The commercial real estate development industry, like many others, is set to be disrupted and enhanced by artificial intelligence (AI). The industry has a reputation for being slow to adopt new technologies - Deloitte’s 2024 Real Estate Outlook survey reported 61% of respondents said their firm’s core technology infrastructure still relied on legacy systems. However, AI tools are expected to redefine nearly every stage of the development process, and organizations embracing technology will be at a distinct advantage over those stuck in a prior era.
Investors and developers are looking toward AI tools to provide data-driven market insights, mitigate risk, and enhance efficiency across the development process. Leaders in the field see the technology as having two major benefits; the first is operational benefits such as addressing process inefficiencies and improving workflows, and the second is gaining a competitive advantage in the industry and being able to more easily demonstrate success to relevant stakeholders. Understanding the full capabilities of AI will help your firm decide how best to leverage the technology to meet its goals.
Here are the top 10 ways real estate AI is transforming the industry, and how your business can leverage these tools to facilitate the development process and drive higher returns:
1. Market Analysis & Predictive Analytics
Market research is an important part of the due diligence process, and AI’s ability to process large amounts of data will provide stronger market insights, crunching numbers on economic conditions, property values, and other demographics. You can use this AI capability to make more accurate predictions about project ROI and more confidently identify promising markets and assets..
2. Improved and Personalized Investor Experience
Investors can leverage AI to improve personalization and provide recommendations based on budgets, preferences, and location requirements. The tools can also complete tasks such as lease data extraction, automated comps optimization, and deal flow optimization to facilitate the investing process. AI can also provide insights on debt maturities and an owner's overall leverage to help investors gauge how likely a property is to sell after construction. As a result, AI will help you bolster and diversify your portfolio, which lowers risk.
3. Property Valuation
AI tools are expected to play an increasingly significant role in the property valuation and appraisal process. Property valuation can be a time-consuming and error-prone process, but AI-powered tools can analyze historical data around a variety of factors to quickly and accurately evaluate assets. In addition, AI for property valuation can help experts pass down institutional knowledge around inspections without overtaxing teams, helping train enough leaders in the field to meet growing demand.
4. Risk Assessment and Mitigation
The many capabilities of AI mean it can be a powerful tool for risk assessment and mitigation on a given project. Investors and developers are relying on AI to manage portfolios, identify potential risks, and make data-driven decisions about property acquisitions and financing. AI can proactively assess and flag risks associated with the different stages of a development project, such as construction delays, regulatory changes, or economic turbulence. Development teams can address these concerns before they become a major concern that could disrupt project timelines or cause overruns.
5. Construction Management
AI is expected to impact construction management in numerous ways, but the most significant use case may be the tool’s capability to detect and identify risks for workers. AI can anticipate concerns on construction job sites, measure their impact, and make appropriate recommendations. Workers can also use AI to detect and report incidents, analyzing reports and identifying the right course of action. On the owner and developer side, AI can also analyze contractor or vendor performance and make recommendations to owners based on productivity and outcomes. When selecting vendors on future projects, you can set your project for success before construction even begins.
6. Sustainability Integrations
AI-powered sustainability features are likely to become the norm in green multifamily projects. Many developments now feature smart technologies that track performance and improve energy efficiencies, such as IoT sensors, interval meters, and water management tools. AI can help interpret data sets to reveal consumption patterns and provide intelligent recommendations to help reduce carbon emissions. This functionality may prove especially useful as firms aim to ensure new properties are aligned with Energy, Social, and Governance (ESG) goals.
7. Enhanced Firm Efficiency
Your firm can use AI and automation to boost employee efficiency at every stage of the development process, eliminating the need for tedious and time-consuming administrative tasks. AI-powered document management systems automatically capture and organize every project document, extracting data and organizing across budget lines. Once data is tagged and indexed, you can quickly and easily search contracts, proposals, or other documentation to make data-driven decisions. Eliminating the need for manual entry allows your development and accounting teams to focus on important tasks and high-level decision-making.
8. AI-Optimized Budgeting
Modern real estate development software with AI capability can help users gain critical insights to keep budgets lean and eliminate any guesswork from the vendor selection process. AI Budget Optimizer functionality estimates how much money you can save based on data from an ever-expanding database of vendors. AI can also help recommend vendors who, based on data and timing, are primed to bid low.
9. Tenant Experience Management
AI can play an important role in tenant experience management, ensuring a property remains profitable long after stabilization. AI algorithms are increasingly being used for predictive maintenance, with data from smart sensors detecting equipment failures and maintenance needs before tenants are disrupted by the issue. Chatbots and virtual assistants are providing instant and personalized communication for prospective and current tenants, handling tenant inquiries, maintenance requests, and lease renewals in real time. AI-powered communication not only improves tenant satisfaction and retention, it also makes the building more attractive to investors looking for forward-thinking and tech-savvy firms.
10. Eliminate Scope Gaps + Improved Bidding
AI can help your development team lower bidding costs, eliminate scope gaps, and remove the guesswork so you can maximize your profits. Modeled with over $175 billion in real estate development projects and hundreds of thousands of project documents, Northspyre AI’s predictive algorithm enables developers to cut costs and refine their budget as early as the pre-development phase. Users of Northspyre’s bidding platform can harness generative AI to review incoming bids from vendors and identify any missing scope or scope gaps.
After you send out your bids and receive RFPs, Northspyre AI will proactively flag scope gaps between your proposals in real-time, eliminating them before they cost you. With large-scale construction projects often involving hundreds of vendors, keeping your project financially viable requires spending valuable time addressing scope gaps via countless change orders. By eliminating the need for the vast majority of change orders, this functionality is expected to provide developers with savings north of $1 million on large projects.
Learn more about Northspyre
Northspyre is the purpose-built, single software solution designed using automation to reduce manual data entry, increase productivity, and maximize your returns from pre-development to project completion. The platform enables you and your teams to ensure every aspect of your project is readily at your fingertips for simple and effective project management. Catering to development teams of all shapes and sizes, Northspyre can help you reduce administrative tasks by up to 80% and lower your project overruns by up to 66%.
Download the Northspyre AI launch event to learn more about the only real-estate specific AI tool designed to proactively flag cost-savings opportunities and eliminate scope gaps in the bidding process.
