From sales to building management, the real estate industry is being transformed by AI. AI tools help with property research and valuation; AI solutions staff buildings more efficiently, meeting customers only when and where they need assistance rather than maintaining staff on-site for fixed hours every day.
Virtual assistants show properties to potential renters and buyers; some hotels are experimenting with humanoids at their front desks. Morgan Stanley Research, which looked at the tasks carried out by 162 real estate investment trust (REIT) and commercial real estate (CRE) companies with a combined $92 billion in labor costs and 525,000 employees, found that these AI innovations could result in efficiency gains worth $34 billion for the real estate industry by 2030. According to the analysis, these businesses can automate 37% of their tasks, especially in management, sales and related activities, office and administrative support, and installation, maintenance, and repairs. According to Ronald Kamdem, Head of U.S., “Our recent works suggest that the greatest opportunity for real estate companies to capitalize on AI in the next three to five years represents operating efficiencies, primarily through labor cost savings.” Morgan Stanley research on REITs and commercial real estate. How AI Can Save Money During the Covid-19 pandemic, when many businesses were forced to accommodate employees working from home and interactions between customers and real estate agents became limited, the technological transformation of real estate gained momentum. One company, for instance, stated that self-selected digital options account for 85 percent of its customer interactions at the moment in the self-storage industry. The firm was able to reduce on-property labor hours by 30% through AI-powered staffing optimization.
Another company in the residential sector claims that AI has increased productivity and has reduced the number of full-time employees by 15% since 2021. Despite the reduction in on-site staffing, companies reported higher satisfaction among both customers and their own teams.
Sectors With Highest Potential for Gains
The benefits of AI today extend beyond workforce efficiencies. Technology is also helping reduce infrastructure costs, through optimization of functions such as heating, ventilation and air conditioning; solar-power implementation; and energy-efficiency initiatives. AI has become a key tool for real estate firms and their clients to identify risks including cash flow stability, climate change, location, regulation, health and safety.
Within certain REIT and CRE services subsectors, AI investments are more likely to pay off. Due to labor automation, for instance, lodging and resorts, brokers, services, and healthcare REITs may see an increase in operating cash flow of more than 15%. According to Kamdem, “Brokers and services, in particular, show the highest potential for automation gains, with a possible 34 percent increase in operating cash flow, as they may be the furthest along in adopting GenAI tools at scale.” Through increased productivity and data center transactions made possible by GenAI tools, “they should benefit not only from labor cost savings but also from enhanced revenue opportunities.” A Vicious Circle?
Because the overall health of the labor market is directly linked to demand for real estate, the potential impact of AI-driven job cuts on various sectors of the market is a topic of discussion within the industry. Both residential and commercial real estate transactions might suffer as a result of the rising unemployment rate. According to Kamdem, “the majority of real estate sectors may face top-line pressure if concerns about significant job losses materialize and the labor force shrinks,” with “a potential disproportionate impact on office and lodging, given higher leverage and low cash flow.” “However, our economists have argued that productivity gains and the creation of new tasks and jobs by AI could have a positive impact on labor demand,” the statement reads.
