We hear that artificial intelligence (AI) and machine learning are disrupting industries, including residential real estate, but the AI clamor is decidedly quieter when talking about its impact on commercial real estate. While AI has gained a foothold in residential real estate, things are moving a bit slower on the commercial side of things. That said, how is AI impacting commercial real estate.
Meet my residential real estate agent – a computer
AI is technology where the machine learns from experience. It can take over from mundane to complicated tasks. For example, if you are shopping or conducting business online you have probably encountered AI – Chat Bot anyone? In fact, REX Real Estate Exchange Brokerage has jumped in with both feet. Using machine learning algorithms that match homebuyers to listings, REX offers customers a virtual agent and a 2 percent commission fee versus the 6 percent human agents typically require.
Meet my commercial real estate agent – a human
So why hasn’t AI had a bigger impact on the buying and selling of commercial real estate? The technology to transform the industry is there, but it has yet to find a foothold. Experts say this really comes down to a knowledge gap – a lack of knowledge about what AI can really do and the industry itself, which is notoriously reluctant to embrace change, especially in terms of technology.
What AI could do for CRE
AI is actually a good fit for commercial real estate. A large part of an agent’s job is sifting through reams of information to identify promising investment opportunities from among the TIIs (terrible investment ideas.) This is a task that could be handled by AI. Machine-learning algorithms trained on market data could generate accurate predictions that lead to better investment decisions. Market data would include hyper-local information such as rent costs, occupancy rates, crime statistics, satellite image data, cellular and wireless infrastructure and more. AI can analyze in a flash thousands of data points that it would take humans several weeks to asses. And it can produce predictions that agents can use to steer investors to the most promising zip codes.
Who’s the new guy? Looks suspicious
The hurdle AI faces in commercial real estate, not to mention other industries, is the concern that it will somehow make an agent unnecessary. That fear is justified. As we mentioned earlier, REX aims to do just that – offer agentless residential real estate services. And a recent study predicts that automation and AI will eliminate as many as 1.5 million service jobs. It’s understandable for any industry to view AI with suspicion and a little fear. But proponents say AI won’t replace humans, it’s a tool that takes over mundane, time-consuming tasks, so humans can spend more time on higher-level tasks. AI offers a new breed of investment analysis that will augment the work of real estate professionals – not replace them.
Let’s work together
Research has shown that the best outcomes result from a combination of AI and human analysis. A 2016 study from Harvard and MIT found that human pathologists slightly outperformed AI in predicting results from breast cancer biopsies but combining human and AI predictions sent the overall accuracy rate to 99.5%. Even more impressive, the human error rate plummeted 85%. There’s no reason to think that you wouldn’t see a similar outcome combining human cognitions skills and expertise with the best AI analytics in CRE.
AI impact coming to CRE from inside and outside
While CRE may be lagging a little in the adoption of AI, a recent survey shows, that is very likely to change soon. Sixty-eight percent of the industry leaders surveyed responded that they plan to up their investment in data/analytics over the next two years. Industry experts say that companies that move to embrace these changes in technology will find that both they and their clients benefit from it.
Ironically, whether or not commercial real estate embraces AI, it will be impacted by machine learning. Automation affects how employees do their jobs, but it also affects where they do their jobs. The where is commercial real estate. AI cannot help but change the physical space required for a business to operate. Automation will wipe out the need for hundreds of millions of square feet of office space and forever alter the digital and physical, commercial real estate landscape.
At Landmark Title Assurance Agency, our residential and commercial teams are always looking to maximize your real estate transaction experience. We work with residential and commercial realtors and clients providing escrow and title service for even the most complicated, transactions. If you have any questions, please call us at (602)768-2800 or visit our website.