COMMERCIAL REAL ESTATE INNOVATION
Is the Commercial Real Estate Industry Ready to Welcome AI ?
CONTRIBUTOR : Michael Hironimus , CCIM
Whether you ’ re discussing ChatGPT or the soaring stock price for NVIDIA , artificial intelligence – AI – is front and center just about everywhere these days .
“ I think it ’ s the biggest technological advance that we ' ve had since the adoption of the internet , and I think it will continue to permeate everything that we do in our daily lives , how we interact business-wise , and how we interact with each other ,”
- Michael Hironimus , CCIM , Principal / Founder of Duckridge Realty Advisors in West Linn , OR
Hironimus is in the process of developing a course on AI for The CCIM Institute , and he also is weaving AI into existing courses offered through The CCIM Institute he teaches with a focus on asset management and market analysis . “ We deal with a lot of big data . So , naturally , we ' re starting to think about how we can utilize AI ,” says Hironimus . Even introducing AI to CCIMs at a high level will be helpful to get people thinking about how they can use it in their business and their company , he adds .
AI is already finding its way into a variety of commercial real estate applications from tenant services chatbots and smart building systems to financial modeling and lease administration . According to a report by Bloomberg Intelligence , the generative AI market alone is expected to grow from an estimated $ 40 billion in 2022 to $ 1.3 trillion over the next ten years .
AI 3.0
AI ranked as the # 4 biggest issue in the Counselors of Real Estate ’ s 2023-24 Top Ten Issues Affecting Real Estate ®. Although AI has exploded along with the introduction of ChatGPT to mainstream users , the use of AI in the CRE industry goes back decades . According to the Counselors of Real Estate , AI 1.0 started back in the 1980s by collecting data , such as on rents , vacancies , operating income , and ultimately cap rates . Groups such as NCREIF came up with standardized data sets to compare NOIs that helped to measure performance , both relative and absolute .
AI 2.0 was the work that Bill Wheaton and Ray Torto did in collecting a time series of data on rents and vacancies and then forecasting using traditional time series methods , and the work that Bob White did in collecting and forecasting transactional cap rates . Where we are now with AI 3.0 is integrating new and alternative forms of data and new forecasting techniques .
CCIMs are already starting to see AI emerge in a variety of tools they are using for business , such as Site To Do Business , ESRI , and Moody ’ s Analytics , as well as everyday tools such as Google , Microsoft , and customer relationship management ( CRM ) software . “ We ’ re starting to see it integrated into the tools that we ' re using now , and it ' s only going to continue to increase as the technology matures , and we see more applications for this technology ,” says Hironimus . The challenge moving forward is just getting people to understand how they can use AI to create value and drive efficiency .
Practical Applications for CRE
As time goes on and people understand that AI is very approachable and useful , there will be more adoption and utilization . A good analogy for AI is to think of it as a really intelligent , enthusiastic intern or junior broker , notes Hironimus . The trick is just being able to give clear instructions and understand how to elicit the information that you need , he adds . For example , Hironimus has created his own AI bots that can perform tasks that range from helping his son learn calculus to financial analysis and lease abstraction .
People also need to understand the guardrails in using generative AI tools , such as putting appropriate privacy settings in place so they are not putting confidential or proprietary information out into the universe . And just like with any intern , it ’ s important to review and fact-check the information being delivered for accuracy . However , CCIMs shouldn ’ t be intimidated or afraid to experiment with AI to see how it can help them in their business .
“ AI is designed to be intuitive and it ’ s getting more intuitive as the technology progresses . The first thing is to just get started and see what you can create with it .”
- Michael Hironimus , CCIM , Principal / Founder of Duckridge Realty Advisors in West Linn , OR
28 | CCIM . COM