We face a challenging investment environment. Currently, real estate investors are facing tight market conditions and holding close to $300 billion in dry powder – record levels, according to figures from Preqin. As investors struggle to identify market anomalies and promising opportunities, it’s increasingly clear that while the real estate world has fine-tuned the calculations necessary to drive intelligent investment decisions, relying on human expertise alone has resulted in firms holding onto their cash and forgoing billions of dollars in value. On top of all that, many predict that the current cycle is soon coming to an end. This unpredictability solidifies the notion that what worked in the industry five years ago won’t suffice today or in the future. The market is on the cusp of seismic change, and those who are agile enough to adopt new strategies and technologies are going to dominate the new economic reality.
Credits: Getty images / jamesteohart
Human expertise in need of enhancement
In order to see what the human eye cannot – to identify and seize opportunities in a tight market and deploy uninvested cash – the commercial real estate industry should turn to advanced technology, including artificial intelligence and machine learning, to augment existing legacy abilities. In short, the industry needs to don an Iron Man suit, if you will.
When human analysts are armed with sophisticated technology, new deal parameters will be illuminated and new value unleashed. So long as commercial real estate acquisitions are still carried out using mainly Excel spreadsheets and siloed data sources, inefficiency will continue to plague the industry. Artificial intelligence and data analytics provide a pathway for both saving precious time and making sense of thousands of data points for which traditional human analyses simply can’t account. To identify the best opportunities and maximize ROI, investors need access to vast amounts of data – from listing data to local points of interest to web data mined using AI and natural language processing (NLP) technology. When knit together, AI and human expertise deliver powerful results, bridging the gap between human error, cognitive bias, and computational limitations.
Enter AI Asset Management
Leveraging AI, commercial real estate investors will have the depth and perspective necessary to impact the entire lifecycle of real estate investment, from deal sourcing and underwriting, to asset management and smart disposition.
How can AI revolutionize the entire process? Take deal sourcing: Using AI, commercial real estate professionals can define their investment criteria and rapidly access the best opportunities. Investors can pinpoint potential deals with risk-reward ratios that best suit their investment goals, explore the market from a macro or micro view according to specified KPIs, predict assets’ time to market, identify market anomalies to exploit, and more. With AI, these analyses can be performed in a matter of minutes – eliminating hundreds of deal-sourcing hours and enabling real estate professionals to focus on what matters most: unlocking more value for investment portfolios.
Releasing Dry Powder
Once investors have decided they are interested in pursuing a deal, AI can generate a full underwriting report within a matter of seconds, complete with a deep assessment, including actionable predictions for asset performance. AI-powered underwriting optimizes risk and reward by providing a high-resolution picture of each asset’s ins and outs, enabling investors to predict KPIs and develop ideal business models. Equipped with the speed and processing power of advanced technology, investors are able to explore exponentially more deals in less time as well as deals that were heretofore unobtainable, including off-market or out-of-market deals.
Armed with these insights, investors will have the confidence and wherewithal to invest their dry powder in more assets, creating billions of dollars in value while guarding against market uncertainty.
Enhanced Investment Future
AI-driven commercial real estate asset management has finally arrived — and given the challenges of today’s commercial market, now is the time to equip investors with the protective (and predictive) armor of AI and predictive analytics. They allow for robust, AI-vetted investments that can survive a low tide, the early identification of market shifts, and unbiased and reliable decision making in times of uncertainty. Those who embrace this innovation today will enjoy a competitive advantage when, in the coming years, “advanced real estate technology” isn’t a novelty, but the reality.