3 ways AI is set to make a major mark on real estate

Global real estate firm JLL noted that while potential for AI to transform businesses, industries and society has been mounting for decades, recent breakthroughs have moved the science from “niche to mainstream.”

AI and generative AI were ranked among the top three technologies that were expected to have the biggest impact on real estate over the next three years by investors, developers and corporate occupiers, according to JLL’s 2023 Global Real Estate Technology Survey.

AI is broadly defined as technology that “uses machine learning and deep learning algorithms to perform tasks that require the ability to learn from experience, understand complex concepts, recognise patterns, interpret the nuances of natural language, and independently make decisions.”

Meanwhile, generative AI is a subset of artificial intelligence that focuses on what its name implies – generating new content, designs or solutions.

“The technology’s proficiency in writing, drawing, coding, and composing has compelled corporate leaders to consider both the opportunities and threats that AI presents for their future,” the firm’s report read.

But while there is strong interest in AI being incorporated into business operations – particularly in commercial real estate – JLL noted there is a lack of clarity on details for business leaders of “what exactly comes next.”

When compared to other surveyed technologies, such as blockchain, virtual reality and robotics, the firm noted respondents indicated the least understanding of AI and generative AI.

Remaining keenly conscious of the forthcoming transformation, JLL highlighted leaders in the real estate industry are persistently seeking avenues to leverage the transformative potentials offered by AI.

Highlighting three key areas, the report uncovers how AI is set to revolutionise real estate practices:

1. AI will boost productivity

With AI projected to change how “people live, work and play over time”, JLL forecasts commercial real estate is “set to feel these effects”, particularly in the workforce.

According to OpenAI, around 80 per cent of jobs are exposed to AI disruption – a significant figure JLL noted has “sparked a wave of concerns” about a potential upheaval in the real estate market because of the impending changes in the labour market.

Despite rising concerns about the potential impact of AI integration on human participation in the labour market, JLL presents a contrasting perspective.

“When technology allows fewer people to achieve the same productivity level, more people are freed to create new areas of opportunity,” it stated.

JLL cited a study by MIT economist David Autor which revealed that more than 85 per cent of employment growth in the US over the last 80 years is explained by the technology-driven creation of new positions.

The firm also referred to Microsoft chief Satya Nadella’s statement that AI service providers are making the conscious choice to explore a human-centric approach, developing “co-pilot” products designed to assist people, as opposed to “auto-pilot” products that aim to entirely replace human roles.

Yao Morin, chief technology officer of JLL Technology, said AI should be perceived as “a valuable human enhancement, not a replacement.”

“The vast quantities of data generated throughout the digital revolution can now be harnessed and analysed by AI to produce powerful insights that shape the future of real estate,” she stated.

JLL further cited a study by PWC, which showed that at an aggregated level, the increase in productivity is projected to augment global GDP by 14 per cent by the year 2030.

2. Tech hubs will be the epicentre of the growing AI ecosystem

According to JLL, the growth of AI companies and supporting infrastructure is likely to drive increased real estate demand, particularly in areas designated as tech hubs.

It noted major tech hubs, such as the San Francisco Bay Area, Boston, Seattle and New York, have already become focal points for AI companies.

Additionally, JLL research shows there is an accelerating demand for AI talent, with AI job postings increasing by over 250 per cent since the beginning of 2021.

“In the longer term, this means growth is likely to be where AI talent is available, namely primary and established secondary tech hubs, innovation centres and universities,” the firm stated.

The AI sector’s need for extensive resources and supporting infrastructure, including data centres and computing power, will contribute to the expansion of colocation, hyperscale, and edge data centre markets globally, according to JLL.

“Additionally, the continuous expansion of AI applications will drive the need for more power, more cooling facilities and more data centres. Manufacturers and vendors of GPU and network switches will also grow, and thus require space as occupiers,” it stated.

According to the 2023 JLL Global Data Centre Outlook, the global colocation data centre market is forecast to grow at 11.3 per cent p.a. (CAGR) from 2021 to 2026.

Meanwhile, the hyperscale data centre market is expected to grow even faster at an approximately 20 per cent CAGR.

3. AI will further advance the technological transformation initiated by proptech

The real estate industry has been proactive in adopting technology through the proptech sector, with over 80 per cent of real estate occupiers, investors, and developers surveyed revealing that they plan to increase their real estate technology budget in the next three years.

“This is powered by a maturing proptech ecosystem. There are now technological solutions for almost every aspect of real estate functions, including investment management, design and construction, building and facility operations, and portfolio management,” JLL stated.

With this, the firm noted “a solid foundation has been laid for AI integration”, with the real estate sector now well-positioned to integrate AI-powered solutions into various functions, bringing improved efficiency and cost savings.

Raj Singh, managing partner for JLL Spark, said AI is “helping to streamline our industry.”

“As venture capital investors, we have seen many experiments with the latest AI capabilities, and the key to making the leap from pilots to successful products hinges on data quality, workflow integration and intuitive output interfaces,” he added.