Diminishing perspective of London city center skyscrapers
Chunyip Wong | Istock | Getty Images
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Register to receive future editions, straight to your inbox.
The commercial real estate market has historically been slow to modernize, and yet it appears to be accelerating its adoption of artificial intelligence.
Companies are moving beyond initial testing and exploration to more focused applications that aim to redefine value, according to a new survey from JLL.
The survey of more than 1,500 senior CRE investors and decision-makers across various industries found that while still in the early stages, organizations are making AI a priority in their technology budgets. They are also moving away from using it purely for efficiency reasons and are now focusing on how they can grow their business.
JLL found that 88% of investors, owners, and landlords said they had started piloting AI, with most pursuing an average of five use cases simultaneously. And more than 90% of occupiers are running AI pilots for corporate real estate, according to the report. Compare that with just 5% of AI pilots who started two years ago. Adoption is rapid, but not entirely easy.
Only 5% of respondents said they achieved all of their program goals, while almost half said they achieved two to three goals. Much of the effort is still experimental, without much growth.
“If you think about commercial real estate, traditionally it’s not a quick adopter of technology, and it’s generally skeptical,” said Yao Morin, chief technology officer at JLL. “The high number of adoptions actually surprises me. What’s not surprising on the other hand is that only 5% think they’ve achieved all the goals. This is in line with many other industries as well.”
The reason they don’t achieve their goals is because the goal line has moved. Businesses have moved beyond simply wanting to do certain tasks faster or what we call operational efficiency. They are now linking AI to their revenue goals.
For example, some use it to help them improve their investment risk models, making investment and portfolio decisions based on AI results. This will require big changes to the way they fundamentally operate.
“When you really start to move towards the revenue side, towards margin expansion, then it’s going to take a lot more than just using technology,” Morin explained. “You can’t just say, ‘Well, I’ll save you 10 percent to do this particular thing.’ Companies really need to rethink their operating model, rethink the way they organize themselves to really make savings. »
This is why companies are investing heavily in AI, despite economic difficulties. More than half of the investors surveyed by JLL were able to achieve significant budgetary growth over the past two years in this sector. Their No. 1 spend is on strategic technology or AI consulting, and most say their budgets have increased solely because of AI. After that, spending will be on upgrading cybersecurity and data security measures and infrastructure for AI integration.
Morin said what she found really surprising is that while most think companies will start using AI for simple tasks or low-risk, low-hanging fruit, that’s not the case at all.
“Our survey showed the opposite. We are reaching a point of sophistication, beyond this initial phase of skepticism, where companies are actually focusing on driving competitive advantage in pressing business problems, using AI to solve instead of [just] these simple, low-risk operations.