Matias Recchia is Co-Founder and CEO of Keyway, the AI- powered real estate investment manager.
The commercial real estate industry is in the early innings of innovation. For real estate investors, developers, asset managers, lenders and property managers, integrating AI into commercial real estate operations offers a myriad of benefits, including increased efficiency, reduced costs and improved decision-making.
As co-founder and CEO of a leading proptech company, Keyway, I have been working with AI, machine learning and data analytics for years and am often asked by peers in commercial real estate how they can integrate AI and machine learning into their operations. In my discussions, I’ve come to believe that we have a sizable runway to continue to create more transparency, real-time data and fairness throughout the real estate ecosystem.
Here are seven ways that AI and machine learning can be integrated into your real estate operations.
1. Structuring Unstructured Data
Real estate data, particularly in multifamily commercial real estate, can be unstructured and decentralized. Simply put, the data is messy and not easy to digest. AI can play an essential role in organizing data so it can be analyzed more easily.
For example, Keyway leverages AI by taking unstructured and decentralized data and making it structured and centralized. Given the multitude of multifamily properties and separate rental agreements, organizing this disparate data can be challenging and time-consuming.
The amount of manual labor is not only costly but also error-prone. AI can organize this unstructured data quickly and convert the data to a format that allows managers to take actionable steps based on data analytics and insights.
2. Predictive Maintenance
No one can predict the future, but AI can analyze past data to make educated guesses about the future. For commercial real estate owners, maintenance can be a major financial cost but also a problem area for tenant satisfaction. Broken elevators, busted water pipes and clogged HVAC vents create maintenance chaos if not managed properly.
Predictive maintenance uses AI to analyze data from sensors to identify maintenance issues in HVAC, elevators, lighting and plumbing. Property managers can monitor equipment performance in real time and even predict problems before they arise. This proactive approach reduces repair costs, minimizes downtime, extends asset life, protects the property’s brand and reputation and increases tenant satisfaction.
3. Energy Optimization
Property managers can leverage AI to monitor patterns in energy usage to determine optimal levels throughout the property. AI can aggregate data from real-time occupancy, weather forecasts, time of year and time of day. It can then use this data to regulate heating, cooling and lighting. For example, a common area may need dimmer lights or cooler temperatures at certain times of day. The ability to automate energy regulation can lead to significant cost savings and sustainability contributions that can appease investors and tenants alike.
4. Real-Time Comps
AI has revolutionized comparable property data, also known as comps, for commercial real estate, which traditionally has been a manual exercise with stale data. To address these legacy challenges, my company built our KeyComps platform based on AI and machine learning as a way to offer a comprehensive end-to-end technology solution that reduces manual labor, saves time, increases productivity and reduces human error.
However, it is worth noting that relying on AI to create rental comps intelligence is not without risk. We choose to power our technology solely through public sources. By using public sources, we ensured transparency for real estate stakeholders and reduced the potential for rental price manipulation from unscrupulous owners.
From automated comps and unit-level rents to historical rent trends and fees and concessions, tools like KeyComps have the potential to enable real estate teams to delegate tedious and mundane tasks to AI. This can often yield more accurate results as these automated results can be tailored by multiple factors, including property characteristics, market trends and economic indicators, and trained to consider cap rates, cash flow or long-term appreciation.
5. Dynamic Pricing
As a corollary to real-time rental comps, property managers can leverage dynamic rental pricing. How does this work? AI can monitor real-time rental prices within a specific geography or a neighborhood. AI can then analyze competitor properties, rent fluctuations, supply and demand, economic indicators and other factors to adjust rent prices regularly.
This strategy is not only fair to tenants but also can maximize revenue for property owners. With AI, property owners don’t have to worry whether they are underpricing or overpricing rent relative to peers. For example, if a property owner can adjust rents in response to market conditions, they’ll increase the likelihood of attracting more tenants and maintaining high occupancy.
6. Tenant Screening
Ideally, property managers want long-term tenants with strong employment and credit histories. With lower turnover, owners can maintain higher recurring cash flow, increase occupancy and save on renovation costs. AI can enhance the screening process by using automated data analytics. For example, AI and machine learning can review applications, focusing on employment status, credit history, rental history and other factors to predict how stable a particular tenant may be.
7. Administrative Tasks
For commercial real estate owners, AI is not simply another technology solution, but an ROI driver. For example, property owners can leverage AI to draft and process lease agreements. AI-powered document management tools, like my company’s KeyDocs, can streamline the management of critical real estate documents, such as offering memoranda (OMs), zoning reports and lease agreements while using advanced AI to provide insightful analysis and summaries.
Automated document management software powered by AI can help real estate teams make more informed decisions faster while reducing the time spent on manual review with minimal human error. Automation also can help drive cost savings while improving cash flow.
Final Thoughts
AI will transform the future of commercial real estate, and winners in our industry will integrate AI and machine learning into their daily operations to increase cash flow, streamline operational performance and drive investment returns. From predictive maintenance and dynamic pricing to tenant screening and energy optimization, now is the time to embrace AI to provide value for tenants and investors alike.
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