The perspective of the skyscrapers in downtown London fades.
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A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. 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 publicly traded companies. Sign up to receive future editions directly to your inbox.
Although the commercial real estate market has historically been slow to modernize, the adoption of artificial intelligence appears to be accelerating.
New research from JLL shows that companies are moving beyond initial testing and exploration to more targeted applications aimed at redefining value.
A survey of more than 1,500 senior CRE investor and occupier decision makers across a variety of industries found that, although still in its early stages, organizations are making AI a priority within their technology budgets. Additionally, the focus has shifted from simply using it to increase efficiency to focusing on how to grow the business.
According to JLL research, 88% of investors, owners, and landlords have begun piloting AI, and most say they are pursuing an average of five use cases at the same time. The report also states that more than 90% of occupiers have implemented corporate real estate AI pilots. Compare that to just 5% starting an AI pilot two years ago. Deployment is quick, but not entirely easy.
Only 5% said they met all of their program goals, but nearly half said they met two to three goals. Many of the initiatives are still in the experimental stage and have not seen significant growth.
“If you think about commercial real estate, they traditionally don’t adopt technology quickly and are usually skeptical,” said Yao Molin, chief technology officer at JLL. “So the high hiring numbers are actually quite surprising to me. On the flip side, and not surprisingly, only 5% think they’ve actually met all their goals. This is pretty much in line with a lot of other industries as well.”
The reason they don’t reach their goal is because the finish line has moved. Companies aren’t just looking for operational efficiency, the ability to perform certain tasks faster. They are now trying to connect AI to revenue goals.
For example, some are using it to make investment and portfolio decisions based on AI output and improve investment risk models. This will require fundamental changes in the way companies operate.
“When you really start working on the revenue side, the profit growth side, you need to do more than just use technology,” Morin explained. “You can’t just say, ‘We’re going to save 10% to do this particular thing.’ Companies need to really rethink their operating models and rethink how they organize to actually achieve savings.”
That’s why companies are investing heavily in AI despite economic headwinds. More than half of the investors surveyed by JLL were able to obtain significant budget increases in this area over the past two years. Their top spend is on strategic advice on technology or AI, with most companies reporting an increase in their budgets thanks to AI. It will then be spent on infrastructure upgrades for cyber and data security measures and AI integration.
Morin said what really surprised him was that while many people thought companies would start using AI for simple tasks, tasks that were low-risk and easy to accomplish, that wasn’t the case at all.
“Our research shows the opposite. Beyond this initial skeptical stage, companies are reaching a stage of sophistication where they are seriously focused on competitive advantage for pressing business problems, using AI instead of (only) simple low-risk tasks.”
