“Ideas that were once the stuff of science fiction are coming to your office, and sooner than you think,” said CBRE “As technology continues its forward march, advances in Artificial Intelligence and machine learning will turn work as we know it on its head.”
According to AscendixTech, “The word ‘proptech,’ or ‘property technology’ as some call it, seems to be everywhere these days. It grew from something we called, if anything at all, real estate technology with less than $1 billion of investments in 2013 to a whole new industry welcoming as much as $32 billion in 2022.”
What comes next is likely to be continued growth, with Future Market Insights forecasting that the proptech market will reach $86.5 billion by 2032.
Developments in AI within the CRE industry are part of a larger picture beyond proptech — much larger. PwC estimates that AI’s global impact will reach $15.7 trillion by 2030.
How Artificial Intelligence Differs from Traditional Computing
We’ve digitized just about everything during the past several decades. Computers in CRE keep track of energy use, security, property values, finances, construction progress, tenant rolls, staffing, market data, and more.
AI can build on the data we now have in place. That sounds great, but what does AI actually do? To find out, we asked ChatGPT, a leading AI platform, to tell us “What makes artificial intelligence different from traditional computing?” It came back with these points, written in plain language, in about 60 seconds.
Learning ability — AI systems can learn from data and improve their performance over time, while traditional computing relies on programmed rules.
Decision-making ability — These systems can make decisions based on complex and uncertain data, whereas traditional computing is deterministic and follows a pre-defined set of rules.
Adaptability — They can adapt to new data and situations, whereas traditional computing requires manual reprogramming to handle changes in input data.
Autonomy — AI systems can operate independently and perform tasks without human intervention, whereas traditional computing requires human input and oversight.
Natural Language Processing — These systems can understand and generate human language, while traditional computing mainly deals with structured data.
Creativity — They can generate novel ideas and solutions, whereas traditional computing is limited to pre-programmed rules and algorithms.
“Overall,” said ChatGPT in another response to the same question, “AI is a more dynamic and flexible approach to computing, designed to emulate human-like intelligence and decision-making capabilities.”
The Power of Words
If you look at the question raised with ChatGPT you can see something different. The system responded to a natural language question — “What makes artificial intelligence different from traditional computing?” — with a natural language answer.
“When Google, Microsoft and the research lab OpenAI recently opened their AI search and chat tools to the masses,” said The Washington Post, “they also upended a decades-old tradition of human-machine interaction. You don’t need to write technical code in languages such as Python or SQL to command the computer; you just talk.”
In other words, dealing with AI is somewhat like two people having a conversation, but with one having the ability to instantly access and analyze about 45 terabytes of text information. How much information is in a terabyte? In rough terms, figure that 525,000 books, each 300 pages long, can be stored in a single terabyte. Or, consider that 10 terabytes can hold all the text in the Library of Congress.
AI in CRE
“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone,” says Bill Gates. “It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.”
One of the promises of AI in CRE is that office-building managers and owners can leverage technology to promote sustainability and ensure greater comfort for office tenants. In a recent webinar, “Tips to Enhance Tenant Experience & Grow Occupancy in Office Buildings,” CRE experts sited AI as a solution for enhancing tenant office experience by balancing use of air quality, energy use, and temperature.
“Tenants are putting more expectations on landlords to create an environment and a building that people want to come to,” said HqO’s Shelly Just. Tim Curran of JLL Technologies, agreed, suggesting that CRE can utilize AI to solve many of those issues. “It [AI] is in the background monitoring millions of data points, 24 hours a day, and it’s fine tuning,” said Curran. “It is reprogramming the building management system (BMS) continuously.”
So, what does this mean for CRE? Let’s look at ways it’s in use throughout the industry.
Chatbots — Many businesses now rely on automated answering systems, but such systems have limited capabilities (e.g., “Press 14 to repeat this message”). In contrast, says ModuleQ, with AI “conversational sales is a prospecting methodology, meaning it targets customers who are qualified or ready to buy. And for those who aren’t ready to buy, you can use sales conversations to help facilitate the questions or doubts hesitant prospects may still have about a product or service.”
Construction — Bill Gates said that by one estimate “the world will add 2 trillion square feet of buildings by 2060 — the equivalent of putting up another New York City every month for the next 40 years.”
That’s a LOT of buildings, and AI is likely to show up throughout the process, with everything from site selection, financing, leasing, management, sales, and re-sales. Will we also see AI at the job site? It may be that certain aspects of the construction process will be increasingly automated, including more construction at the factory where elements can be standardized.
Financing — AI is a natural fit with financing. Walker & Dunlop, one of the country’s largest CRE lenders, acquired GeoPhy in 2022 and together they created the Apprise valuation service. It combines Geophy’s AI capabilities with a massive data set.
With Apprise, says the company, “data points, fields, and more are standardized to minimize manual data entry and arm appraisers with accurate and consistent information. Processes are optimized for speed and accuracy and controlled for consistency to reduce the risk of data inconsistencies, typos in formulas, or erratic analyses.
“Built-in analytics provide even more digital assistance. AI-empowered ‘data tips’ help appraisers identify trends and insights otherwise invisible to the human appraiser,” it adds. “Moreover, Apprise’s technology ‘learns’ from appraiser behaviors, becoming faster and smarter with every analysis.”
And that, in brief, is another key characteristic of artificial intelligence in CRE. It learns as it goes, a concept that can be enormously valuable with CRE data analytics.
Valuations — Ascendix, which describes itself as a “software development company and real estate technology consultancy,” points out that “while not replacing the financial models yet, recent developments have utilized Artificial Intelligence (AI) to support underwriting and management of investments.”
“These AI underwriting platforms,” it adds, “can use a variety of publicly available information cross-referencing it with locational information and other market transactions to inform a valuation.”
AI versus AI — Applications for CRE aren’t always exclusive to the industry. For instance, hiring has become an expensive and often-exhaustive process, one ripe for an AI update. An Australian firm, Sapia.ai, says it can do much of the work for employers with video interviews. What it does, essentially, is compare the language used by an individual applicant with a base of over two million candidates worldwide.
“The communication score algorithm is based on several dimensions, including the length of responses, readability, word usage, word choice, development and organization of ideas, and others,” according to the company.
The system is based on text-based interviews. “By ingesting only, the text responses as fed to our AI, the evaluation remains free of bias-inducing visual and audial signals.”
Management and CRE data analytics — In 2022, CBRE acquired E2C Technology, an Artificial Intelligence/Machine Learning (AI/ML) data-driven technology company. CBRE, at the time of acquisition, explained how E2C would be used — essentially a look at how AI will become a more important CRE management tool.
“CBRE already utilizes E2C’s cloud-based Nexus solution for rapid onboarding of commercial buildings based on AI/ML models for data ingestion, aggregation, and normalization,” said the company.
It added that the system “drives improved facility performance by detecting faults and inefficiencies, reducing energy use and costs, streamlining maintenance operations, measuring and managing occupant experience, and meeting increasing regulatory and reporting requirements for environmental sustainability.”
According to JLL Technologies, “the right facilities management system, processes, and expertise can increase ROI, accelerate operational initiatives, and deliver exceptional employee and customer experiences.”
AI has the potential to significantly organize and automate many management tasks in a way that we have not seen before because such systems can learn with experience. In effect, in the future of CRE there is a constant, automated and digitized push to improve existing processes and systems.
Multifamily Sales and Rentals — Online listing services have been fundamentally unchanged for years if not decades, but that’s about to change. Zillow, as one example, announced in January that it has “launched a new AI-powered feature that lets shoppers search for homes in the same way they would talk to their friends and family.”
“Home shoppers, said the company in January, “can enter phrases like ‘$700K homes in Charlotte with a backyard’ or ‘open house near me with four bedrooms’ directly into the Zillow search bar, rather than starting with a location and having to filter their way to the homes they want. They can also save their searches and have Zillow notify them when new qualifying listings come online.”
Conceptually, the same approach can work for office space, life sciences facilities, warehouses, etc.
Resumes — What’s good for the AI gander is also good for the AI goose. While CRE organizations can use AI to rate candidates, job seekers can use AI to write resume drafts. Think of it as a resume arms race, one powered by AI.
Trends & Predictions — Skyline.AI, acquired by JLL in 2021, says it “fuses the expertise of select commercial real estate partners with artificial intelligence to achieve above-human performance.”
The company says its data comes from more than 400,000 assets with some information going back 50 years. The purpose is to identify emerging trends, looking for areas with expected growth while avoiding those with declining prospects. Skyline AI looks for such markers as value creation opportunities, off-market deals, distress signals, performance anomalies, and hidden risk factors.
What we’re looking at today is just the beginning, something similar to the early days of personal computing or smartphones. The big question is, what happens next? As you’ll learn in this article’s second installment, regulators are already trying to figure out the rules of AI, lawyers are debating the ownership of content being mined and produced, and experts are debating whether it will be humankind’s boon or downfall.
Look for part II of this report in the coming weeks. Plus, learn more about KBS and the latest in the CRE industry by visiting KBS.com/Insights.