The commercial real estate (CRE) industry has been around for a long time. Many of today’s biggest CRE firms can trace their roots to the industrial revolution, and sometimes it seems like our industry hasn’t changed that much in the meantime.
In our research, we found that first-time tenants are surprised—even shocked—by how complicated it is to lease office space and how much they must rely on their broker for even the most basic tasks. For the most part, brokers in CRE had an “old boys club” dynamic where deals were based almost entirely on personal relationships and networks.
But make no mistake: the best brokers are deeply knowledgeable about the market, and their expertise gives their clients a significant advantage. Savvy tenants recognize this, and they value their relationships with their brokers, despite the inefficiencies in the process.
So how do we bring transparency and efficiency to CRE, while still retaining the considerable value of expert brokers? Thanks to today’s smarter tech—especially artificial intelligence (AI)—we can use AI to partner with brokers to deliver the best of both.
AI is impacting all industries across the world. Reach and Markets predicts that AI revenue will reach $38.8B by 2025. While AI is automating many industries, it’s also leading to new opportunities and creating new jobs. According to a 2017 Forrester Report, AI will create 15 million new jobs in the U.S. over the next 10 years, specifically in the areas of programmers and developers.
We see three key areas where AI has the potential to significantly improve the tenant’s experience: search, logistics, and negotiations.
Tenants are overwhelmed by the search process. A large city may have hundreds of viable spaces, and tenants often have no idea where to start. What should they expect to pay? What aspects should they prioritize? How many properties should they visit?
At Truss, we rely on our AI-powered chatbot to ask smart questions that help the tenant find the best spaces for them. In addition, our bot adapts to the tenant’s level. Experienced tenants can answer more detailed questions to get even more control over their search.
What previously seemed overwhelming becomes easy to understand. Instead of hundreds of options, tenants can easily see the most relevant. This AI-enhanced process saves time and money for all parties. The tenant doesn’t waste time viewing properties that aren’t a fit, while the landlord can focus on tenants that are most likely to rent their space.
We looked at how brokers spend their time, and we were stunned by what we found. In a typical deal, a broker might send hundreds of emails and make hundreds of phone calls. Most of these were completely mundane: requests for routine information, scheduling tours, forwarding documents, and reminders about key dates and deadlines.
At Truss, we see this as a tremendous waste of time and energy.
Instead of relying on overworked brokers, our AI tracks key details, coordinates communication, and keeps everyone in the loop. But it goes beyond this to make smart suggestions, for example, grouping tours together to minimize travel time.
Confident that AI is taking care of day-to-day scheduling, brokers and tenants can focus on their business problems rather than acting as a glorified switchboard and calendar.
Perhaps nothing is so scary to a new tenant as the prospect of negotiating the final lease. Even sophisticated clients report a nagging worry that they haven’t negotiated a fair deal. It isn’t for lack of effort: tenants, landlords and their respective brokers typically spend days discussing and negotiating details of the lease terms, fair pricing and other matters.
AI can help the negotiation process by grounding it in hard data and clear analysis. For example, by analyzing existing data, AI can quickly calculate a “fair deal” and skip a few rounds of back-and-forth. When the tenant understands comparable prices of other office spaces in the neighborhood, they can negotiate with confidence, knowing that the terms of the deal are reasonable. The faster the deal closes at a fair price, the better for everyone.
While these three innovations have the potential to transform the industry, we’re just getting started.
If CRE follows the pattern in other knowledge-based industries, the best brokers will become more valuable than ever. Efficient processes will enable them to serve many more clients, and their work will focus on their unique expertise.
In addition, as the process becomes simpler and more transparent, the market will expand. A small tenant might find today’s leasing process too daunting and opt to work from home or stay in a coworking space. When the process becomes simple, fast, and transparent, they will be more likely to consider commercial leasing. We believe there is a tremendous amount of untapped potential among customers like this.
On the technology side, the biggest limitation for AI in real estate is finding good data to power it. Over the next several years, we expect to see this improve in a virtuous cycle. As more companies become sophisticated enough to use data intelligently, data providers will invest more in creating high-quality data sources.
One thing is for sure, the next few years will see a significant transformation in our industry, and AI will play a huge role.