The impact of AI on the commercial real estate sector
For commercial realtors hit by high interest rates and low office occupancy, artificial intelligence (AI) has promise as a potential gateway to greater productivity. Real estate agencies are betting that data science can come to the rescue with new efficiencies that could bolster the bottom line.
The rise of AI is also fuelling apprehension among brokers and support staff when it comes to the loss of the human touch and the impact on privacy and jobs, as well as possible copyright violations – prompting a push for technologies that can audit the origins of real estate data.
“Everybody is flagging this issue, not just in the real estate sector,” says intellectual-property lawyer Maya Medeiros. “Just because an image or video content is available on the internet doesn’t mean it’s permitted to be used in any way.”
Ms. Medeiros, a partner at Vancouver-based Norton Rose Fulbright, says the benefits of AI can outweigh liability risks, which are manageable if firms implement data-governance programs to single out inaccurate and restricted material.
AI vendors are increasingly offering liability insurance and legal indemnity, committing to defend clients sued for alleged improper use of computer-generated data, she adds.
Off-the-shelf, due-diligence software for data can cross-reference open-source codes against usage licensing agreements, she explains, but differentiating between protected and copyright-violating content in large image and data sets whose design is not publicly accessible is a far trickier proposition.
As such, she says, technology companies are working on real estate data audit software that can map the lineage of property information.
Against this backdrop, and as business investment skyrockets in generative AI – which can produce various forms of content – Stanford University’s AI Index 2024 Annual Report shows private funding for the technology was nearly multiplied by eight to US$25.2-billion last year compared with 2022. The imperative to understand the “life cycle” of data has become more pressing, Ms. Medeiros says.
Ottawa is to replace the current voluntary code of conduct with AI legislation focused on “high impact” scenarios – to shield emergency services data, for example – but the new laws are not expected until 2025 or 2026.
Beyond legal access, there is the issue of a lack of useful source content.
“There is no qualitative data in real estate,” says property tech expert Robin Rivaton, a shortfall he says is preventing widespread AI adoption, particularly in commercial real estate (CRE) where information can be guarded to keep it from competitors.
Mr. Rivaton, chief executive officer of Paris-based Stonal, an AI platform for commercial and residential real estate data management, says documents, commercial rental agreements and contracts have been digitized but underlying text has not. CRE “will be a laggard without further standardization or further automated extraction from documents.”
Despite the challenges, CRE agencies are raising funds to develop apps, including predictive analytics that track and anticipate trends such as property pricing in specific markets.
Realtors are looking to AI – which can help read, write, create and analyze – to generate text, images and video using tools that troll the internet to respond to user questions and prompts.
“People will be using these tools,” Mark Mandelbaum, co-founder and chairman of Toronto-based condominium developer Lanterra Developments, said at a recent industry panel discussion in Toronto hosted by his company. “If you use computers intelligently and harness the power, it can put you above the competition.”
Among other tasks, AI can generate three-dimensional virtual images of properties. Transactions, appraisals and estimates can be fashioned using AI-based algorithms. And volumes of documents such as lease agreements can be vetted by AI software.
For brokers and agents, AI can help service a greater number of clients simultaneously while reducing time spent on administrative tasks and incorporate automated customer interaction software, such as chatbots, into company systems.
Chatbot GPT is an AI system designed to communicate, using natural language, with consultants who are able to custom design programs for real estate applications. The system personalizes communication by tracking client search behaviours and preferences. Tools can be added to provide security, privacy protection and assure regulatory compliance.
John Asher, president of single-family rental investment service agency Konfidis, said at the recent industry panel that AI allows firms to scale up without huge investment in personnel and technology. “We used AI tools to take what would have taken a year to build and develop [a technology platform] down into weeks.”
An automated program can make complex material easy to understand, compose and record virtual voice narration for video content, he explained to the audience – and bid on 100 properties in a day.
“Three or four clicks to have an offer out the door,” he said. “You talk about the impact on jobs. I don’t need people to do that. I can do it on my own.”
While Mr. Asher said AI could potentially jettison entire real estate marketing teams, some experts, such as Victoria Lee Joly, a broker with Distinctive Real Estate Advisors in Toronto, stressed that human analysis and judgment will always be crucial.
“There isn’t a piece of software that can replace the compassion and care of a human.”
This article was first reported by The Globe and Mail
