WORDS: DEBBIE HATHWAY :: PHOTOS: SUPPLIED
The adoption of AI technology is rapidly gaining momentum across diverse industries such as healthcare, finance, retail, transportation, and of course, real estate.
The debate surrounding the role of Artificial Intelligence (AI) in our lives has ended. AI has firmly established its presence and significantly influences multiple aspects of our daily lives and businesses, including one of the oldest industries: real estate.
CONSUMER EXPECTATIONS
How AI will ultimately transform life up to 2027 is reflected in this chart derived through insights from an Ipsos survey (2021).
In real estate, AI encompasses a wide range of technologies to identify the most lucrative investment opportunities within the market, according to Farhana Hassim, Associate Director of Risk and Advisory at BDO South Africa. It is revolutionising the development and execution of real estate investment strategies, equipping investors with data-driven insights and analysis.
8 WAYS THAT AI CAN INFLUENCE STRATEGIES
- Predictive analytics: By harnessing the power of AI-powered predictive analytics, investors can identify potential opportunities and risks in the market by analysing vast amounts of data. This analysis includes examining trends in property prices, rental rates, vacancy rates, and demographic data to pinpoint areas with high growth potential.
- Portfolio optimisation: AI can optimise real estate portfolios by analysing property performance data, market trends, and investor objectives. Through advanced technology, AI can recommend portfolio adjustments to enhance returns, identify the optimal mix of investments, mitigate risks, and maintain diversification.
- Property valuation: AI enables quick and practical assessment of substantial data from various sources to facilitate property valuation. This includes evaluating property records and transaction history and predicting market trends. AI can also provide a more accurate estimation of a property’s current and future value, empowering investors to make well-informed investment decisions.
- Risk management: Leveraging historical data and market trends, AI can identify potential risks associated with real estate investments. This includes identifying properties at a high risk of default or areas prone to natural disasters. Additionally, AI can analyse historical and current political events to predict future trends, such as the risk of national shutdowns and their potential impact on the retail industry.
- Marketing and sales: AI can assist in marketing and selling properties by analysing customer data and predicting customer preferences. This allows real estate companies to target potential buyers more effectively, enhance customer satisfaction, and reduce marketing costs.
- Streamlined property management: AI tools can automate routine tasks in property management, such as responding to tenant enquiries, generating and managing documents like leases and utilities, facilitating payments, and scheduling maintenance. This improves overall property management efficiency.
- Enhanced internal operations: AI can support the implementation of digital strategies that streamline internal processes, reduce costs, and improve shareholder value.
- Customer experience: AI enables investors to understand precisely what their target market seeks regarding retail real estate. For instance, AI can assess customers’ shopping preferences and identify whether they desire more digitally driven shopping experiences, such as cardless parking facilities. By aligning with customer demands, investors can tailor their retail strategies effectively.
It is increasingly evident that AI has become an essential tool for providing valuable insights and improving investment decision-making in the real estate industry. However, it is crucial to recognise that the effectiveness of AI relies on the quality of the data it analyses. Therefore, digital strategies must consider data requirements and objectives during the design phase, and they should be integrated into the overall business strategy.
Furthermore, it is essential to understand that data is inherently human-centric, both in terms of its collection and relevance within the sector. Access to accurate data empowers investment managers to manage risks and make real-time adjustments based on changing market conditions. While the pandemic has dramatically transformed the landscape of real estate investment, AI now serves as a tool to navigate these changes.
From a risk and business continuity perspective, tenants seek more flexibility in lease terms, commercial real estate is pursuing scalability as work-from-home scenarios emerge, and some tenants are even searching for real estate that can easily convert from standard warehousing into streamlined distribution hubs. It is crucial for investment strategies to adapt to these changes and for the real estate industry to remain agile in proactively addressing evolving tenant needs. This is where the power of AI truly shines.
Even within the unique South African context of load-shedding, AI has found its place. While energy crises are not new, there are novel ways to respond. More than generators alone is required to sustain business operations, but AI can leverage big data to recognise patterns and predict energy usage. This can assist investors in considering suitable alternative energy sources that optimise use and mitigate the high downtime costs during load-shedding stages. Furthermore, AI can aid in predicting strategies related to cost management and navigating the rise of future-related and unrelated expenses, such as increased insurance premiums.
From predictive analytics to property valuation and everything in between, AI is revolutionising real estate investment strategies by improving performance and reducing risk. As AI evolves, it will become an even more indispensable tool for real estate investors and companies seeking to stay ahead of the curve.
