For commercial real estate investors, particularly those investing in Class A properties, analyzing and forecasting future successes or risks used to be dependent on human assessment. However, in recent years, real estate technology has made commercial investing more reliable and less risky. Today, investors use a combination of human evaluation and artificial intelligence to forecast profitable zones and identify lucrative properties. Artificial intelligence (AI) and machine learning (ML) are painting a more accurate picture of the real estate forecast for the next five, ten, or even twenty years.
Real estate technology and artificial intelligence are overtaking human data analysis as the best source of information. Here, we’re examining several ways AI can help you make the most of your commercial real estate investments and protect your portfolio.
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The Rise of Real Estate Technology: What is Artificial Intelligence?
Though it might sound like something straight out of a science-fiction novel, artificial intelligence impacts many facets of our everyday lives. Search engines, social media, financial institutions, and even aircraft manufacturers all use artificial intelligence and machine learning to predict future outcomes and make the customer experience better.
What is Artificial Intelligence?
Merriam-Webster defines AI as “the capability of a machine to imitate intelligent human behavior.” Essentially, it’s any computer program that can imitate human intelligence, and “learn” through a series of trial and error. By doing so, the computer system can solve problems, forecast outcomes, and generate solutions based on the data it processes over time.
Machine learning, a subset of AI, is the computer science dedicated to helping machines learn and improve without being explicitly programmed.
How is AI Changing Commercial Real Estate?
At first glance, machine learning and commercial real estate don’t seem to have much in common. But in recent years, there’s been a push towards integrating real estate technology into CRE purchases, development, and management.
In the past, investors spent hours pouring over potential real estate leads, examining past and present forecasting data, and coordinating property management. Today, technology does all that for us, freeing up time to focus on what matters most. AI and ML can accurately predict the real estate forecast for the next five years or more, can help identify properties that match your portfolio, and can help manage tenants with ease.
AI is the future of CRE. Those not keeping up will soon find themselves outpaced by their competitors.
Artificial Intelligence and CRE
While technology is continuously changing and improving, there are three important applications for AI in commercial real estate.
Market Analysis and Site Selection
Many computer applications are helping CRE investors identify, purchase, and oversee all properties in their portfolios. Some programs focus on financial analysis, others on market data analysis, and still others on property acquisition. Used together, these applications create a more efficient and accurate market for investors and their associates.
Such programs can analyze the profitability of a potential retail center in a designated market, for instance. Or a program might compare one possible site with multiple others. The combination of the past, present, and forecast data helps identify the more profitable solution for your business. These programs can analyze multiple properties, assessing the profitability and sustainability of your portfolio, giving you an advantage over other investors.
How does it work? An investor downloads the chosen program and identifies geographic locations where current investments are doing well (or performing poorly). Then, the user inputs other data about market performance, preferred keywords, and additional information. Using this data, the system will use machine learning to identify potential investments and sites that match your preferred parameters.
Of course, no computer system is foolproof, so AI still requires human analysis to choose the best investment.
Tenant Selection and Communication
Artificial intelligence is used for more than just property acquisition. AI can also help investors and building owners attract and keep high-quality tenants.
First, real estate technology applications allow building owners and property managers to digitally identify the ideal tenant, screen them electronically, and then notify the owner of their approval. Machine learning allows these computer applications to determine which tenants match your specific needs and requests. Of course, property owners and managers should still meet with potential tenants face-to-face before signing a lease. But AI can perform much of the screening process upfront, freeing up hours of valuable time.
Secondly, AI and other real estate technologies can help attract and keep tenants. By equipping your buildings with smart technology, AI office solutions, or other technological advances, you’ll attract higher-end tenants who are more likely to pay a higher rate and stay longer. Real estate technology doesn’t just serve the investor, but also increases tenant retention and makes your property much more valuable.
Property Management
AI isn’t just about data analysis and portfolio expansion. It’s also helping CRE investors, brokers, and property managers spend less time on mundane tasks. Applications can digitally manage everything from tenant applications to maintenance requests. These applications make commercial property management easier for both manager and tenant.
Artificial intelligence and machine learning are revolutionizing commercial property management. We use several AI applications to keep both owners and tenants completely satisfied. Moreover, we can use the time we save on administrative tasks to connect with our clients and their tenants.
Will Artificial Intelligence Replace Brokers and Appraisers?
In short, no. While all indications point to real estate technology playing a more significant role in commercial real estate in the future, nothing can replace experience. Reputable, knowledgeable real estate brokers, appraisers, property managers, and the like aren’t going anywhere soon.
Real estate technology is most effective when combined with a real estate professional who knows both the market and how to accurately interpret the data. Without the human component, AI is essentially worthless.
Still, real estate technology should not be ignored or underutilized. Emerging technologies are the wave of the future, giving the next generation of CRE professionals an advantage over their competition.