5 ways AI is transforming commercial real estate demand

Generative artificial intelligence (AI), renowned for its transformative potential, is now recognised in the commercial property sector for its ability to uncover previously unexplored demand, according to JLL.

“AI has enormous potential to reshape real estate, with near- and long-term impacts ranging from the emergence of new markets and asset types to innovations in investment and revenue models,” Yuehan Wang, global research associate for real estate technology at JLL, said.

She emphasised that the rapidly expanding AI ecosystem and its supporting infrastructure will generate fresh demand for real estate across various global markets.

Findings from the global real estate firm’s latest survey showed expectations are running high among investors, developers and occupiers that AI, along with its subset, generative AI, will be among the top three technologies to have the greatest impact on real estate over the next three years.

What are the top five areas where demand is emerging due to AI’s rapid development?

1. AI hubs in established tech markets

As AI rapidly develops, the war for specialised skill sets is already driving decision-making for AI companies and investors on where best to establish operations, according to JLL.

The firm noted companies are establishing operations in major technology hubs with proximity to academic institutions, aiming to tap into the technology ecosystem and a pool of AI engineers and technical talent.

For instance, OpenAI announced London as its first international hub for AI technology and policies. Similarly, in Taiwan and Shanghai, new AI-focused business parks and clusters are being built to attract investors and foster AI growth.

Notably, other markets are using the same playbook to attract commercial investors. In Shanghai, the municipal government is building an AI cluster as part of a three-year plan to boost its production output by 28 per cent to US$251 billion.

2. Increased data centre development

Christopher Street, the managing director of data centres for Asia-Pacific at JLL, said significant data processing and storage demands driven by AI have propelled data centre development into the spotlight.

“As generative AI technology becomes more seamlessly integrated into our everyday lives, the appetite for data will inevitably increase,” he said.

JLL data showed the number of hyperscale sites in development across the world is expected to double by 2024, up from 500 sites just five years ago.

“We’ve seen a substantial increase in the size of campus builds, with constructions exceeding 100 megawatts becoming commonplace, compared to the past when a 20-megawatt requirement was considered large,” Mr Street added.

But he noted that it’s not just about building more data centres to meet demand.

According to Mr Street, data centre operators are also now prioritising sustainability and energy efficiency in new builds through technology improvements and the adoption of renewable energy sources to address environmental impacts.

3. AI-powered ‘smart’ buildings

As developers rely on smart technologies to deliver buildings with high sustainability performance, AI-powered buildings are becoming the new normal, according to JLL.

A separate report released by the firm in April showed the rise of hybrid work set-ups is also spurring demand for smart office spaces.

With all generative AI applications, Albert Ovidi, chief operating officer, markets, for Asia-Pacific at JLL, said the key for real estate owners and users will be to build the right prompts to “connect insights across essential elements such as human experience, real estate performance and sustainability to learn and address new opportunities”.

“Another key opportunity is to further integrate AI with existing technologies such as robotics, drones and digital humans to ‘see’ different parts of a building and improve feedback and communication with the building and its users,” Mr Ovidi added.

4. AI-optimised real estate transactions and market analytics

AI is being used more to speed up transactions and provide detailed property and market analytics for investors, according to JLL.

Given the tech’s capacity to scan data and find meaningful patterns at speed, the firm noted AI can offer recommendations aligned with an investor’s objectives, risk tolerance and market conditions.

“AI-driven data analysis also gives co-working operators the ability to forecast future space demand, optimise energy usage and plan space utilisation more effectively. This, in turn, generates new revenue streams and expansion opportunities,” JLL said.

5. Enhanced workspace environments with personalised experiences

JLL highlighted AI advancements are revolutionising the workplace, enhancing human experiences and enabling personalised office environments.

“What AI is able to do is to connect the cognitive data we collect from users with the physical data on usage patterns and human behaviour before making sense of it and recommending better insights on how we can run offices,” Mr Ovidi said.

For example, Microsoft’s Redmond headquarters has an AI-powered system that collects and analyses data from employee behaviour to anticipate needs and customise environmental factors accordingly.

With AI’s capabilities, Mr Ovidi expects employees’ expectations for workspace personalisation and experience will only continue to increase.

“I believe the workplace should align with people’s experience of technology in their daily lives as personal, useful and easy. And I believe AI can help meet that expectation,” he said.