Artificial Intelligence (AI) is set to revolutionize the CRE business as it provides landlords with valuable insights to proactively adapt their strategies and spaces to meet the needs of their end users and, ultimately, boost their bottom line.
The use of AI in the CRE space isn’t new. Machine-learning capabilities have helped retailers entice loyal customers using chatbots, automated assistants and other self-service features. However, AI has now developed to provide retail customers with a more personalized and seamless customer service experience thanks to advanced data aggregation and analysis techniques.
What is AI?
AI is a broad term that is used to describe a range of algorithms and technologies that can learn without being explicitly programmed.
There are three basic subsets of AI, which are:
- Machine learning algorithms that can analyze large amounts of data to provide valuable insights;
- Image processing algorithms that could look at a photo or a video and identify specific objects;
- Natural language engines that can understand what humans say and respond intelligently.
In the simplest terms, artificial intelligence will allow for the automation of many tasks that, previously, only humans could do.
Here’s how this phenomenon could affect the commercial real estate market:
Building Automation-as-a-Service Systems
One of the most exciting AI-based areas lies within the smart building concept. The Internet of Things (IoT) is a blanket term that describes a network of connected objects, which can all “talk” to one another over the internet. But how would this work in a CRE setting?
Let’s say a tenant opens a window in your building, the building automation system will detect this change and alter the heating system accordingly. And, by automatically maintaining a consistent temperature, this will reduce your energy costs.
This automation does not just make sound financial sense; users of eco-friendly smart buildings are also 16% more productive compared to those in conventional offices. Research reveals this is because the use of the space and resources is optimized to streamline the working day for the staff.
This focus on productivity is an important change of direction for many in the CRE industry. Speaking at the Disrupt CRE conference, one speaker said: “The tenant experience is important to us because that’s what attracts people to our buildings.”
“Landlords want to be able to take the technology innovation they’ve built into their building and say to a prospective tenant, ‘Hey, you should come to our building because your employees are going to be X more productive and efficient than the guy next door,’” they added.
Let’s look at another example. Maybe your printer is low on ink. Imagine if the printer alerts the building system and new ink cartridges are ordered automatically, before the printer runs dry. By tracking tenant requests, contractor work, and repair history, you can also use AI to find patterns that indicate potential problems to further optimize your approach to building management.
This allows commercial building landlords and managers to take a more proactive, and efficient, approach to optimize the running of their buildings. Such intelligent building performance systems are also predicted to represent a $19 billion market by 2020, according to Memoori, a market research firm.
Lucas Seyhun, co-founder of affordable coworking space The Farm SoHo, said: “We have begun to integrate AI-based tools into our building management processes to improve our service to clients. For example, we use the Kisi access control system to automate entry into our building.” Kisi uses a keyless system, so tenants can access a space with their smartphone. What’s more, you don’t need to overhaul your infrastructure to install the system—you can just add new access points as and when you need to.
Optimizing Your Efficiency
AI can automate many of the mundane, manual tasks that may take a considerable amount of time for landlords and building managers to complete. Research reveals more than half of executives feel their valuations and appraisals are areas that could see a significant impact from AI for many processes.
For example, let’s say you want to review a lease. An AI tool could pull out the information that’s most valuable to you to provide you with the information you need in a concise and understandable manner, which will save you hours of paper sifting.
Such logic could be applied across a property portfolio—and some AI-based tools are already on the market to help your create a framework to streamline the process of getting a property on the market, and find and attract tenants with tailored marketing campaigns.
For example, Appfolio and VTS are two such tools that help real estate managers integrate marketing data with contract information. They also analyze potential buyers, control existing contracts and provide insights into your accounting and reporting.
Predicting and Pleasing Your Tenants
Predictive analytics finds patterns that otherwise wouldn’t be obvious, improving commercial real estate performance in numerous ways. This phenomenon is particularly useful given the prevalence of big data, where important information could easily get lost without the right analytics system in place.
For example, using predictive analytics, you could predict what properties your clients will be most interested in based on specific data about past behavior. You could also work out the likelihood of a tenant renewing a lease based on their past paying habits and identify potential new clients.
Predictive analytics could also inform your acquisition and disposition decisions to optimize your portfolio and help you target the best sales practices to move a potential lead to a closed deal. Imagine if AI could pull data from every client and deal for analysis.
One tech startup recently added AI to its CRE valuation process in order to detect and exploit market anomalies, identify investment opportunities and discover untapped value creation possibilities, according to the company.
You need to be prepared to embrace AI to stay ahead in the CRE industry. A recent study from Harvard Business Review revealed those using AI to analyze and apply data gave gained a 5% increase in productivity and a 6% increase in profits, compared to the competition. While such a stat isn’t groundbreaking, it is indicative of the slow shift towards artificial intelligence in the CRE sector, and of the benefits that such technologies bring.
The pace of development within AI is racing ahead and it’s not yet clear what such technologies will be capable of in the CRE industry. This article merely scratches the surface of what is possible. However, it is clear that commercial real estate must prepare for an automated and digitized future.
As is so often the case with disruptive technologies, early adopters will reap the full rewards of artificial intelligence by embracing its tremendous power.
Gemma Church is “the freelance writer who gets tech.” She’s a specialist freelance science writer, journalist, and blogger. Her USP is that she’s worked in the science and technology sectors she writes about, bringing a unique level of understanding and experience most writers cannot offer.