JLL on How AI Will Affect Commercial Real Estate
New artificial intelligence (AI) technology is estimated to disrupt up to 80% of jobs, and commercial real estate isn’t immune.
With its potential to change how people live, work and play, it’s no surprise that AI is the corporate buzzword of the year. While the long-term impacts of so-called generative AI that can produce content have yet to be realized, it stands to reason that there are two near-term ways this emerging technology could change commercial real estate: with AI companies as a real estate occupiers, and AI as a new tool adopted by the industry.
“AI is helping to streamline our industry,” said Raj Singh, managing partner at JLL Spark, an investment arm of the brokerage focused on real estate tech innovation.
JLL released a report on the potential impacts of AI, as well as a global real estate technology survey. To get a better sense of the findings, LoopNet spoke with Yuehan Wang, who authored both reports for JLL. In this Q&A, Wang unpacked the report and elaborated on a few of its key findings.
In your estimation, what part of the industry will be disrupted first by this new technology? What has already changed as far as standard business practices or applications in brokerage, appraisals, etc.?
AI is more of an enhancement than a disruptor. Our real estate professionals are using AI solutions to support data-driven decision-making and client conversations. Take brokerage as an example: companies use AI algorithms for matchmaking and recommending properties based on detailed client requirements. They also use AI to enhance client communications. Tools, such as EliseAI, help businesses manage, track and act on communications 24/7.
What are ways that JLL has already adopted generative AI?
We’ve adopted GenAI both in our internal workflow and our client-facing services and products. For example, we developed JLL GPT — our proprietary, purpose-built large language model — specifically for the real estate industry and are training it with JLL’s extensive in-house data and external CRE sources. It is now being used by our researchers, analysts and various dedicated professionals to deliver better and faster insights to our clients. We are also supercharging our AI capabilities by investment and acquisition. For example, JLL acquired a leading AI technology company in 2021 that uses proprietary AI models in the origination and analysis of real estate opportunities. Now, one out of five deals of our Capital Markets team is sourced with the help of this integrated AI platform.
JLL identified AI medical and healthcare uses as the companies with the most investment that are occupying real estate space. Do you have examples?
Medical and healthcare AI companies received the most private investment in developing solutions in this particular focus area, which include drug development, diagnosis assistance, clinical processes streamlining, etc. As this sector grows, the demand for space in certain markets grows.
The other primary uses are data storage and Fintech. The primary markets of focus identified by JLL are the Bay Area, Boston, Seattle and New York. Can data storage and Fintech uses specific to AI be replicated in markets across the country? Why or why not?
If we are talking about where the companies locate, then there’s no signal of them moving away from major and established secondary tech markets. There are two main reasons for this. One is an investment and industry agglomeration; companies need to be close to resources and support services. The other is talent. It would be much harder for organizations to find appropriate AI talents in less established markets.
What other AI-centric deals has JLL been involved with recently?
Most real estate participants don’t have the in-house tech expertise needed to manage market-driven financial risk, so JLL acquired a technology platform (Frame Financial Systems) as part of the Kensington Capital Advisors deal earlier this year. Frame Financial Systems offers CRE investor clients a debt portfolio reporting and analytics solution featuring AI.
In addition to our AI-centric deals, JLL is constantly innovating in-house as part of our tech strategy to build, buy, partner and invest to curate a best-in-breed tech portfolio. We recently concluded our annual Employee Hackathon, which centered around generative AI this year. The company-wide event featured more than 800 participants, and 207 teams from 25 countries representing nearly every JLL business line and function. Previous Hackathon winning entries, like JLLT’s Carbon Pathfinder SaaS solution, have gone on to become commercially available products.
Where do you think this is all headed?
As JLL’s recent hackathon entries demonstrated, AI will continue to enhance the performance of real estate experts and will generate sharper insights for our clients. The AI economy will produce changes in real estate demand, as well.
This interview has been edited for brevity and clarity.
