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The artificial intelligence boom, so prevalent in so many walks of life, is now impacting the real estate space as well. Some have gone so far as to call it a revolution, adding that there are few things in the industry that will not be automated or disrupted.
If it is in fact a revolution, it is being played out in slow motion. At the moment AI’s most significant impact on the real estate industry is on the way pricing is managed in apartment communities, through a yield-management system based on web searches, inquiries, projected occupancies, renewals and actual traffic.
More to come, to be sure. Some industry leaders are apprehensive about the latest technological wrinkles, and as a result have adopted a wait-and-see approach toward AI.
I feel otherwise. I find AI to be really exciting, and believe it will lead to greater efficiency and ultimately greater service to tenants in multifamily properties — and, as a result, more profitable operations. And my enthusiasm appears to be widespread. In the second quarter of 2018, for instance, AI startups turned 116 deals totaling $1.9 billion, according to PwC and CB Insights. That’s nearly 30% greater than the previous quarter, making it the most productive quarter in two years. Now AI stands poised to disrupt the most lucrative industry in the U.S.: Real estate drew in some $2.6 trillion in 2017, just over 13% of the U.S. GDP. Some $1.3 trillion of that is tied up in apartment rentals.
The disruption will be wide-ranging, touching such areas as advertising, marketing and customer service, but I foresee it having particular impact on property management, organization and design. Truly, AI is only beginning to scratch the surface of the real estate space, only beginning to boldly go where it has seldom gone before. Goodness knows it already impacts our lives in a multitude of other ways — and in ways we might not even realize. Consider online banking and shopping. Consider, for that matter, the possibility of self-driving cars.
Which brings us back to innovation in the multifamily space. To revisit the idea of pricing rentals, it is not all that dissimilar to the manner in which the airline industry prices seats on planes — they’ve been doing it for a while now, and it works very well. It maximizes revenue on the landlord side, and it also makes available discounts or move-in specials where a community needs to increase its occupancy.
That also benefits tenants who happen to be rental shopping at that particular time, who are greater in number than ever before. Nine million people across the country have chosen to go that route in the last decade, the greatest increase over such a span in U.S. history. This heightened demand for multifamily properties has resulted in a concomitant demand for property management services. And such AI-based technology as voice recognition is one avenue that can be used to improve those services.
Ashwin Karuhatty, Alexa Smart Properties Business Development Leader at Amazon, summarized voice recognition’s evolution at the RealWorld conference in July 2017, pointing out that while there were virtually no voice searches in 2014, that number rose to 50 billion a month in 2017 and is expected to reach 200 billion by 2020.
Such technology, which includes not only Alexa but other virtual assistants like Apple’s Siri and Google Home, is part of the so-called internet of things, an interconnected world comprised of such smart devices as thermostats, lights, refrigerators, smoke detectors, locks, beds and garage openers. Karuhatty told those in attendance at the conference that this technology reflects the “third wave” of the internet, and discussed the manner in which smart devices might adjust various interior settings courtesy of voice prompts.
This cuts in several other directions as well. Owners of multifamily properties could use phone assistants to field calls from prospective tenants. And upon moving in, residents would never have to leave the comfort of their apartments to pay the rent or report a maintenance issue; they could use chatbots or virtual assistants for those tasks.
Another bit of smart technology that comes into play is Radio Frequency Identification (RFID), as it is used in key fobs. Through such devices, it is possible to track the frequency different amenities in a multifamily property might be used, such as a pool, fitness center or business center. The helps in the planning of a property’s layout.
There are sensors capable of detecting whether residents are home or not, allowing a given unit’s temperature to be adjusted accordingly — which, among other things, improves a property’s energy efficiency. There is AI capable of understanding ahead of time when maintenance might be necessary, or when a given piece of equipment — say, a furnace — might be nearing its expiration date. That would, as a result, enable a landlord to nip potential problems in the bud.
In the future, I believe AI will make it possible for property owners to tailor service requests to meet tenants’ needs, something that is of vital importance, as the fulfillment of such requests is often critical to whether or not tenants decide to renew their leases.
I also believe that in the future it will be possible to anticipate the movements of prospective tenants — that it will be possible to create a database showing those in a certain section of Manhattan, for instance, who have a lease expiring and might be in the market for a new place.
Simply put, the revolution figures to continue, making its impact in ways that we are only beginning to discern.