The real estate industry is on the brink of transformation as a result of the rapid advancements in Artificial Intelligence (AI) technology. In a recent report, global real estate firm JLL explores the impact of these technological shifts on the industry.
According to JLL’s 2023 Global Real Estate Technology Survey, AI and generative AI are ranked among the top three technologies expected to have the greatest influence on real estate in the next three years. Investors, developers, and corporate occupiers recognize the potential of AI to revolutionize businesses, industries, and society as a whole.
AI is a broad term encompassing technology that utilizes machine learning and deep learning algorithms to perform tasks that involve learning from experience, understanding complex concepts, recognizing patterns, interpreting natural language nuances, and making independent decisions.
Generative AI, on the other hand, is a subset of AI that focuses on generating new content, designs, or solutions. Its capabilities in writing, drawing, coding, and composing have compelled corporate leaders to consider the opportunities and threats it presents for the future.
While there is a strong interest in incorporating AI into business operations, particularly in commercial real estate, JLL highlights a lack of clarity among business leaders regarding the specifics of what comes next. Compared to other technologies surveyed, such as blockchain, virtual reality, and robotics, respondents demonstrated the least understanding of AI and generative AI.
However, JLL emphasizes that leaders in the real estate industry are acutely aware of the impending transformation and actively seeking ways to harness the transformative potential of AI. The report identifies three key areas in which AI is poised to revolutionize real estate practices:
- AI will boost productivity
In the realm of commercial real estate, the impact of artificial intelligence (AI) is expected to be significant, as it has the potential to reshape how people live, work, and engage in recreational activities. JLL, a leading real estate firm, predicts that the workforce within the industry will particularly experience these effects.
JLL has highlighted a concerning statistic from OpenAI, indicating that approximately 80 percent of jobs are susceptible to disruption by AI. This figure has sparked apprehension about the potential upheaval that the real estate market may face due to impending changes in the labor market.
However, JLL presents an alternative viewpoint, countering the prevailing worries surrounding the integration of AI into the labor market. The firm believes that when technology enables fewer individuals to achieve the same level of productivity, it creates opportunities for others to explore new avenues.
To support this perspective, JLL references a study by MIT economist David Autor, which reveals that technology-driven advancements have been responsible for over 85 percent of employment growth in the United States over the past eight decades. This demonstrates the capacity of technology to generate new job positions.
Additionally, JLL cites Microsoft CEO Satya Nadella’s statement emphasizing a human-centric approach to AI. Nadella highlights the conscious decision made by AI service providers to develop products that act as “co-pilots,” assisting humans rather than entirely replacing them like “auto-pilot” products would.
Yao Morin, the Chief Technology Officer of JLL Technology, stresses the significance of perceiving AI as a valuable enhancement to human capabilities rather than a complete replacement. Morin notes that AI can effectively analyze the vast amounts of data generated during the digital revolution, offering powerful insights that shape the future of real estate.
Supporting JLL’s perspective, a study by PWC reveals that increased productivity, facilitated by AI, is projected to contribute to a 14 percent augmentation of global GDP by 2030 at an aggregated level. This highlights the potential positive impact of AI on various industries, including real estate.
- Tech hubs will be the epicentre of the growing AI ecosystem
The increasing presence of AI companies and the development of supporting infrastructure are set to boost the demand for real estate, particularly in designated tech hubs, according to JLL, a leading real estate services firm.
JLL’s research highlights prominent tech hubs like the San Francisco Bay Area, Boston, Seattle, and New York as key locations where AI companies have already established a strong presence.
Furthermore, the study reveals a significant surge in demand for AI talent, as job postings in the field have increased by over 250 percent since the start of 2021.
JLL predicts that long-term growth in the AI sector will primarily occur in areas with readily available AI talent, such as primary and well-established secondary tech hubs, innovation centers, and universities.
The AI industry’s extensive resource requirements and supporting infrastructure, including data centers and high-performance computing, will contribute to the global expansion of colocation, hyperscale, and edge data center markets, according to JLL.
Moreover, as AI applications continue to expand, there will be an increased demand for power, cooling facilities, and data centers. This growth will also benefit manufacturers and vendors of GPU and network switches, who will require space as occupiers.
JLL’s 2023 Global Data Center Outlook projects that the colocation data center market will experience a compound annual growth rate (CAGR) of 11.3 percent from 2021 to 2026.
Meanwhile, the hyperscale data center market is expected to grow even faster, with an approximate CAGR of 20 percent.
- AI will further advance the technological transformation initiated by proptech
The proptech sector has played a pivotal role in driving technological advancements in the real estate industry. According to a survey conducted among real estate occupiers, investors, and developers, more than 80 percent of respondents expressed their intention to augment their real estate technology budget over the next three years.
The widespread adoption of technology in real estate has been facilitated by the maturation of the proptech ecosystem. Today, there exists a diverse range of technological solutions catering to nearly every facet of real estate operations, such as investment management, design and construction, building and facility operations, and portfolio management, as highlighted by JLL.
This progress has laid a strong foundation for the integration of artificial intelligence (AI) within the real estate sector. The industry is now poised to leverage AI-powered solutions across various functions, leading to enhanced operational efficiency and significant cost savings.
Raj Singh, the managing partner for JLL Spark, emphasized the role of AI in streamlining the real estate industry. He noted that as venture capital investors, they have observed numerous experiments involving the latest AI capabilities. The key factors determining the successful transition from pilot projects to viable products, according to Singh, lie in ensuring high-quality data, seamless workflow integration, and intuitive user interfaces for output.
By embracing AI, the real estate industry can unlock its potential for transformative change, revolutionizing the way business is conducted and delivering tangible benefits to stakeholders.