Don't panic, AI brings efficiency–not chaos–to commercial real estate
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There is no doubt about one thing – artificial intelligence is not just a media phenomenon, but a real trend that the world’s largest companies are embracing. The clearest evidence of this is the market performance of the company which has made the design and manufacture of AI-optimized chips its flagship business. Nvidia’s revenue has grown 265% this year and the company’s market cap continues to exceed expectations.
Even in industries as mature as real estate, the widespread and universal use of AI-based tools is beginning to be noticed. As an indication of the pace of change being driven by artificial intelligence, the Emerging Trends in Real Estate® Europe report, which summarizes sentiment and trends in the real estate industry for 2023, says nothing about this particular technology, while in the corresponding 2024 report, up to 95% of professionals surveyed say AI will impact their business in the next decade.
So, as it looks like AI is going to change our world, so deeply and so fast that it can be seen even in something as stable as real estate, it’s worth considering what those changes will be.
AI: Fourth Revolution of the Third Chimpanzee
“Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level,” Peter Thiel, one of the founders of PayPal, wrote in the introduction to his book Zero to One.
This quote is a good summary of the view that technology is a tool – another in a long line of tools with which humans have changed the world. In the history of mankind, it is easy to identify moments that have had a transformative effect on human life and that are the source of successive revolutions. Each time, it has been closely linked to the invention and diffusion of technology that has opened up new possibilities for our species. African hominids were able to spread across the planet by mastering fire and making stone tools and clothing. The Industrial Revolution, which began with the conquest of steam power, electricity, and the splitting of the atom, led us to where we are today – global communications, mass production, and unprecedented mobility. It seems that we may be on the cusp of another revolution, this time brought about by the mastery of AI.
AI is a tool that, like a javelin with a stone spearhead, an ox harnessed to a plow, or a steam engine, allows you to ‘do more with less,’ freeing up time and energy for other tasks. This is true both for the student using ChatGPT to sift through the source material and for the government official modeling the economic impact of introducing the new legislation.
AI in real estate – quo vadis?
And where does real estate fit into all of this? Is there a need for such a tool, what can it do for the industry, and will the industry be able to make use of it? Starting from scratch – yes, there is. And it’s a great need.
As the world increasingly experiences the effects of the climate crisis and the international community searches for ways to reduce its magnitude, construction is responsible for 40% of CO2 emissions. This is a huge potential for reduction. The first step is to understand that most of these emissions are generated by construction and demolition.
So the real estate industry has no choice but to build wisely, to carefully consider whether a building should be built, to design it in a purposeful and thoughtful way that will allow it to last as long as possible. This requires advanced modeling, effective extrapolation of trends, and prediction of upcoming changes – and this is where AI excels over humans.
Sure enough, we have to keep in mind that AI-based solutions bring with them challenges that the industry and the experts are well aware of. Summing up the recent panel discussion at the CEE Summit in London, Svetlana Fedosova, founder of the Entralon Club, said: “The panel also acknowledged the challenges associated with AI, such as the potential risk of intellectual property leaks when feeding AI with confidential information and concerns about job displacement as automation reduces the need for human labour.”
As Radek Zaleski, partner at Netguru, adds, “The slow death of routine office work being taken over by AI will change the need for businesses to have offices. And this will change in general what the office is for the new generations: maybe they will be small, elite, high-quality clubs for top managers?”
That being said, experts who know the ins and outs of this market can rest easy. AI is supposed to be used to give them superpowers, that is, to provide them with reliable data in a timely manner.
Faster. More. Better. And with Greater Satisfaction
In any case, artificial intelligence makes it possible to achieve the desired result faster and to reduce the number of errors. In business, this means a quantum leap in the potential of an employee with such a tool – and we’re talking about actual differences that can be observed and measured.
According to a study published by Github, as many as 88% of software developers who use an AI tool say they are more productive – though it should be noted that ‘productivity’ goes beyond the simple metric of the amount of code written per unit of time and includes elements such as the feeling of having more mental potential for other tasks or greater satisfaction with the work done.
Aleksandra Przegalińska and Konrad Sowa came to very similar conclusions in a study published in the book Digital Transformation of Collaboration. Namely, the managers in the study who were supported by a virtual AI assistant performed their work more than half as effectively (measured by the number of tasks completed) and reported higher job satisfaction than the control group who worked without the tool’s support.
Needless to say, the employer’s costs can be reduced due to the increased efficiency of employees and the ability to fully automate some tasks. It’s also something we already know from history, because it happened with the proliferation of each successive tool. Weaving machines virtually eliminated the profession of weaver, but at the same time there was a need for mechanics, a need for laborers, a logistical chain necessary to keep the machine running that did not exist before, or a huge demand for laborers in the trade that suddenly became massive.
I am convinced that we will soon see both of these effects – the disappearance of some jobs and the emergence of entirely new ones. The use of AI will increase prosperity, both at the level of societies and at the level of individual organizations or systems, where decisions will be made faster and more accurately, as is already the case on Wall Street, where more and more trades are made automatically, yielding higher profits.
Brent Watkins, One Consulting s.r.o., accurately sums up the relationship between the human factor and AI in the real estate: "Technology has always been a part of real estate, in fact from a human-centric view, buildings are technology and just serve a purpose (and necessity for humans), therefore better tech is good. I think the best buildings in near future will be run by AI but curated by an experienced human. Living buildings still need that human hand on the controls and interface with the users".
Tools made of flint did not destroy mankind but helped it to evolve. The same goes for growing crops or building railroads. This will also be the case with AI, a tool that will advance humanity by allowing us to draw conclusions faster so we can make decisions that are more cost-effective, greener and better for both investors and the world.
