Diminishing perspective of skyscrapers in central London
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A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future issues straight to your inbox.
The commercial real estate market has historically been slow to modernize, and yet the adoption of artificial intelligence appears to be accelerating.
According to a new survey from JLL, companies are moving beyond initial testing and exploration to more targeted applications that aim to redefine value.
The survey of more than 1,500 senior decision makers from CRE investors and users across industries found that companies are making AI a priority in their technology budgets early on. They are also moving from just using it for efficiency reasons to focusing on how it can grow their business.
JLL found that 88% of investors, owners and landlords said they have started piloting AI, with most pursuing an average of five use cases at a time. According to the report, more than 90% of tenants are piloting artificial intelligence in corporate real estate. Compare that to just 5% who started AI pilots two years ago. The introduction is quick, but not easy.
Only 5% of respondents reported meeting all of their program goals, while nearly half reported meeting two to three goals. Many of the efforts are still experimental and without much growth.
“When you think about commercial real estate, you're not traditionally the type of person who adopts technology quickly, and you're usually skeptical,” said Yao Morin, chief technology officer at JLL. “So the high number of adoptions actually surprises me quite a bit. What's not surprising, on the other hand, is that only 5% actually think they've achieved all their goals. That's pretty consistent with a lot of other industries too.”
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The reason they are not achieving their goals is because the goal line has moved. Companies don't just want to complete certain tasks faster or increase so-called operational efficiency. Now they are linking AI to their sales goals.
For example, some use it to improve their investment risk models and make investment and portfolio decisions based on AI results. That requires big changes in the fundamental way they work.
“When you really start to move towards the revenue side, the margin expansion side, it's going to require a lot more than just deploying a technology,” Morin explained. “You can't just say, 'Well, I'll save you 10% on this specific thing.' Companies need to actually rethink their operating model and rethink how they organize themselves to actually achieve the savings.”
And so, despite economic headwinds, companies are investing heavily in AI. More than half of the investors surveyed by JLL were able to achieve significant budget growth in this area in the last two years. Their biggest spend is on strategic advice on technology or AI, and most say their budgets have increased due to AI alone. Spending will then go toward modernizing both cyber and data security measures as well as the infrastructure for AI integration.
Morin said what she found really surprising is that while most companies assume that companies will use AI for menial tasks or low-risk, low-hanging tasks, this is not the case at all.
“Our survey showed the opposite. We are moving beyond this initial phase of skepticism to a point of maturity where companies are truly focused on competitive advantage over pressing business problems and are instead using AI to solve them.” [just] these simple, low-risk surgeries.”