Artificial Intelligence (AI) has increasingly put its stamp on technology on recent years and will likely do the same for the commercial real estate industry, according to CRE firm JLL. AI isn’t the first technology to transform CRE in recent years, however making its foray into industry more of an evolution than a revolution, according to Yuehan Wang, global research associate and lead for the JLL Global Technology Research Program.
“Proptech (property technology) is now widely adopted across the whole real estate value chain, so we already had a solid foundation for incorporating AI technologies across the industry,” Wang said.
The fact that AI can be easily incorporated into CRE doesn’t minimize its potential, however. Investors, developers and corporate occupiers have projected that AI is one of the top three technologies to have the biggest impact on the industry during the next three years, according to JLL’s Artificial Intelligence: Real Estate Revolution or Evolution report.
High hopes for AI in CRE stem from the fact that it can analyze multiple data sets simultaneously. It can also support decision-making by creating personalized property lists based on a client’s preferences and private activity. Meanwhile, generative AI can learn input data’s patterns and behavior to create new content and respond to customer questions throughout the day.
Tech impacting CRE isn’t new, however. Property management software, financial analysis tools and customer management systems have been making the industry more efficient for decades, according to JLL. The use of technology has only increased since then. JLL discovered in 2021 that the number of proptech startup companies had tripled during the prior decade. A record $9.7 billion in funding had been put toward proptech due to the COVID-19 pandemic.
Unfortunately, proptech venture capital has decreased significantly this year — $2.2 billion worldwide — according to private equity research firm Pitchbook data. Optimism remains high within the sector, however.
“There are now technological solutions for almost every aspect of real estate functions, including investment management, design and construction, building and facility operations and portfolio management,” Wang said.
The future of AI in CRE
Given that more than 500 companies around the world are creating artificial-powered services with a real estate focus, AI is poised to make a significant industry impact, according to JLL. The capital raised for AI-powered proptech last year reached $4 billion globally — double the amount raised in 2021, per Pitchbook.
U.K. investment firm Royal London Asset Management has put JLL’s AI-powered Hank technologies to work to improve the HVAC operations and overall energy efficiency in its 125,000 square foot Birmingham office building, JLL said. The firm has already seen a more than 700 percent return on investment and reduced its carbon emissions by 500 metric tons annually since the beginning of 2023.
“AI technology is also used to analyse data from the building management system to understand the performance of the equipment in that building, identifying clearly what might need to be changed or maintained,” Carolyn Trickett, Growth Principal at JLL Spark Global Ventures, said.
With AI’s ability to quickly analyze large amounts of data, building owners can make more informed decisions about their properties. For example, VergeSense uses optical sensor technology and AI to show CRE owners how buildings are used. Information includes desk and conference room usage as well as employees’ arrival and departure times, according to Trickett.
“In a post COVID-19 world with an increase in hybrid working, this can help analyze the space needs of a company,” she said.
AI technology may have the capabilities to make CRE buildings more efficient, but a lot of the tech is still new, which early adopters need to keep in mind, according to Wang.
“The regulation landscape for AI isn’t moving quite as fast as the technology,” she said. “So, you should consider potential risks in cybersecurity or data security when considering implementation. We are at a critical point for businesses to start thinking about the pain points AI technology might be able to help you with and how you might need to refine your processes or technology to realize the most value from it.”