The adoption of AI is booming across all sectors, and the real estate industry is no exception.
According to a January 2024 market intelligence report, the AI market in real estate is expected to be valued at $164.96 billion in 2023, reaching $226.71 billion by the end of 2024 and $731.59 billion by 2028. The report noted that machine learning, natural language processing, and computer vision are the most widely used AI techniques in the sector.
Additionally, a Delta Media Group study found that 75% of U.S. real estate agents surveyed have adopted AI. The study, released in January, found that 82% of agents surveyed use AI to write property descriptions. Two-thirds of agents use AI to write blog posts, emails and letters, 60% use AI to create social media content and 44% use AI to create website content.
Opportunities for AI in real estate are on the rise as industry professionals find new ways to incorporate it into their work. Here we look at seven of the most prominent use cases, along with challenges to look out for.
1. Document review and summary
Many real estate professionals, especially those in commercial real estate, are using AI for document review: AI tools can process pages of legal language to produce summaries and insights that would be too tedious to process manually on a daily basis.
John D'Angelo, U.S. real estate industry lead at Deloitte Consulting, pointed to the use of AI in lease abstraction. AI tools can review and summarize leases and highlight key clauses, allowing property owners, real estate professionals, and leaseholders to do this quickly, accurately, and at scale. This AI application is especially useful for professionals who need to gain insight into dozens or hundreds of leases, D'Angelo said.
“[AI] “Technology is taking the tedious tasks out of the equation and allowing machines to do the work for you. It's also making the impossible possible and achievable,” he said.
2. Financial Evaluation
AI tools can provide accurate information about current property values, predict future values and provide precise recommendations about actions to take. What's more, AI can provide this information in real time, says Dan Wiseman, director of innovation strategy for the National Association of Realtors' Strategic Business, Innovation and Technology group.
“AI-type techniques have been around for years for real estate valuation and appraisal,” Wiseman said. “Now, because we have more data available, we can actually do more with it, with greater accuracy and transparency.” For example, investors can use AI to determine the best markets to invest in and the best time to broker a deal.
AI can also help remove human assumptions from assessments, leading to better decision-making, Wiseman added, though it's important to remember that AI can also reflect and perpetuate human biases.
3. Real estate maintenance
According to Wiseman, AI will use data from a variety of sources, including endpoint sensors, IoT devices and weather forecasts, to identify patterns, trends and needs to help commercial property owners and managers maintain their properties.
For example, some companies are using AI to analyze people's movements within buildings such as airports and shopping malls to gain insights into purchasing patterns. These insights can help in better building designs that better serve buyer needs and improve the overall user experience.
4. Commitment to sustainability and efficiency
AI is already helping to create more efficient and environmentally sustainable buildings, said Tyler Wiggers, assistant lecturer and director of industry partnerships and engagement at the Center for Real Estate Finance and Investment at the University of Miami's Farmer College of Business.
AI-powered building management systems collect data from multiple sources such as IoT devices, weather forecasts, HVAC units, etc. to analyze and predict energy demand and adjust accordingly. These systems proactively optimize and dynamically manage energy consumption to minimize waste.
And it's not just commercial real estate that will benefit from AI in this way, Wiseman added: AI-enabled smart homes can understand occupant needs and patterns and manage their homes more effectively.
5. Strengthened security
Property owners and managers can also leverage AI tools such as computer vision systems with automated alerts for security operations.
AI can analyze activity more effectively than the human eye or simple camera systems and can even detect indicators of movement and mood, Wiggers said.
6. Visualization
AI-powered tools create virtual representations of spaces to help architects, builders and designers visualize a realistic version of their envisioned projects through the design and construction phases, D'Angelo said.
AI will also enable people to digitally manipulate and alter spaces, whether on a computer screen or through augmented or virtual reality headsets.
“[AI] “We can generate renderings of walkable spaces and simulate how people will interact in those spaces before the spaces are built,” D'Angelo said.
7. Planning and Development
AI can quickly sift through large amounts of data to spot patterns humans can't, making it an essential tool for property owners and operators who want to understand future trends, D'Angelo said. For example, AI can analyze current weather patterns and geographic data to predict future scenarios and identify whether real estate assets may be threatened by climate change.
Additionally, owners and managers of retail complexes can use AI to determine the optimal tenant mix, maximizing tenant sales and allowing facility owners to charge higher rents, Wiggers said.
“AI has the power to quickly process huge amounts of data and find correlations that humans cannot. [without the technology]” Wiggers explained.
AI can also predict trends in property supply and demand in a particular area over a specific time period, he said, a capability that would allow planners and developers to more effectively balance property supply and demand.
“mismatch [between supply and demand] “It's never going to go away, but AI can help minimize it,” Wiggers said.
Challenges of AI in Real Estate and Mitigation Strategies
While the use of AI in real estate is on the rise, the industry has yet to see transformative change, D'Angelo said. Like many other industries, the real estate industry faces challenges in using AI for both incremental improvements and transformative use cases.
He said one of the biggest hurdles is preparing the data needed to power AI systems, while other major challenges include planning and prioritizing projects, and identifying and mitigating risks like algorithmic bias and security concerns.
For example, algorithmic bias can occur when AI tools and systems are trained on internet data and learn certain biases and stereotypes that affect marginalized communities. In real estate, this raises a range of concerns, including that AI bias could perpetuate housing discrimination.
To mitigate such risks and take into account the limitations of AI tools, real estate practitioners should assign human evaluators to check the output of AI systems when making decisions, predictions, and recommendations.
Mary K. Pratt is an award-winning freelance journalist specializing in enterprise IT and cybersecurity management.