Historically, commercial real estate has paced behind other industries in adopting new technologies and fundamentally changing how it conducts business. Commercial real estate is a relationship-driven sector at its core, and innovative tools must be fully vetted and easily integrated into this person-centric ethos to stand the test of time, lest they fade into obsolescence and disuse. Artificial intelligence (AI), however, is here to stay and has the potential to radically transform how commercial real estate stakeholders operate and transact.
We’ve already seen transformation. AI's recent advancements are ushering in a new era of technology tools to enhance commercial real estate's relationship-driven business. While a few naysayers fear displacement, AI can improve productivity, reduce operational spending and enhance stakeholders' abilities to discover, research, and close deals.
Read on to learn more about what AIs are capable of and how commercial real estate professionals can consider integrating these game-changing tools into their business.
Despite its recent splash on the news cycle, AI technology has been around for several years and has been implemented in many industries. Retailers use chatbots to automate many customer service requests, while warehouses use AI to facilitate inventory management and optimize storage and movement processes. Siri, Alexa, and Google have lived in our pockets and on our computers for years, helping with simple reminders and small automated tasks.
More recent advancements in a specific branch of AI, large language models (LLM), are behind why you've been reading about AI on every news page. In the fall of 2022, OpenAI crossed a threshold with the launch of the 3.5 version of ChatGPT. This AI model can effectively communicate with humans, provide information, and handle tasks of much higher quality than previous versions. The following months saw a tsunami of AI tools building on these improvements, creating models to build software, generate business ideas, create art, and even write articles.
That AI has improved by orders of magnitude unlocks the exponential capacity of models to transform many aspects of different businesses.
Where commercial real estate can leverage AI
The improvements in natural language processing in ChatGPT and other AIs mean that these technologies can take on various administrative tasks, freeing up brokers and commercial real estate stakeholders to focus on the relationship and expertise sides of their business.
AI-powered technology can quickly compile market and data reports (albeit at a surface level), regularly update current listings, and schedule meetings and property viewings. Thanks to more natural-sounding language, these bots can effectively personalize client communication, providing a seamless customer experience while allowing brokers or investors to prioritize more critical tasks.
Increasing numbers of commercial real estate players are incorporating artificial intelligence into their marketing processes. AI is now being used to create highly targeted social media ads, listing copy, and even blog articles, taking much of the busywork out of human hands.
On Crexi, our new AI Script feature allows brokers to upload an OM into a listing draft, and the software will automatically generate compelling, highly detailed marketing copy within seconds. Brokers no longer need to worry about the perfect marketing materials—computers can create them, and with minimal tweaks, they'll do the trick and free up hours of copywriting and design time.
However, some experts still caution against using these tools without some human guidance. Generative AI is much closer than it's ever been to matching human creativity and nuance. Yet these tools generally still require some oversight to make sure marketing materials come off precisely as intended and as best fit each use case. In some cases, AIs can also “hallucinate,” or confidently provide a generated response that is downright false and unjustified by any training data. As such, they need some human-led guidance to ensure accuracy.
Due diligence and demographic research
Technology has already created inroads in saving time on research and data collection, particularly in commercial real estate's due diligence phase. AI is poised to expedite the processes, providing nearly real-time insights and metrics on a rapid scale that would formerly take analysts days or weeks to complete. This speed is crucial in a moving property market, especially with macroeconomic conditions and trends evolving ever more rapidly.
AI's ability to analyze data is also helpful in identifying and predicting trends in specific markets. AI can use these insights to help brokers and potential inventors predict demand for multifamily or office space in certain cities, understand environmental risk factors, and even determine potential development sites based on shifting demographic data.
Loan and financial modeling
Brokers who've spent many decades in the industry may recall when financials and underwriting calculations were all conducted manually. Today, AI can crunch numbers quickly through a machine trained by past financial models and results to get accurate and workable outputs.
For example, investors calculating NOI and ROI can use artificial intelligence tools to understand what investment factors to consider when considering a deal. By the same stroke, underwriters and lenders can better predict potential returns on certain contracts and optimize their liquidity for more secure investments.
Analyzing for risk assessment is also a crucial aspect of any commercial real estate data. These emergent AI algorithms can quickly analyze economic factors, market trends, historical data, and other data inputs to give stakeholders the information they need to make more informed decisions about potential acquisitions.
As any business grows, operational tools must expand in tandem with amassing piles of documents and data sets. In commercial real estate, stakeholders can use AI to extract data from reports more efficiently, offering memorandums, due diligence documentation, comparables, and other documents at scale. For example, it can even alert individuals when updated records are due or proactively report on increased tenant demand, as an example. AI can also quickly classify, store, and resurface documents as needed, providing a glut of historical data to pull from and allowing property stakeholders to make more informed decisions.
Challenges facing adoption of AI in CRE
The implementation of AI into various commercial real estate processes is not without its challenges. Commercial real estate firms face two significant hurdles: the internal capacity to collect data so technology can drive better decision-making and a general lack of interest in investing in time-saving technologies. But the AI wave is here, and early adopters get the home-field advantage.
It's important for commercial real estate organizations to closely scrutinize what technologies will offer the most effective AI-powered tools for operational costs, especially in a market that's returning to normalcy after a multi-year market cycle peak. Commercial real estate leaders should closely examine their business needs and determine which operational time sucks can be made more efficient and cost-effective through technology. Client feedback will also provide a helpful lens through which companies can implement technology and AI into their processes.
Throughout the development and management of commercial real estate, AI can play a vital role in overseeing complex projects and facilities. AI can provide customized customer service, automate repetitive and manual tasks, and proactively manage data. In this rapidly evolving industry, those that adopt a "technology first" attitude will be at an advantage.
The Bottom Line
Commercial real estate is well-poised to take advantage of AI as a vital component in customer service, marketing and analytics, and data management. Organizations that embrace the technology wave will likely get a competitive advantage. While some jobs may disappear with improved operational efficiency, these technologies will create new opportunities in tech management and data analysis.
Overall, AI tools will enable brokers and stakeholders to streamline processes and focus on what they do best: engage in human relationships and clear a path to generate the highest ROI on commercial investments.
Shanti Ryle is a senior commercial real estate writer for CREXi.