Since AI platforms opened up to the public last year, kicked off by ChatGPT’s release, commercial real estate professionals have been clamoring to find out how the technology can be used in commercial real estate. Generative AI programs have already been widely used to do common tasks like research, writing, and creating images. But as it’s grown in popularity and use, it’s been criticized for its shortcomings. Earlier this year, two attorneys in New York who used ChatGPT to write a legal brief were formally sanctioned by a judge after discovering that the brief included several fabricated case citations generated by the AI platform. It’s a technology that is still finding its footing, and industries are figuring out what it can and cannot do. But one promising new avenue where it could be useful is for developers looking to streamline the development process and get projects done faster.
In most commercial real estate developments, the contractor or construction company on the project uses construction management software like Procore to organize and keep track of all the various moving parts of a project. It essentially acts as a central hub for all documents, calendars, invoices, and all the other various paperwork and updates that occur during the construction process. But historically, the developer or sponsor on a project has used individual spreadsheets, a practice that doesn’t exactly lend itself to efficiency. While it’s well-known that the commercial real estate industry has been slow to adopt technology, it still surprises me that project management software for developers, like what the construction industry uses, was unavailable until recently. Now, more software is being rolled out that gives developers the same organizational tools as construction companies—with AI built into it.
Developers already face difficulties in today’s landscape of high-interest rates, inflation, and ongoing issues with labor shortages and construction delays. Added to that, a complex, multi-million dollar development project could mean constantly trying to wrangle data from vendors, including everything from an elevator company to a door hardware consultant. Meanwhile, that data is collected on several different spreadsheets that tend to be error-prone or get stale from slow data entry, everyone’s least favorite task. “Real estate development has been slow to change,” said William Sankey, Founder and CEO of Northspyre, a company that creates project management software for developers. “General contractors are probably a decade ahead of developers.”
When Sankey first founded Northspyre in 2017, it was a relatively green field. He estimates that 95 percent of teams were using spreadsheets to organize all their data and vendors. As he and his team first began showing potential clients demos of their software, it was hard to even get them to take a look at it. Several years later, he’s finding developers to be much more receptive to the idea. “Every knowledge-based industry is going through a transition where highly effective team members in any industry are expected to have good tools, and real estate development is no different,” he said.
The software can now bring all the data components of development together in one place and open up what AI can then do with all of that data. One of the biggest ways it can help developers is during the pre-planning phase. The programs take in a lot of data coming from different angles of the project and even additional info about zoning, permits, and conditions of a property. Machine intelligence can process all these different data points and can generate different scenarios of how a project can run and what the cost would be. This is especially useful for developers and owners looking to convert an office building to residential use, “conversion projects are harder than normal because there are unforeseen field conditions; it’s kind of unknowable,” Sankey said.
Before settling on a final project, a developer could run up to two dozen different scenarios in order to stress test every possible thing that could happen. For instance, if inflation were to increase costs by 10 percent, how much would that impact the entire project? The software can also pull in historical and institutional data and even market data in some of the larger office markets around the U.S. Typically, it’s difficult for developers to estimate costs without doing a lot of expensive probes up front, so having the ability to run different scenarios while avoiding undertaking timely and costly probes has huge upside for development teams.
AI can also automate a lot of the repetitive and time-consuming tasks involved in a project, including scheduling, progress tracking, and document management. It has the ability to automatically scan incoming emails for certain documents, pull them out, and upload them to the project’s central hub. AI-powered software can also predict potential risks associated with a project, like material shortages and labor disputes. It can help develop strategies to tackle these potential risks and reduce the likelihood of them happening again. “I think what’s most important in using technology is it really equips developers with the tools most construction companies have on their side,” said Phil Kang, CEO of Velocity Property Management, a Washington, D.C.-based real estate firm. “It kind of evens the table in the ability to be organized and update changes to a project.”
The ways AI is being used in the real estate industry continue to expand. After ChatGPT was released to the public less than a year ago, it was quickly identified as a tool for real estate professionals to help with things like writing marketing copy, generating business strategy ideas, and writing basic HTML code. Professionals in design and architecture have experimented with the tech in developing hypothetical prototypes of buildings and even to help make buildings more sustainable. With a growing number of developers looking to up their game with property management software that uses AI to automate time-consuming tasks, we’re seeing even more of what AI can provide to the industry. Though there has been a lot of criticism around factual errors and fabrications, AI platforms have generated and the limitations that this kind of tech has, it’s still an area that represents a lot of possibilities for the real estate industry, and we’ll surely see more ways it can be used in the future.
