Throughout my career analysing real estate markets, I’ve observed how technological shifts create both disruption and opportunity.

Ten years ago, real estate investors urgently needed to develop a nuanced understanding of how e-commerce would reshape outcomes in both retail and logistics markets.

Now, artificial intelligence represents the most significant technological inflection point our industry has faced. While data centres and their massive power infrastructure requirements grab headlines, AI’s second and third-order effects on traditional commercial real estate assets may prove more consequential.

AI is a general-purpose technology akin to electricity or the internal combustion engine. Like these predecessors, AI will send ripples through our economy and society over decades in ways that defy simple predictions.

Consider how the internal combustion engine was initially viewed as a replacement for horse-drawn carriages. Nobody could have foreseen how it would enable suburban sprawl, create new retail formats, and fundamentally alter supply chains. With AI, we should maintain high humility in our forecasts.

Yet, while acknowledging these uncertainties, investors cannot remain on the sidelines. Every investment is effectively a prediction about the future. Those who ignore AI’s trajectory risk missing significant opportunities—or being blindsided by emerging risks—as this powerful technology evolves.

Here are five key dynamics to monitor as we assess how AI will transform commercial real estate markets in the coming years.

1. Labour Market Transformation: Position for disruption

Is AI already transforming labour markets? It is hard to say.

A recent paper by Anthropic suggested over a third of occupations were using AI for at least a quarter of their tasks, often augmenting but sometimes automating human activities.

However, AI’s effect on labour demand changes is tricky to observe. Specific types of jobs have definitely been impacted. AI-powered chatbots are changing the demand for some particular customer service roles, for example. Demand has declined for translation, copywriting, and graphic design skills, too.

Software development trends are notable. Anthropic data shows that Claude is extensively used in tasks associated with software development. Meanwhile, Indeed data show that software development postings have fallen by about a third since 2020, while the total number of job listings has increased by 10%. The largest tech companies are seeing their stock valuations reach new highs while reducing the size of their workforce.

More broadly, professional and business services employment has been on a downward trend recently. It has declined from its peak of 22,846,000 in May 2023 to 22,598,000 by January 2025—a loss of 248,000 jobs over 20 months. Such declines are unusual outside recessionary periods.

Are AI-driven productivity gains enabling organizations to do more with fewer employees? In some cases, yes, but in other instances, business leaders may be slowing down hiring while they gather data and reassess how best to deploy human capital.

Now, it is always much easier to identify the jobs at risk from a new technology than the new jobs the technology will create. The new roles AI will create have not been invented yet, and we do not have names for them.

Real estate investors do not need to prepare for a worse labour market; they need to be ready for a labour market experiencing accelerated change. Businesses facing automation pressure could see sudden changes in their revenues and profitability, while new sectors flourish.

This underscores the importance of holding resilient real estate—well-located, versatile, and desirable across multiple tenant categories. Relying on specific tenants whose business models could be disrupted is a riskier approach.

While it is hard to predict how geographic outcomes will differ, the impact of different local economies will vary. Diversifying exposure across different geographies is, therefore, appropriate.

2. Mobility Revolution: Location value will be redefined

AI is becoming ubiquitous, so almost every technological innovation will be AI-driven. For those interested in the evolution of the built environment, some of the most important developments relate to mobility.

Autonomous vehicles are fast becoming part of urban life in cities such as Phoenix and San Francisco. As AI-enabled self-driving technology advances, we’ll likely see decreased demand for urban fuel stations, parking structures, and surface lots, creating repurposing opportunities that savvy investors can capitalize on.

More fundamentally, autonomous travel could reduce the perceived “cost” of commuting—passengers can work, rest, or be entertained while en route. This shift may encourage suburban or exurban living, driving development opportunities farther from city centres. Conversely, AI-driven mobility options like autonomous buses and urban robo-taxis could make it easier for people to leverage the benefits of proximity, reinforcing urban density.

Real estate investors need to keep a keen eye on how autonomous vehicles are used differently from cars today and be ready to rethink location value.

3. Logistics and Warehousing: Efficiency v expansion

Advanced warehouse automation, is already increasing throughput while reducing labour needs. But AI could unlock further gains. We should be optimistic about demand growth for logistics assets. However, if efficiencies rise faster than overall logistics volume, the total demand for warehouse space could plateau or even decline in some markets.

However, modern, well-located logistics assets will likely become more valuable, particularly those near major population centres or crucial transit hubs. With fewer, more efficient warehouses handling greater throughput, competition among operators for prime locations can drive up rents and property values.

As always in real estate, location, connectivity, and limits to competing supply remain critical differentiators.

4. The Enduring Value of Experiential Real Estate: Consumption patterns as an anchor

While AI may dramatically transform how and where productive work happens, human consumption patterns—particularly for experiences—are likely to prove far more stable and predictable. The fundamental human desire for face-to-face interaction, shared experiences, and physical consumption has remained remarkably consistent even as technology has evolved.

Let’s monitor how people use their leisure time and disposable income. If changes are modest, properties catering to experiential consumption—restaurants, entertainment venues, cultural institutions, and hospitality assets—may offer a degree of insulation from AI disruption.

People will continue to value gathering in physical spaces to dine, socialize, be entertained, and engage with culture, regardless of how AI transforms the workspace. Properties that facilitate these experiential uses may provide stability. Indeed, as the next section points out, increasing disposable income may suggest a significant upside for consumption-focused real estate.

5. Macroeconomic Tailwinds: The compounding effect of productivity gains

While AI evangelists and sceptics debate the scale of potential productivity growth, even modest yet sustained increases—from, say, 0.5% per annum – can produce significant outcomes when compounded over a decade. Such productivity gains generally translate into higher national income and more robust demand for commercial space.

These macroeconomic tailwinds could provide a supportive backdrop for real estate investors with long-term horizons, even as specific sectors and locations experience disruption. The challenge lies in positioning portfolios to benefit from this rising tide while navigating the concentrated impacts of technological change.

Strategy for a market being transformed by AI

The best defence against uncertainty is not a precise prediction but thoughtful preparation: geographic and sector diversification, a focus on versatile properties, and the flexibility to adapt as AI opens new doors—and closes old ones—in commercial real estate markets.

Those who approach AI’s transformation with both humility about what can be predicted and confidence in their ability to adapt will likely find themselves not just surviving this technological shift but thriving through it.