If I asked you to think of the most tech-savvy industries, real estate is not likely to be one of them. Buying or selling a property still requires painful amounts of paperwork, mysterious fees, and other bureaucratic tasks. Commercial real estate is fraught with inefficient processes and very few options to improve them. We all accept it because it’s just the way we’ve done business for a long time.
So, you wouldn’t think the real estate industry would be that jazzed by ChatGPT and other next generation AI technology. That’s where you’d be wrong, though.
This new wave of AI is set to have a profound and positive impact on the industry. I predict that ChatGPT and similar applications could slash at least $400 billion in operating costs from the $3.8 trillion U.S. real estate industry over the next decade. It has the power to make operations much more efficient, reduce inflationary pressure, and allow employees to drop the grunt work and focus on higher-value tasks.
But why would a historically tech-resistant industry suddenly embrace it now? Because the ChatGPT version of AI is different. Unlike previous AI applications, it is immediately accessible, requires no training, and delivers a clear impact, crushing the time it takes to perform everyday tasks.
The fact that the real estate industry is still quite laborious and doesn’t have many sunk costs in technology makes it easier to leapfrog into the new AI era, like the way that many African nations skipped landlines and went straight to cell phones.
Myself and many of my colleagues in the commercial real estate world are already avid users of ChatGPT only a few months after the free tool burst onto the scene. Say that I needed to write up a commercial ground lease for 99 years with 1 percent annual bumps in rent that complies with Indiana state and other relevant laws. That document would usually take hours to complete. ChatGPT spits it out in a minute. Sure, that first version will still need refining by further prompts and a human editor, but the overall time saving is still astounding.
It’s not hard to find a whole swath of other commercial real estate tasks that could easily be taken over by this powerful new form of AI. Writing notices, analyzing large amounts of data to help understand investment returns, producing marketing materials, and performing due diligence checks based on public records are just a few that come to mind. ChatGPT can be used to create brochures for investors based on best-in-class offering memorandums, replacing the time-consuming manual production of PowerPoint presentations. The new AI tools will supercharge chatbots for interacting with clients and tenants, transforming them from basic informational tools into a much more nuanced and human-like experience.
While ChatGPT has been hogging all the headlines, it’s just the tip of the iceberg as other groundbreaking AI tools come to market. Applications such as Dall-E 2 and Stable Diffusion are making it possible to do with images and video what ChatGPT does with text. Instead of tasking internal staff or freelancers to spend days creating marketing materials as they do now, real estate firms will be able to create professional-grade content in minutes.
The impact of blockchain technology will complement the use of AI in the coming years, marking another big step forward in the digitalization of real estate. Countries like Dubai are already using blockchain-based databases to record all real estate contracts, including leases, cutting out huge amounts of paperwork and other bureaucracy. These efficient digital systems are a perfect place for AI to stretch its wings and do things never before thought possible. The strength of vested interests and regulations means that the U.S. market isn’t ready for this yet, but it’s surely a matter of time.
While the advent of AI is a big growth opportunity for the industry, it comes with serious challenges that real estate companies will need to consider and confront as early as possible. Number one is the human impact. A day doesn’t go by without news of some previously unimaginable feat that ChatGPT has achieved, be it passing the Wharton MBA exam, writing college-level essays, or writing speeches for political leaders. The impact this will have on jobs and education requires a societal-level response to put a greater emphasis on critical reasoning, teamwork, and “soft” skills that remain outside the reach of AI.
There’s no question that many real estate jobs will be eaten up by ChatGPT and other AI tools. But employers in the industry should start to prepare for the impact now. The real estate industry needs to get ahead of the upcoming paradigm shift from AI by changing the way they think about training and upskilling their talent into higher value functions. Companies will need robust training programs that operate on more frequent cycles to ensure they are getting the most out of their employees while helping them to stay ahead of the fast-moving AI wave. Real estate might never be one of the quickest to adopt technology but my guess is that before long, it will have no choice but to adapt to the world changing innovation that AI will bring.