risks related to tenant defaults, property maintenance and market volatility.

Drones equipped with AI can take aerial photos of commercial property, assess the condition of outdoor elements, including roofs, windows, siding, brickwork, etc. and deliver a detailed inspection report that includes photos, videos and 3D models, making property inspections more manageable and cost-effective.

8. Streamlined Transaction Processes, Lease Creation and Negotiations

AI can significantly streamline the commercial real estate transaction process by automating many of the most time-consuming and tedious parts of transactions.

AI can quickly analyze and extract crucial information in the lease abstraction process, providing clients with concise and easy-to-understand summaries of their rights and responsibilities.

In the lease creation and negotiation processes, AI can provide market intelligence by comparing similar properties, locations and transactions, simulating different scenarios and suggesting optimal terms and conditions.

When a deal is ready inked, AI can generate secure, customized and compliant contracts.

9. Property Management and Smart Building Tech

AI can automate a myriad of property management tasks, from tenant screening, lease creation and rent payment processing to scheduling maintenance and tracking repairs. By integrating AI with sensors connected via wireless networks (also known as the Internet of Things, IoT), AI can monitor and adjust building HVAC systems to enhance tenant comfort on cold or hot days and optimize energy efficiency every day.

AI can eliminate the need for security systems utilizing swipe cards and keypads by using facial recognition to grant varying levels of building access. It can also alert security personnel or the police about potential break-ins or fire, flood and earthquake events as they happen.

10. Portfolio Management

What AI can do for one property, it can do across an entire commercial real estate portfolio, allowing for instant updates on portfolio performance.

Challenges of Using AI in Commercial Real Estate

While AI is a potent tool, its output will always be limited by the quality of the data it’s trained on or analyzes. As the saying goes, garbage in, garbage out. With an ever-increasing number of datasets available, there’s an urgent need for data input standardization across all industries.

Robust data governance measures are also needed to safeguard personal and financial data used in AI processes, given the vulnerability of computer systems to bad actors.

Lastly, although many AI tools are currently priced to entice utilization within the commercial real estate sector, others entail significant software licensing and training costs, which can disadvantage local commercial real estate companies compared to national competitors with deep pockets.

AI’s Impact on Commercial Real Estate is Just Beginning

Artificial intelligence is transforming the commercial real estate industry by increasing efficiency, reducing costs, enhancing customer experience and enabling better decision-making.

While purchasing and implementing many AI technologies can present significant challenges, there are also substantial opportunities for agents, brokerages and the industry as a whole.

Layering human expertise onto AI analysis is crucial for achieving optimal results in commercial real estate transactions. While AI can automate repetitive tasks and suggest actionable insights, human input is vital to an in-depth understanding of client needs and complex decision-making and strategy development.