Embracing the Future: The Impact of Generative AI on Real Estate
When ChatGPT made its debut in 2022, artificial intelligence (AI) was still a novelty across industries. Since then, AI assistants and generative AI (GenAI) tools have gained widespread popularity, offering versatile applications in various business contexts.
As these technologies become commonplace, the commercial real estate (CRE) industry is grappling with questions about the value GenAI tools can bring to dealmaking and how their adoption is shaping the real estate landscape.
Understanding Generative AI Distinguishing GenAI from traditional AI is crucial to addressing these questions. While traditional AI focuses on specific tasks, such as IBM’s ‘Deep Blue’ excelling in chess, GenAI takes a more creative approach. It can generate new content, insights, and patterns from existing data, offering a fresh perspective on familiar concepts.
GenAI in CRE A recent McKinsey report suggests that GenAI could generate significant value for the real estate industry, ranging from $110 billion to $180 billion. The report highlights key use cases for GenAI in real estate, including summarizing themes in lease documentation, providing insights for client communications, enhancing rental deals through visualization, and identifying investment opportunities using vast datasets.
Importantly, GenAI doesn’t replace a human’s discernment but extracts new insights to make CRE operations more efficient. McKinsey’s report with AI reveals over 10% improvement in net operating income for real estate companies through enhanced operating models, customer experience, tenant retention, new revenue streams, and smarter asset selection.
Gen AI Adoption in CRE While the potential is immense, GenAI adoption in most commercial real estate firms is currently limited. However, leading proptech solutions, including tools used in the CRE community, are integrating GenAI. RealPage is training GenAI to streamline leasing, and Markerr is deploying an “AI data scientist” for rent forecasting and innovative investment strategies. Applications like risk reduction and improved tenant services are gaining traction.
Caution and Promise Despite its promise, GenAI faces challenges, including reliability issues and potential inaccuracies. These tools should complement, not replace, due diligence in deal-making. They serve as copilots for brokers, reducing tedious tasks and adding value to day-to-day operations.
In conclusion, GenAI offers the real estate industry a chance to embrace technological advancement. While caution is warranted, leveraging GenAI capabilities can transform the industry, making it more efficient and cutting-edge. For further insights, McKinsey’s report provides adoption strategies and a focus piece on GenAI and productivity in the CRE business.