<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=669891663901487&amp;ev=PageView&amp;noscript=1">
Skip to content

    Commercial Real Estate AI Is Curbing Costs at Every Phase

    Artificial intelligence is revolutionizing the way that we work. To understand the big picture, AI can automate 80% of physical work, 70% of data processing and 64% of data collection tasks. 

    In commercial real estate—an industry that heavily relies on both data analytics and physical labor—the impact is major.

    Commercial real estate AI is able to reduce equipment and material spend, streamline accounting and drive efficiency in operations. For real estate developers, the technology is making an impact throughout the project lifecycle, from pre-construction through stabilization. And it’s arriving at the perfect time.

    In the last 12 months, development and management costs have soared to record highs, and developers and owners are turning to automation and machine learning to offset inflated operational expenses. 

    AI In Development 

    If you ask a developer how much a ground-up commercial building costs in today’s market, the phrase “a king’s ransom” is probably the first to spring to mind. 

    In the last 12 months, construction material costs have increased nearly 20%, the largest annual increase on record at the Bureau of Labor Statistics. Throw in significant supply chain disruptions and a skilled labor shortage, and construction costs are reaching staggering new heights. By the year's end, JLL expects commercial real estate developers will spend an additional 6% on new developments, and the company’s research forecasts the same increase again in 2022. 

    AI is helping to offset these costs. Developers use AI to manage budgets and schedules, guide project design and automate construction sites. 

    Budget Management

    Artificial intelligence is informing budget and schedule management—and driving value in the process. Development and construction management software centralizes documents and financial information and then uses AI to process the information. The technology completely eliminates low-value and time-consuming tasks, and developers gain critical insights that drive better, proactive decision making, forecast outcomes and mitigate project risk. 

    This software typically makes an appearance at the beginning of the project lifecycle, and it continues to deliver real-time data updates throughout the development process to allow developers and other project stakeholders to respond to rising issues and manage costs.

    Architecture and Design

    As developers move from the planning and budgeting phase into the design phase, AI will help to process essential data and make early design decisions. Architects rely on copious amounts of data, everything from city permits and zoning regulations to the physical construction of the building. AI can process all of this data to create a series of design models that will work within the development site. 

    The architect can level up from there, using CAD software to run endless variations of design concepts for a single project—and this can all happen within minutes, leaving the architects free to do more conceptual and creative tasks. The technology drives down architecture costs and time commitment, but it can also produce better, highly designed buildings. 

    Automated Construction Sites

    Data processing is the bread-and-butter of the AI world, and it’s what most people imagine when they think about artificial intelligence. But, the technology is also automating physical labor, a game changer for the construction industry. After all, labor shortages are a significant contributor to rising construction costs. 

    AI tools can manage materials, take measurements, track progress with image overlay software and make paper plans interactive so onsite labor can quickly translate them on job sites. 

    AI in construction is the fastest growing tech market in commercial real estate, growing at 35% per year. It is expected to reach $2 billion in total valuation by 2023. 

    [Whitepaper] Why real estate developers' mindset on technology needs to catch  up.

    AI After Development

    The value of artificial intelligence doesn’t stop with construction. Operators are leveraging AI tools to drive efficiency, automate tasks and provide better services to tenants. There are endless applications for AI in real estate building operations, from in-unit smart features, like thermostats and voice-command lights, to customer service applications, like the smart leasing assistants that became so popular during the pandemic. 

    Managing Energy Consumption

    There are a few standout ways that AI can deliver value at the property level, and energy usage is at the top of the list. Commercial owners spend about $400 billion annually on energy costs in the US, but research from In-Building Tech estimates that 30% of energy is lost to building inefficiencies - a huge expense for building operations.

    Machine learning, however, can analyze historical building data and current conditions to regulate energy usage through a series of sensors. At the most basic level, the technology reduces energy during peak times and prevents bottlenecks before they happen—but it’s capable of more. AI can forecast energy use to better manage future consumption, predict system failures and manage power grids with multiple energy sources to direct power appropriately.

    Google uses DeepMind AI to manage energy at its physical properties, and reports cutting energy consumption by 30% as a result. Other major corporations are looking for solutions to manage energy, making this a great opportunity for owners to partner with tenants, particularly in the net lease market. 

    Digitizing Amenities

    In the last decade, commercial and residential developers have continued to raise the bar of luxury onsite amenities. What started as resort-style pools and fitness centers turned into onsite bike shops, rooftop dog parks and, in the case of one luxury apartment building in New York City, an on-call sommelier service. 

    The amenities race came as a response to the on-demand economy. People today want services, and they want them at the touch of a button. Luxury developers have struggled with the high cost of amenities, but for class-B and class-C owners, amenities have not been an option, until now. 

    Automated building tools are helping to democratize the amenities race. Smart locks and automated reservation systems allow residents to book and use online services easily. Dog walkers, for example, can enter a unit with a temporary code, food delivery drivers can gain one-time building access and packages can better find their way to tenants with limited staff engagement. Smart thermostats, in-unit lights and voice assistants are rapidly rising in popularity. 

    These amenities are valued more by renters than built-in services. In a study conducted by StreetEasy and published by the New York Times, renters valued air conditioners, in-unit washer-dryers and a doorman above all else. All three of those can be automated through smart technology.   

    Post pandemic, even luxury owners are looking at ways to reformat shared amenity spaces and turn to in-unit amenities—the place where people are spending most of their time these days. 

    Artificial intelligence is transforming workflows across industries. In commercial real estate, it’s a disruptor for both real estate stakeholders and the tenants that occupy those buildings. 

    New call-to-action


    Other posts you might be interested in

    View All Posts

    Subscribe to our Newsletter

    Never miss a real estate development beat.