The Power of Gen AI in Real Estate

Generative AI (Gen AI) is ushering in a new era of innovation in the real estate industry. With access to a wealth of data about properties, communities, tenants, and the market, investors can leverage Gen AI tools to revolutionize various aspects of the industry. These tools can help identify investment opportunities, transform building and interior design, create effective marketing materials, and enhance customer experiences, ultimately leading to new revenue streams. The impact of Gen AI on the real estate industry cannot be underestimated.

Embracing Generative AI

Analytical AI, which has been shaping the business world for decades, focuses on specific goals and tasks, such as predicting future values or segmenting customers. Gen AI, on the other hand, introduces an open-ended and creative approach to AI, unlocking new possibilities that analytical AI cannot address. According to the McKinsey Global Institute, Gen AI has the potential to generate a staggering $110 billion to $180 billion in value for the real estate industry.

McKinsey identified 63 generative AI use cases spanning 16 business functions that could deliver total value in the range of $2.6 trillion to $4.4 trillion in economic benefits annually when applied across industries. source

This presents a significant opportunity for Real estate companies that strategically align their tech infrastructure to facilitate future use cases will position themselves for optimal success. Taking deliberate steps to integrate vendor systems and streamline data across property management, customer relations, and maintenance portals will yield fruitful results. It is crucial for companies to adopt an operating model that can scale alongside the growth and diversification of their real estate portfolio. This may involve redefining roles and capabilities to align with the evolving focus points of work, such as employing prompt and data engineers to implement foundational models.

By leveraging Gen AI tools, existing employees can transition away from time-consuming tasks and concentrate on specialized assignments. The advent of Gen AI also presents opportunities for the creation of new roles and skill sets in areas like marketing and investing teams. In order to embrace these changes, companies must be willing to adapt and recognize that their IT or marketing organization will undergo a transformation with the integration of AI technology.

Risks of Gen AI to Real Estate

It is important to acknowledge and address the unique risks that Gen AI poses to the real estate industry. As this technology is relatively new and constantly evolving, there may be unintentional biases in training data that lead to unintended consequences. Furthermore, concerns surrounding intellectual property and legal precedents related to foundational models need to be monitored. For instance, if marketing content is generated by an algorithm trained on unlicensed images, it poses a risk to the real estate business. Adjustments made to the foundational models supporting real estate-specific tools may also have unforeseen impacts on output quality and content.

Companies must take steps to mitigate these risks and continually improve their approaches. Certain use cases, such as emergency response or leasing decisions that require regulatory compliance, may not be suitable for Gen AI at its current stage. Implementing Gen AI in situations where investment professionals, operating teams, and tenants interact introduces additional risks that need careful consideration. Companies that identify and address risks early on will be better equipped to respond effectively.

Catalysts for AI in Real Estate

Two primary factors make it opportune for the real estate industry to embrace Gen AI.

1. The technology has advanced to a point where it can provide groundbreaking solutions to the challenges faced by real estate companies. With proper design and execution, Gen AI can be a game-changer.

2. The commercial real estate sector currently faces numerous challenges and demands innovative approaches. Gen AI does not replace analytical AI but instead opens up new use cases that were previously inconceivable and relevant to previously untouched aspects of the real estate value chain. Despite being labeled as a tech laggard, the real estate industry can actually benefit from not overinvesting in outdated technology. While there may be a steeper learning curve for those yet to invest in technology and data strategies, the insights, speed, and transformative power of Gen AI in the real estate industry make it a journey worth embarking on. Data utilization and strategic differentiation through data will be the battleground for securing investor dollars, tenants, buyers, and long-term success.

Takeaway The real estate industry is undeniably undergoing significant changes. The question is, which companies will answer the call for change, adapt to the new landscape, and embrace a digitally empowered future.

References:

EY: Generative AI In Real Estate & Hospitality Construction
Deloitte: Generative AI in real estate
McKinsey: Generative AI Can Change Real Estate
McKinsey: The Economic Potential of Generative AI