Key takeaways from ‘The Future of Generative AI in Real Estate’
You’d be hard-pressed to find any organization not having discussions about AI and its potential uses. Real estate is no different. But there are still a lot of questions and important considerations organizations are grappling with when it comes determining how this advanced technology can be applied to commercial real estate. While AI is seen as a game changer by real estate professionals, understanding of its capabilities is still low.
JLL recently assembled a panel of experts to answer fundamental questions about AI and explore the strategic advantages it offers in a webinar entitled, “The Future of Generative AI in Real Estate.” The panelists included Yao Morin, chief technology officer at JLL; Or Hiltch, chief data & AI architect at JLL; Yuehan Wang, global research associate, real estate technologies at JLL; and Laurent Grill, partner at JLL Spark Global Ventures.
To kick off the discussion, Yuehan shared key findings from JLL’s Global Real Estate Technology Survey 2023, which confirmed that AI and generative AI are considered the most impactful emerging technologies in the industry.
The panel focused on three perspectives about how AI impacts real estate:
1. AI has the power to transform how people live, work, and play, thus reshaping the real estate market over time.
Historically, new technology has been a driver of change in real estate. But it is important to note that there are concerns about a potential upheaval in the real estate market because of the impending changes in the labor market.
But with labor market churn and new jobs being created, the net effect is expected to be an increase and various credible research institutes estimate that AI’s potential contribution to the world economy will reach more than $15 trillion.
While AI does have the power to transform how people live, work, and play, it will happen across an extended period of time. Ultimately, we need to carefully assess our own position in this transformation.
Technological advances impact the real estate markets in five ways.
- Geographical shifts in market growth
- Altered demand and profitability among different asset types
- Creation of new assets and product types
- Emergence of new real estate investment and revenue models
- Evolution in space functions and design
AI is anticipated to have the same five-fold impact on real estate.
- Initial growth focused primarily on major and established secondary tech markets
- Increasing demand in data centers, new energy smart grids, and connectivity infrastructure
- The birth of the “real intelligent building” with AI-compliant infrastructure as default
- Expansion of the “space-as-a-service” model. Faster transaction processes, more efficient analytics of properties and markets
- Experience-driven design, highly customizable environmental settings
2. AI companies and supporting infrastructure will drive demand for real estate in different markets.
There is a growing AI ecosystem globally covering hardware, computing systems, models, and applications in various industries. However, training and using AI requires significant resources and supporting infrastructure. The continuous expansion of AI applications will drive the need for more power, more cooling facilities, and more data centers.
Manufacturers and vendors of GPU and network switches will also grow and require more space as occupiers. But AI infrastructure location criteria is very different from traditional offices and what AI companies want. Factors like competitive energy pricing and energy consumption regulations are driving growth toward less crowded markets.
In addition, data centers are going through a redesign process to accommodate the need of training and using AI models. This leads to considerations about the impact of that and potential risks to the environment.
Cyber and data security concerns are what real estate investors and developers recognized as the most significant challenge in deploying new technologies. There are also new policies and regulations being developed, including:
- Market standards and regulations on cyber and data security, including data quality, IP rights, privacy, and data security
- Regulations to mitigate social risks, such as regulations to protect the labor market or offsetting the inherent bias that AI possesses
- Regulations to mitigate environmental impacts, including carbon emissions
3. AI will further transform how the real estate industry operates.
The real estate industry is embracing new technologies, with more than 80% of companies planning to increase their technology budgets over the next three years. Most AI-powered proptech companies are in a maturity stage from seed to late-stage VC, and more than 500 companies are providing AI-powered services to real estate.
The top use cases include:
- Valuation and transactions
- Investment and capital planning
- Construction project management
- Design, modeling and planning
- Building energy and utility management
- Leasing and brokerage
- Market research
- Portfolio data analytics and benchmarking
- Real estate marketing
The panel agreed that generative AI is an enhancer; it is eliminating tasks, not jobs. But they emphasized the importance of having a purpose and attracting the right talent to leverage the potential of generative AI. But acquiring top AI talent is not without its challenges. The panel recommended a multi-faceted approach that includes upskilling the existing workforce, hiring new talent, partnering with external experts, acquiring companies, and outsourcing tasks.