What The Rise of AI Means for Commercial Real Estate CRE
AI is a powerful tool that can improve the efficiency of commercial real estate. Learn what the rise of artificial intelligence means for CRE in 2022.
As artificial intelligence (AI) becomes more ubiquitous in society, many commercial real estate (CRE) professionals wonder what the technology will mean for their industry. There is a lot of speculation about how AI will change the way businesses operate and how people interact with space, but not a lot of concrete information.
In this blog post, we will explore how AI is likely to impact CRE in the near future.
Defining Artificial Intelligence (AI)
Before discussing how AI will disrupt commercial real estate, we need to define what we mean by artificial intelligence. Simply put, artificial intelligence is a branch of computer science that deals with creating intelligent machines that can work and react like humans.
There are many different definitions of AI, but for our purposes, we will focus on two key aspects of the science:
Machine learning (ML)
Machine learning is the ability of a computer to learn from data and improve its performance over time without being explicitly programmed. Machine learning is a subset of AI that is particularly well-suited to commercial real estate applications.
Natural language processing (NLP)
Natural language processing enables of a computer to make sense of human language and respond in a way that is natural for humans. NLP is necessary for commercial real estate applications because it allows computers to interact with people more naturally.
How Will AI Affect Commercial Real Estate?
Now that we have a basic understanding of AI, let's explore how it will be applied in commercial real estate in ways that will advance competitive advantage.
1. Real-Time Population Analysis and Prediction
Another way AI will impact commercial real estate is through data analytics. In the past, we primarily used data analytics for historical analysis. However, with the advent of machine learning, you can now use data analytics for real-time analysis and prediction. This is particularly important for commercial real estate because of the need to make quick decisions in a rapidly changing market as conditions evolve.
You can use machine learning to analyze demographic data to identify trends and patterns. We can then use this information to predict future demand for office space, retail space, or industrial space.
Property owners and management companies can use this information to make decisions about rents, marketing, and tenant mix. Developers can also use it to identify potential development sites. For example, an AI application might predict changes in population density in a given area and recommend that a developer build a new office tower to meet the future demand.
2. Financial and Loan Modeling
One of the biggest ways AI will impact commercial real estate is through the use of financial modeling. Financial modeling is the process of creating a mathematical model to simulate the financial performance of a real estate asset.
Financial modeling is used to make investment, development, and financing decisions. In the past, it was a time-consuming and manual process. However, with the advent of machine learning, financial modeling can now be done quickly and automatically. This is important for commercial real estate because it allows investors to make better-informed decisions about where to invest their money. It also allows developers to get financing for their projects more efficiently.
You can use machine learning to generate financial models automatically, which is done by training a machine learning algorithm on a data set of past transactions. The algorithm then learns the most predictive features of success and generates a model accordingly. This is revolutionary because it allows for custom models for each project. In the past, financial models were created using a one-size-fits-all approach. This resulted in projects being financed using models that were not well suited to them.
Now, each project can have its own custom-built financial model supported with machine learning, giving investors and developers a more accurate picture of the risks and rewards associated with a particular project.
3. Augmenting Brokers
One of the most immediate ways AI will impact commercial real estate is through the use of AI Augmentation with bots. A bot is a computer program that can automate tasks that a human would normally do. Bots are already being used in a variety of industries to improve efficiency and accuracy. For example, many online retailers use bots to handle customer service inquiries. In the commercial real estate industry, bots can be used to automate repetitive tasks such as market research, lease administration, and property management. You can also use bots to enhance the way brokers interact with clients. For example, a bot could provide real-time updates on listings that match a client's criteria.
Now more than ever it is difficult to connect with people. Building relationships in a hybrid and remote work, you want to be aware of what is going on with your prospects and clients. As a CRE professional you want to be more aware of what your customers are doing with their office space by sourcing internal business insights and combining them with external signals, like news and significant developments. This is another way to leverage AI augmentation, by using applications like ModuleQ, that tap into users' natural workflow.
4. Enhanced Customer Experience
Commercial real estate is a service industry. As such, customer experience is crucial to success. You can use AI to enhance the customer experience in various ways. One way is through the use of chatbots.
Chatbots are computer programs that simulate human conversation. You can use them to answer customer questions, provide recommendations, and schedule appointments.
Using Natural Language Processing, chatbots can understand a human conversation and provide intelligent responses. This is important for commercial real estate because it allows landlords and property managers to provide an instant response to their tenants and potential tenants.
Another way you can use AI to enhance customer experience is through virtual reality. Virtual reality allows potential tenants to walk through a property without physically being there. Using VR, landlords and property managers can give potential tenants a realistic view of what the property looks like. That's noteworthy because it allows potential tenants to decide whether or not to rent a particular property.
You can use AI to create 3D models of properties. The machine learning algorithm takes a set of 2D images and creates a 3D model of the property. The final result will portray the property much more accurately than if an artist were to create the model by hand, which is important because it allows potential tenants to see what the property looks like from all angles.
5. IoT for Property Management
The Internet of Things (IoT) is a network of physical devices, such as sensors and cameras connected to the internet. These devices can collect data about their surroundings and report it back to a central database.
IoT devices can generate a lot of data. This data can be used to improve the efficiency of property management. For example, if a sensor detects an empty room, it can automatically turn off the lights. If a camera detects that there is trash on the ground, it can automatically send a message to the cleaning crew.
CRE can also use IoT to improve security. If a camera detects that someone is trying to break into a property, it can send an alert to the police. We can also use it to improve the safety of tenants. Overall, IoT can be used to make property management more efficient and effective.
6. Human-Centered AI
Historically, enterprise AI solutions have focused on automating specific tasks. These are powerful and important applications, but they focus on the work itself, not on the people who do the work. ModuleQ's People-Facing AI inverts the paradigm, using AI to understand and augment your people.
By connecting the dots in your work data, People-Facing AI can predict the information you’re likely to need at any given moment. People-Facing AI is like an extension of your brain in the cloud that continuously monitors the digital information universe for important updates and automatically surfaces the most timely and relevant information. People-Facing AI integrates seamlessly into collaborative online workspaces such as Microsoft Teams and Slack, so information is pushed to you right in the flow of your work.
Artificial intelligence is a powerful tool that can improve the performance of commercial real estate firms. While it's unlikely that real estate agents and firms will be replaced by AI anytime soon, it's important to understand how we can use AI to improve the outcomes for CRE firms.
In the future, AI will become more and more commonplace in commercial real estate. Those who are early adopters of AI will have a competitive advantage over those who are not.