The Impact of AI and Automation on CRE

by | 11 January 2019

While artificial intelligence (AI) is technology whereby a machine perceives its environment and acts by “learning” from the experience, automation is the application of technology to automate a process with minimal human assistance. Though differing in their application, when combined, these technologies provide powerful tools for business, industry and specifically, commercial real estate (CRE).

Businesses are working to keep up with evolving standards and technological advancements of AI and automation. There has been a recent focus on how AI and automation affects how workers do their jobs—but there hasn’t been much discussion on how these advancing technologies will affect where workers do their jobs, especially in how it relates to CRE.

From the amount of space required, to the CRE asset types most affected and, to the way CRE professionals conduct business on behalf of their clients, the impacts of AI and automation are being felt in every aspect of the CRE industry.

The Effects of AI & Automation on CRE

Colliers’ Executive Vice President, Head of Innovation for Occupiers Services, Chris Zlocki knows how executives from the top down in every industry are keeping a close eye on these technologies and the correlation to their business, from impact to leverage.

Zlocki monitors how decision makers are gathering data and research in order to answer the questions that AI and automation are bringing to the forefront. What is the impact of AI and automation on the physical space required for a business to perform its operations? Will there be an increasing reduction in the amount of space needed going forward? Zlocki notes that in a recent McKinsey & Company article, Realigning global support-function footprints in a digital world, as many as 1.5 million service jobs could be affected as a result of AI & automation. This could translate into hundreds of millions of square feet of decommissioned or adaptive reuse space.

In CRE, evolving technology often has a direct impact on physical space requirements. Colliers’ U.S. Executive Vice President of Operations, Dan Spiegel, is an expert on how to help clients stay on the forefront of automated technology and how to adapt accordingly.

Spiegel finds that technology is already lowering staffing levels in some sectors and maximizing 24-hour operations for manufacturing and distribution in industrial buildings. To accommodate new technology requirements, the industry is building warehouses with expanded ceiling heights because, in part, tasks that were dangerous for individuals to perform are now automated, and the CRE industry must evolve to accommodate for new machinery requirements.

The questions that CRE industry leaders need answers to are at the intersection of automation and commercial real estate. Zlocki states that the most pertinent questions at this point are:

  • “How are emerging technologies impacting future footprint planning, the use of space and strategies that drive location and hiring decisions?”
  • “Will more autonomy ultimately decrease space requirements, costs and utilization?”

In addition to reducing size and potential locations, buildings are using less lighting and energy with automation, primarily because machines don’t need the same environment humans do. “There’s an impact on what is being constructed, as well as a downstream impact originating from changes in how consumers buy, retailers and distributors optimize their networks and how new industrial construction meets these needs. Industrial tenants demand the best distribution locations with buildings that can leverage the best warehousing technology. The industrial real estate market has changed due to the automation of manufacturing, distribution and consumption,” noted Spiegel.

Automation is being used in CRE to evaluate property uses for efficiency in every way possible. Spiegel continues, “There is technology that counts the number of people that enter a building, then automatically adjusts the temperature to be more efficient for the body heat being created. There’s a whole area of building operations that aims to increase efficiency.”

Spiegel is particularly interested in how AI-driven data can help developers acquire and build the right buildings for the land. “In today’s data-driven world, you can put a lot more science behind decisions to know real value. The development of CRE assets can be pinpointed and more accurate to achieve a property’s highest potential value faster.”

In planning CRE decisions, there is a need for knowledge about how a space is being used. Technology, like cell phone pings, can be used to create metrics and determine if a space is being utilized to its full potential. For example, this technology can be used to determine where people are congregating in an office or how full the office is on any given Friday.

And applied to the retail environment, the same technology indicates to property owners and retailers where shoppers spend most of their time in a store. Much of the movement toward AI and automation is about creating measurement tools and data that can be analyzed to create spaces that are most efficient, not just for owners and investors, but also for users and occupiers.

Using AI and Automation to Create Efficiencies

Aside from the space considerations that the convergence of AI and automation will necessitate, there is also a shift occurring on the business side of CRE. Spiegel explains that much of the technology being used now in CRE streamlines the contractual back-and-forth of buying and selling of commercial real estate. Abstraction technology used to scan contracts makes negotiations more manageable and time efficient for all parties.

Zlocki points to this aspect of AI and automation developments as the most “tangible” impact for CRE, and the closest to the surface in its immediate viability. “The transaction process—the automation around doing a deal—will change the broker process. You’ll be able to get more done and done more quickly. A great example of this is in looking at market comparables.”

Spiegel explains, “The overall shift toward a more number-driven or quantifiable world makes metrics even more essential when evaluating properties. Abstraction technology helps to make more accurate and efficient evaluations and transactions. There is potential to make the process smoother. Using AI technology, there would be tremendous value to the industry—occupiers and investors alike. All advancements in technology have an impact on how we interact with space, clients and how commercial real estate developments evolve.”

Zlocki points out that Colliers is utilizing AI and automation in the Colliers 360 platform to provide clients with analysis of their current CRE market conditions, investments, future opportunities and new projects. Colliers has been able to use AI to analyze information from multiple data sources, inclusive of the valuable data clients already have, and then provide actionable insight to clients that goes way beyond the transaction.

The Long-Term Impact of AI & Automation

Some of the fear surrounding AI and automation is that human labor will be outpaced and outperformed by technology—making many positions in key industries obsolete. However, research published in McKinsey Quarterly demonstrations that AI and automation are more likely to eliminate specific activities, not entire occupations. Even for positions that are highly automatable, there is more to consider than just how easy it is to program a machine to perform a specific task.

Zlocki sees more opportunities than downsides for CRE where automation is concerned, stating that, “Companies that move to embrace these changes in technology will find that both they, and their clients, benefit from it. AI can enhance the services provided by CRE companies when they’re paired with knowledgeable human resources.”

The effects of AI and automation won’t negate the need for experienced and knowledgeable CRE professionals, only enhance the experience for their current and future clients. Zlocki equates the impact of AI and automation on CRE to that of the invention of electricity, concluding that, “The world was never the same after the adoption of electricity, and likewise, the world—and the commercial real estate industry—will never be the same after fully embracing AI and automation advancements.”

About the Experts

Colliers’ Executive Vice President, Head of Innovation for Occupier Services Chris Zlocki oversees consulting and technology services including Colliers360, providing clients flexible dashboard analytics, insights and portfolio solutions.

Colliers’ Executive Vice President of U.S. Operations Dan Spiegel is focused on connecting lines of business and expanding Colliers’ U.S. footprint. Spiegel monitors evolving technologies and their integration and early adoption, creating value and efficiency for the brokerage business lines and clients they serve.

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