Artificial Intelligence and CRE: Will your job be affected?
- Jason Gordon
Artificial Intelligence (AI) is here and it is dramatically altering the commercial real estate industry as we know it. Faced with the introduction of new and intimidating methods or technologies which lack familiarity, it’s not uncommon to fall victim to anxiety. Are you concerned that artificial intelligence components could replace your real estate job? Will landlords, attempting to lower expenses and improve accuracy, be inclined to rely more heavily on intelligent platforms than on real estate professionals to manage their portfolios? How will brokers be affected when much of their important preparations when working on a transaction can be achieved through AI technology? Let’s consider and take a deeper dive into the introduction of AI components in our industry, and its impact on CRE jobs.
Let’s just consider one example: Every broker is familiar with comparative market analysis (CMA) which is a search to help determine the fair market value of a given property a client is interested in purchasing or selling. This usually involves tedious research identify properties most closely resembling the one in question. The broker knows that an error resulting in a single oversight can result in a costly failure to close a deal. Although already in use, CMA technology, in the near term will improve in both accuracy and in the number of variables it will be able to optimize. Do these advances represent a legitimate threat to the broker, or rather, is it a valuable tool that can be harnessed to more quickly complete a successful transaction?
First some perspective. This is far from the first time in history that people, fearing job loss, reacted to advancing technology with trepidation and even anger. When the first machines replaced hand production during the Industrial Revolution in the late 18th and early 19th centuries, fear was rampant that these new production methods would render their skills obsolete. While some jobs were lost forever, those who mastered the new technology were handsomely rewarded. As production and profits rose dramatically, so did wages.
When the introduction of computers into the workplace began, fears of job displacement spread like an epidemic. But, again, while some jobs were eliminated, a whole new industry was birthed which created millions of new professions: programmers, hardware engineers, software developers, systems analysts, project managers, etc. These new professions, while requiring greater skill levels, once again, offered higher pay than the more menial positions they replaced.
Some of you may be thinking that just because certain historical fears proved to be overblown, it doesn’t necessarily mean that the introduction of AI into the workplace will follow precedent. So, let’s take a quick look at what the evidence indicates.
In a 2017 study by Deloitte, 250 industry leaders representing “some of the most aggressive adopters of cognitive technology” were asked what impact the introduction of AI technologies will have on employment. A solid majority of respondents anticipated that AI will not result in job loss. “Within the next three years, 69% of enterprises anticipate minimal or no job loss.” And while 21% said that integrating AI components into the workplace will have no impact on job security at all, an impressive 33% thought that it will, in fact, add jobs. A majority agreed with the premise that, “Machines and humans will augment each other in the workplace.” These industry leaders believe that the introduction of AI will not replace workers; it will instead serve to make these professionals more effective at what they do.
On a more macro level, and in line with the Deloitte findings, Forbes reports that the countries in the forefront of incorporating AI into the workplace (Germany, South Korea, Japan) are also among the countries with the lowest unemployment rates.
CRE professionals work in an industry that is data driven. Information concerning any transaction, such as the cost of capital, property appraisal reports, zoning regulations, comparables, workforce trends, ownership histories, financial documents, etc. must be collected, organized, and analyzed. According to Propmodo a multimedia firm which explores how emerging technologies affect the business environment, “[AI] algorithms are specifically designed to process immense volumes of data, making them an invaluable tool for real estate professionals who have long been bogged down by the administrative legwork necessary to conduct market research.” In general agreement with the Deloitte study, Propmodo adds that these AI platforms, “Can free brokers to focus on the kind of creative, higher-level problem solving which remains the exclusive purview of the human mind … AI … isn’t going to replace brokers so much as improve their outcomes. This will help brokers do more with their time.”
While AI platforms excel at data collection, predictive probabilities, and compiling reports, they lack those uniquely human qualities such as intuition, discernment, grasping nuance, and most importantly wisdom. An AI platform, for example, cannot alert a client that a deal is too good to be true – and to therefore proceed with caution. Nor can it have relationships with landlords and colleagues which could be invaluable in closing a deal. And the professional’s indispensable ability to negotiate on behalf of a client cannot be outsourced to AI circuitry.
The CRE professional possesses the ability to understand a client’s priorities in a deeper way than the data driven results conveyed by an AI component. The professional can understand on a personal level what a client’s long-term financial plans are, and even inform him of planned construction or developments in the surrounding area which could affect the value of a property he is considering buying or selling. And finally, a broker can be communicated with – just an email or a phone call away.
But the future has arrived. Are CRE professionals grasping the importance of the impending AI era?
The Building Owners and Managers Association (BOMA) commissioned a survey because of their understanding that, “Commercial real estate professionals are struggling to adapt to the technology change that is occurring within the CRE industry.” And that there is, “A sense that many CRE professionals are overwhelmed at the pace of this change and the proliferation of new technology solutions.” The July 2018 survey of 600 CRE professionals revealed that 54% of respondents believe that AI will have a “profound or significant” effect on the CRE industry. And another 29% thought the impact will be “meaningful.” That’s a good start. Industry professionals are clearly attuned to what’s on the horizon.
My best advice is that the wise CRE professional should be proactive and learn as much as he or she can about AI and how it is more likely to enhance your outcomes rather than threaten your future.
To keep ahead of the curve, there are many free online courses available, but a good recommendation is the one offered by Google and Stanford experts here.
If you’ll excuse the pun – get with the program.