AI is transforming the working life of real estate professionals. We are all going to have to rethink and relearn our jobs.
Emerging academic research supports what many of us are finding out for ourselves; effectively utilizing AI allows people to do their work better and faster. Whether undertaking market analysis, building discounted cash flows, compiling fund reports, or writing thought pieces, early adopters are achieving significant efficiency gains.
Once these efficiencies emerge, what next? As the costs of completing tasks fall, new use cases will arise. This has happened in the past; when spreadsheet software first emerged, basic bookkeeping tasks were displaced. However, new jobs were created through broader small business adoption of accounting services. Spreadsheets also allowed accountants to focus more on advising clients.
While people needed to retrain, spreadsheet software had a net positive impact on accounting employment; lower costs for accounting activities increased overall demand. Experts expect similar dynamics as AI becomes ubiquitous in real estate. While AI reduces resource constraints, professionals can redeploy efforts to add more value. Your organization can find a competitive advantage in intelligent adaption as well as rapid adoption. It is time to ask what you will do now that you can do so much more.
Here are five ways workflows and processes are set to change as AI unlocks new possibilities:
1. From simplistic assumptions to robust risk analysis
The application of AI is likely to revolutionize underwriting and investment analysis in commercial real estate. No longer will investment decisions be based on a simple Excel model with a few hard assumptions.
Rather than relying on a single base case, investors can use AI systems to generate hundreds of realistic scenarios informed by both quantitative data and qualitative insights. AI can rapidly assess how changes in rental growth, vacancy rates, operating expenses, capital expenditures, exit cap rates, and other variables impact asset performance. Investors will understand ahead of time how much these factors can swing returns, enhancing risk management and resulting in decisions made from a richer information set.
With AI systems, investors can embed probabilistic thinking into underwriting, moving beyond simplistic point estimates to model distributions and correlations. Investors will comprehensively map the risk landscape and understand tail risks before acquisition.
Those who adapt quickly will soon make investment decisions with greater insight, diligence, and confidence in the projections. Indeed, it will not be long until the bar for appropriate diligence in underwriting is raised significantly.
2. One size no longer fits all
The efficiencies of AI allow for far greater customization of outputs without additional resources. For example, previously, a brokerage would produce a single market report, perhaps quarterly. Given the pace at which real estate trends play out, there may be little value in producing market reports at a higher cadence. However, creating multiple versions of the report could have significant benefits.
Some firms will already use AI to help them draft reports and repurpose them for blog posts and LinkedIn articles. But why not generate customized versions of the report to serve strategic clients better? Bespoke reports can spotlight the submarkets, trends, and data most relevant to each client’s assets. An investment manager with a suburban office portfolio may receive a report tailored to suburban trends, while an urban core investor gets an urban-focused version. The writing can be adjusted to suit each client’s preferences; more technical for sophisticated investors or simplified for general partners.
AI allows delivering tailored market insights to clients without expending more resources. Targeted, relevant insights drive engagement and bolster client relationships. Now, there are fewer limits on how targeted you can be.
3. Making more meaningful connections
It is time to move beyond the generic pitch deck to demonstrate and build more profound client knowledge. Investment managers can redeploy resources to take client targeting to the next level by developing tailored pitch decks that speak to each prospect’s unique needs and position. By analysing factors like a client’s existing portfolio, strategic objectives, recent deals, and portfolio benchmarks, managers can craft bespoke presentations positioning their fund as the perfect fit. Customized pitch decks demonstrate a profound understanding of what each client seeks in new investments.
Relationship managers can also reallocate time once spent on routine tasks to have more strategic discussions with clients. AI enables staff to spend less time processing documents and more time analysing client histories to uncover pain points and identify value-adding solutions. With more bandwidth, managers can proactively address emerging client needs rather than just reacting to requests. One of the best uses of freed resources is to deepen client relationships; bespoke pitches, proactive consultations, and strategic advice demonstrate an attentive, customized approach that strengthens client ties.
4. Multiplying perspectives
AI enables real estate firms to cost-effectively build complementary analytical outputs that provide alternative perspectives, facilitating more rigorous investment decisions and risk management. For example, a firm could leverage AI to develop an automated valuation model to double-check its appraisal process. The automated model may identify discrepancies to facilitate appropriate scrutiny of manual processes.
Firms can also construct alternative market analyses to challenge their forecasts, ensuring they avoid groupthink or blind spots. Using AI systems to question assumptions and play “red team,” teams can stress test their work without significantly adding workload. Rather than relying on a single approach, AI empowers firms to compare different methods efficiently. Negotiation strategies, underwriting criteria, and portfolio optimization approaches can all be simulated to find the most effective path forward.
Just as using AI tools means never to start with a blank page or spreadsheet, it also means you can always have your work checked, reviewed, and assessed. Such AI-generated feedback can ultimately drive better investment decisions.
5. Data findings made intuitive
The reduced costs of developing visualizations with AI means real estate professionals will use them much more. Expect to see them deployed early in all kinds of processes. Dynamic data visualizations will allow professionals to explore information and identify patterns more easily than static reports.
Deal flow maps can showcase an acquisition strategy. Charts can highlight portfolio benchmarks. And 3D models can bring developments to life for leasing. By making complex data tangible and engaging, visualizations enabled by AI will become an integral part of everything from underwriting to asset management. Increasingly, visualizations will be used to identify critical takeaways rather than simply communicating conclusions.
An exciting future awaits
AI can elevate real estate jobs, allowing real estate professionals to focus more on the “what” and “why” rather than the “how.” As AI tools free resources, practitioners can dedicate more time to creative thinking and strategy. Real estate professionals can adapt to an AI-enabled work-life to focus on high-value work, strengthen client relationships, and make better-informed decisions. The result will be increased performance, productivity, and professional satisfaction.
