AI’s impact in the real estate market
 

AI has been deemed a revolution with widespread impact

According to OpenAI, around 80% of jobs are exposed to AI disruption. This number has sparked a wave of concerns about a potential upheaval in the real estate market because of the impending changes in the labor market.

Anxiety around such change is not new. In 1589, Queen Elizabeth of England refused to grant the inventor of the mechanical knitting machine a patent out of fear that it would put knitters out of work. Now, it is universally acknowledged that mechanical knitting machines spearheaded the first industrial revolution that led to explosive economic growth and real estate market expansion.

AI is expected to boost productivity

When technology allows fewer people to achieve the same productivity level, more people are freed to create new areas of opportunity. Goldman Sachs draws on a study by MIT economist David Autor to reveal that more than 85% of employment growth in the U.S. over the last 80 years is explained by the technology-driven creation of new positions.

Additionally, according to Microsoft CEO Satya Nadella, AI service providers are making the conscious choice to explore a human-centric approach, developing “co-pilot” products designed to assist people, as opposed to “auto-pilot” products that aim to entirely replace human roles. This positions AI as a significant productivity booster. On an aggregated level, the increase in productivity is projected to augment global GDP by 14% by the year 2030.

Commercial real estate is set to feel these effects. Historically, there have been five adaptive ways that real estate responded to technological changes over time:

AI sector as real estate occupiers
 

The growing AI ecosystem will continue to expand in selected tech hubs

Foundation model developers, such as OpenAI, are just the tip of the iceberg when it comes to the AI ecosystem. Companies involved in semiconductor hardware, cloud computing platforms, model hubs and application development all represent a growing occupier segment. The commercial real estate opportunity looks even brighter when considering the additional companies that will emerge as pre-trained foundation models are modified for specific use cases.

In 2024, private investment in AI within the US alone hit US$109 billion, doubling the amount in 2023. China showed the second largest investment of US $9.3 billion. The AI focus area with the most investment was medical and healthcare; followed by data management, processing and cloud computing; and Fintech. Additionally, enterprise use cases for generative AI represent a substantial opportunity. The GDP related to AI is anticipated to grow with a 18.6% compound annual growth rate (CAGR) through 2030 (PwC). According to our research, the growth in AI is also translating into increased real estate demand from this sector. In the US alone, AI companies nearly doubled their footprint in just two years, occupying more than 2.04 million square meters. This footprint is expected to grow  to 5.2 million square meters in 2030.
 

37% of AI companies are based in the U.S.

The real estate industry as AI adopter
 

The PropTech sector has laid a solid foundation for AI integration into real estate applications

The real estate industry has begun to proactively embrace and adopt new technologies.. In JLL‘s 2024 Future of Work Survey, most companies (90.1%) expect to carry out corporate real estate activities, such as workplace strategy, occupancy management and lease administration, with AI supporting human experts over the next five years. Over 60% have already started piloting different AI use cases in their real estate functions.

This is powered by a maturing PropTech ecosystem. There are now technological solutions for almost every aspect of real estate functions, including investment management, design and construction, building and facility operations and portfolio management. A solid foundation has been laid for AI integration.

Globally, there are over 500 companies providing AI-powered services to real estate and already delivering value in terms of improved efficiency and cost-savings. Top use cases of AI include:

• Document sorting and data standardization for portfolio data analytics and benchmarking
• IoT data mining for automated facility management
• Price modeling and prediction for investment management
• Satellite image processing for asset valuation and risk management
• Reality capture for construction site monitoring
• Scheduling for construction and capital project
• Recommendation and matchmaking for leasing and investment transactions
   

Generative AI applications in real estate are still in the early stages
 

Emerging use cases cover client communication assistance in leasing and property management (such as chatbots to handle tenant queries), floorplan and design generation and summarizing unstructured documents to create reports. More products are expected to come onto the market soon. Large Language Models, in particular, provide the ability to extract insights from vast amounts of text-based documents in real estate, significantly reducing the complexity of multi-lingual, multi-national operations.

However, most companies still lack a systematic approach to their AI implementation. The ability to develop actionable strategy is going to be the key determining factor for successful integration.

Read more about AI adoption in The future of AI in CRE - Why corporate real estate needs a systematic approach to AI

Early adopters of AI-enabled solutions are already seeing returns
 

Royal London Asset Management, a leading UK investment firm, experienced significant improvements in HVAC operations and energy efficiency in an 11,600 square meters commercial office building. By implementing JLL’s AI-powered Hank technologies, the firm has reached a record ROI of 708% and energy savings of 59%, reducing carbon emissions by up to 500 metric tons per year.
 

Case studies: AI creating value for real estate