Is our industry a relic in the age of the AI revolution?

It is without a doubt there is a huge amount of buzz around the AI sector; it’s impossible to attend a meeting or even a dinner party for that matter without the term AI being thrown across the room.

However, one industry in which AI’s transformative power has been missing is real estate, a historically slow adopter of new technologies. Does gen AI represents a fresh chance to revolutionise our industry?

According to McKinsey, gen AI could generate $110 billion to $180 billion or more in value for the real estate industry. A large amount of this growth is and will be highlighted within the Investment and Asset Management sector. AI and ML (Machine Learning) provide the tools required to conduct predictive analysis of assets in management to aid in the valuation processes. Therefore, this technology can provide significantly more accurate asset valuations, taking into account factors such as location, historical prices, market trends and amenities consequently aiding asset managers in achieving portfolio optimization.

Real estate has traditionally been seen as a secure investment. However, many argue that, in particular, the decline in demand for office and retail asset classes has created an increasingly volatile and challenging industry. Nevertheless, AI technologies enable corporate real estate investors to assess and manage various types of risk associated with property investments. AI algorithms can analyse historical data whilst identifying particular risks. For example with the right use and selection of PropTech software available on the market, portfolio managers can identify potential risks such as market volatility, tenant defaults or regulatory change and therefore can utilise risk mitigation strategies to protect investment portfolios.

Now, there’s a huge amount of hype around PropTech; perhaps maybe too much. Take other industries for example: Fintech has been around for years, arguably seriously taking off after the ’08 crash. Understandably, after a rise in lack of trust in financial institutions and a desire for more secure and efficient products paired with a surge in technological advancements, it would make perfect sense for the ever-growing emergence of tech within the industry.

Cast your minds back to 2008 in the real estate industry. Granted, this was not exactly the smoothest time in the market. I think we can all agree property and technology were unquestionably a foreign pairing. One would even be lucky to hear a hint of ESG discussion within a manager’s portfolio. Instead, you’d expect more talk of the round at Sunningdale over the past weekend.

Net Zero by 2030? A pressing question. But is this a concern for an industry contributing to 40% of global carbon emissions? Largely, one would hope so. ML and AI are already heavily utilized to help solve CRE’s largest operational challenges. Smart building technology, such as Workman’s Intelligent Building Operating System (IBOS) and JLL’s Hank, are key players in paving the way to provide smart operating systems for building automation that saves carbon and reduces operational energy consumption. In 2023, IBOS saved £3.4 million on clients’ energy bills and 2.5 million kilograms of Carbon emissions has been prevented.

I guess from this we could argue our sector is in fact not a relic within the AI revolution?

The industry is ever-changing and increasingly dynamic. Although it can be argued that we are behind, that is not to say that we are losing as an industry. There already is and will continue to be a huge amount of opportunity within the sector. It will be the firms that can adapt to the use of AI and ML that will come out on top.