As we approach the top of the real estate market cycle, commercial real estate investors are being forced to look at the bigger picture and become more adaptable to maximize their portfolios and stay ahead of the competition. The good news? Tech-enabled solutions are helping to drive strong returns and create new opportunities for investors to get the most out of their properties and access the data necessary for strong valuations.
Just looking at the sea of change being driven by new technologies across industries, it’s no surprise that artificial intelligence (AI) has quickly become the biggest disruptor in the commercial real estate industry. Numerous software platforms now use machine learning and predictive analytics to help investors ensure the profitability and sustainability of their portfolios, while reducing the often high level risk factor of top-tier investments. Unfortunately, only those who are willing to adopt these new tools will see maximized returns in a shifting real estate market. In short, staying ahead of the competition is now predicated on staying ahead of the technology curve.
For example, big data, behavioral modeling, and performance analytics are enabling highly targeted customer acquisition and market analysis that helps investors better understand how properties are performing in designated markets. This is a major game changer, as securing long-term tenants in class-A properties is what will help lower vacancy rates and ultimately benefit an asset—current or prospective. Here are three ways AI-driven real estate technology is helping drive property valuation and improve portfolio performance for the commercial real estate investor:
- AI aggregates data that provides investors with the once invisible insights they need to make informed decisions. This can include a detailed breakdown of energy consumption, market performance, rent and occupancy rates, and usage space, along with other key economic indicators. These learnings give investors a leg up on the competition. However, having access to the data is only the first step. Knowing how to interpret the information and make it work in the valuation process is what will deliver untapped value to investors.
- AI streamlines the efficiency and cost effectiveness of real estate marketing efforts with highly targeted online ads. Rather than displaying ads for large, often unfocused groups based on excessively vague demographics or search histories, AI can capture and analyze the traction specific ads receive and push them out to applicable users at optimal times in the customer journey. This targeting strategy can help increase property value and improve portfolio performance.
- AI is also useful in monitoring rental trends per geographic location, with the ability to adjust rates automatically when leases expire. Of major importance, AI enables building automation and expansion analysis to acquire tenants and drastically reduce vacancy periods. This allows commercial real estate investors to determine potential returns based on data that impacts rents, expenses, and profits in rental housing.
Real estate technology is nothing new, but the recent shift to AI, predictive analytics, and machine learning brings with it a novel sophistication to how commercial real estate investors are meeting business objectives through the digital landscape and evolving consumption patterns. In an industry that often adopts technology at a slower pace, it will take some time and effort to bridge knowledge gaps in how to integrate advanced tools and utilize AI to its fullest, but it’s mission-critical in stimulating new investment opportunities and generating profit. Put simply, commercial real estate investors must understand that those leveraging the power of AI, and its financial returns, are creating a widening gap of a new generation of winners versus those who fail to take advantage of the technology.
Patrick Davidson serves as chief operating officer with G5, which focuses on real estate marketing optimization. Previously, he held leadership positions with Oracle and Vlocity, as well as serving as founder and president of Wanaka Properties LLC.