How Artificial Intelligence Will Transform CRE

Richard Sarkis, CEO of CRE data platform Reonomy

Artificial intelligence has already redefined a number of industries, but the commercial real estate sector has yet to fully embrace the technology’s potential.

Among the most prominent manifestations of artificial intelligence, machine learning, natural language processing, and predictive analytics are already making significant contributions to industries as diverse as education, software development, healthcare, and finance. To echo author and big data expert Bernard Marr, “the AI revolution isn’t coming…it’s already here.”

According to the Harvard Business Review, there is a compelling, if simple, reason why so many diverse enterprises are embracing AI: it produces tangible results. An HBR study found that “companies in the top third of their industry in the use of data-driven decision making [much of which is facilitated by AI] were, on average, 5% more productive and 6% more profitable than their competitors.”

Reluctance to Adapt

Despite these demonstrable benefits, the commercial real estate sector has been slow to develop and adopt AI-based technologies capable of improving the way businesses buy, sell, rent, and lease properties and buildings. This can be attributed, at least in part, to apprehension among CRE professionals regarding automation-driven job loss and the impersonalization AI represents — concerns that are more or less unfounded.

Success in the CRE industry was, is, and always will be rooted in interpersonal human relationships. AI, transformative as it may be, will not negate this. Conversely, technology will actually facilitate more opportunities for relationship-building and help brokers pinpoint whom among their clients — or better yet, potential clients — is ready to move forward in the sales cycle. Make no mistake, the role of the modern CRE broker is markedly different than what it was a decade ago, but a changing job description need not require the abandonment of a personal touch.

AI presents a distinct competitive advantage for those CRE professionals willing to embrace its potential to augment their abilities. While no two sets of circumstances are the same, CRE organizations that do their due diligence in selecting the most effective AI tools for their particular business focus are well on their way to becoming market-leaders. This transformation may take a number of forms, and as such, it’s worthwhile to review those areas of CRE with the most to gain from AI integration.

Organizing Information and Transforming it into Actionable Insights

Even before the proliferation of computers, CRE was a documentation-intensive field. An effective CRE broker must collect data related to the ownership history, zoning regulations, and financial status of dozens — if not hundreds — of properties to stay competitive in an oftentimes cutthroat environment. Collecting this data is time-consuming enough on its own, but organizing it in manner conducive to easy retrieval is a burdensome task unto itself.

Once a broker manages to parlay those data points into a deal, finalizing the contract involves extensive paperwork including leases, non-disclosure agreements, partnership agreements, and supplemental financial documents. Such paperwork includes sensitive personal information and legally-binding purchase or rent obligations, yet many CRE firms still organize and store it in haphazard and insecure ways.

AI technology has the potential to clean up, refine, and reposition these CRE data processes. Not only can AI gather, organize, store, and retrieve asset data more efficiently than any human broker, it can also perpetually analyze incoming and amended documentation to ensure that everything is in order. Missing signatures and unintended legal missteps have long been unavoidable in CRE, but these risks can be easily minimized with the help of an AI data platform.

What’s more, AI technologies like predictive analytics are capable of turning vast repositories of data into actionable insights, picking up on patterns too subtle for the human eye that may indicate, for instance, when a specific neighborhood is ready to explode in popularity. Deploying AI as an organizational tool and safeguard against risk is certainly beneficial, but brokers who are able to take advantage of the technology’s forward-looking capabilities will truly revolutionize the way CRE business is conducted.

Increasing the Efficiency of Deal-making

Integrating AI into the CRE process will not challenge the centrality of human interaction as much as make it more efficient. Lead development is part and parcel of successful CRE, and while this will always entail cold-calling property owners, many AI systems are powerful enough to scan thousands upon thousands of data points drawn from public profit and loss reports and historical sales records to determine which properties are most likely to sell. In other words, AI doesn’t eliminate the need to pick up the phone, but it can ensure that every number a broker cold-calls has a high potential for success.

Relatedly, by analyzing both historic and current market conditions, AI can accurately predict precisely where a price compromise will occur. This provides brokers with an invaluable piece of information that can streamline the negotiation process and ensure that brokers appear knowledgeable during cold-call encounters. CRE expertise stems in large part from having access to and understanding as much information as possible, and nothing hurts like an opportunity lost quite as much as being laughed out of the room (or off a call) for suggesting a starting price-point an owner finds preposterous. An effective AI is built to prevent such missteps, and knowing that an initial offer is well within market standards — and having the data to back it up — lifts a heavy burden from a broker’s shoulders.

Embracing the Changes Offered by Technology

These functions barely scratch the surface of what artificial intelligence is capable of, but it’s clear that commercial real estate is rapidly headed for a digitized and automated future. So long as brokers learn to wield the tremendous power of technology instead of reject it, they have nothing to fear and everything to gain.

AI technology has the potential to clean up, refine, and reposition these CRE data processes. Not only can AI gather, organize, store, and retrieve asset data more efficiently than any human broker, it can also perpetually analyze incoming and amended documentation to ensure that everything is in order. Missing signatures and unintended legal missteps have long been unavoidable in CRE, but these risks can be easily minimized with the help of an AI data platform.

What’s more, AI technologies like predictive analytics are capable of turning vast repositories of data into actionable insights, picking up on patterns too subtle for the human eye that may indicate, for instance, when a specific neighborhood is ready to explode in popularity. Deploying AI as an organizational tool and safeguard against risk is certainly beneficial, but brokers who are able to take advantage of the technology’s forward-looking capabilities will truly revolutionize the way CRE business is conducted.

Increasing the Efficiency of Deal-making

Integrating AI into the CRE process will not challenge the centrality of human interaction as much as make it more efficient. Lead development is part and parcel of successful CRE, and while this will always entail cold-calling property owners, many AI systems are powerful enough to scan thousands upon thousands of data points drawn from public profit and loss reports and historical sales records to determine which properties are most likely to sell. In other words, AI doesn’t eliminate the need to pick up the phone, but it can ensure that every number a broker cold-calls has a high potential for success.

Relatedly, by analyzing both historic and current market conditions, AI can accurately predict precisely where a price compromise will occur. This provides brokers with an invaluable piece of information that can streamline the negotiation process and ensure that brokers appear knowledgeable during cold-call encounters. CRE expertise stems in large part from having access to and understanding as much information as possible, and nothing hurts like being laughed out of the room (or off a call) for suggesting a starting price-point an owner finds preposterous. An effective AI is built to prevent such missteps, and knowing that an initial offer is well within market standards — and having the data to back it up — lifts a heavy burden from a broker’s shoulders.

Embracing the Changes Offered by Technology

These functions barely scratch the surface of what artificial intelligence is capable of, but it’s clear that commercial real estate is rapidly headed for a digitized and automated future. So long as brokers learn to wield the tremendous power of technology instead of reject it, they have nothing to fear and everything to gain.