The (Data) Science Of The Deal: How AI Will Transform Commercial Real Estate

Posted by Guy Zipori Jul 2, 2019

For the past 10 years, the main ingredient for success in real estate investing has been... investing in real estate. Some have done better than others - but the market has been on a steady incline, which we all know will end at some point.

Artificial intelligence has reached maturation, and is now changing the way we work, do business, discover, and vet information.

Yet many believe that AI is coming for our jobs. As we see our future unfolding with innovations like driverless cars just around the corner, many new fears are being sparked. And it’s no wonder - Hollywood has done a wonderful job terrifying us about technology. Predictably, the entertainment value in stories about AI taking over the world sells far more tickets than real-life AI, which is actually helping generate more business insight in real life.

In an interesting example of history repeating, much of the fear around AI today is similar to that felt during the introduction of machines as the Industrial Revolution took off. Until the 18th century, people were used to doing everything by hand.

Sure, it was hard manual labor - but the predictability of their employment and responsibilities was secure. The rise of machines threatened to change all of that. For many people, it was a terrifying time.

But of course, the new innovations eventually pushed everything forward, creating new jobs and transforming economies for the better.

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Of course, it’s easier to see the power of a revolution retrospectively.

The CRE World: Time for Change

Identifying a sector today that hasn’t been profoundly affected by artificial intelligence would be a difficult task. Aeronautics, industrial assembly, retail, data management, the financial sector, communication platforms, healthcare, self-driving cars - almost no industry has escaped the sweeping ground-up overhauls of AI and machine learning. But commercial real estate, one of the biggest asset classes in the world, has been so resistant to tech-driven overhaul that it’s actually one of the last strongholds of pre-digital methodology.

Having said that, however, all signs indicate that CRE is finally ready for its own technology-based overhaul. Here’s why.

  • AI and machine learning technology are finally mature enough
  • The current market is tight, and AI can detect anomalies at better rates than humans - an invaluable advantage in today’s market climate
  • Record amounts of “dry powder” - cash reserved for investments but left unused - means that investors will embrace new methods
  • Market unpredictability and volatility means investors are becoming more open to the concept of “adapt or die”

As history has shown from the Industrial Revolution, there’s no reason to fear the evolution driven by AI. When computers handle repetitive tasks such as data crunching, humans are freed to focus on creativity, strategy, and fine tuning our strongest capabilities - all the things machines can’t compete with. AI is not replacing lawyers or winning cases in court, but rather ensuring that contracts don’t go out with overlooked mistakes. Today, artificial intelligence is helping with cancer detection and many other critical medical applications, offering much faster and more comprehensive insight than human abilities alone ever could.

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Do you know how much time out of a 16 hour flight from NYC to Tokyo is manually flown by a pilot? Only eight minutes! We trust AI with our lives, but what about our investments?

Technology has advanced, and what was once only available to those with supercomputers and seven-figure budgets is now being outdone by every common hand-held device.

Bottomless Data

There is far more data available today than ever before. Take Planet, a technology company with 150 satellites in orbit which produce 1.2 million images over 300 million square miles daily. These images are used to deliver operation-enhancing insights to industries from agriculture to shipping to insurance and beyond.

But let’s get back to real estate. For the first time, data availability, advanced technology, and computing power allow us to sequence the DNA of real estate investing. For example: instead of comparing similar property assets by looking at their vintage, location, or other static characteristics, we can use data such as internet browsing data - in other words, what people are really looking for - to reveal a deeper understanding of which asset factors truly matter.

Today, Skyline AI is connected to more than 200 different data sources. Any piece of information that may affect real estate value is important to us and to our investors. We leverage our proprietary AI technology to extract insights and generate predictions based on this data, and together with our partners, we make better real estate investment decisions and achieve higher results than industry benchmarks.

Limitless Technology

Our technology impacts the entire lifecycle of real estate investing. Using Skyline AI’s investment platform, advanced real estate players can transform how they approach investment decisions from the ground up. Our AI also augments accuracy and bottom line results for deal sourcing and investment underwriting, allowing us to find and analyze the best available deals in seconds, rather than weeks - and with hyperaccuracy.

During the ownership period, this technology allows us to access a complete picture of the asset at all times and compare it with competing assets around it. It also provides asset management insight and disposition decisioning.

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The Future of AI Adoption

AI is not about to ruthlessly replace human real estate operators, nor is that its goal. What it can do, however, is complement the creativity and experience of human investors and analysts with valuable new tools for informing the decisions they make, leveraging once-unseen data correlations to find hidden value and gauge the risks and benefits of potential deals.

As AI infiltrates more aspects of business, commercial real estate investors will come to expect the implementation of AI solutions to yield more precise decision making. Each deal will still involve its own element of art - but investors stand to win big by introducing some data science into the process.

The AI revolution has begun. What side of history will you be on?