The Impact of AI on the UK Real Estate Sector's Productivity
Midjourney / Antony Slumbers
Our starting point when thinking about how AI is going to impact productivity across the real estate sector must be to understand what it is that we are dealing with.
AI fits into two main camps; Predictive AI and Generative AI. The former is an analytical tool, the latter a creative one.
Predictive AI is all about ‘Predict, Cluster, Classify’ and relies on learning from a very large corpora of historical data to predict what will happen in the future.
Generative AI is all about ‘Create, Synthesise, Innovate’ and relies on ‘Models’ that have been trained on extremely large corpora of data to create a statistical model that can then be referred to in order to ‘generate’ new data, mostly in the form of language, imagery or computer code.
The difference is critical in real estate. It is only when we have very large quantities of relevant data that we are able to utilise Predictive AI, whereas Generative AI can be used with our own proprietary data but does not require it, and has enormous utility ‘right out of the box’.
Given its nature Predictive AI has powerful but limited ways in which it can impact productivity within real estate. For years people have talked about using ‘AI’ to predict price movements and market dynamics: these have largely failed because the historic data is not large enough to successfully apply Machine Learning to (ML being the bedrock of Predictive AI). This is unlikely to change. So predicting the future of real estate for investment purposes will remain more a data science than an AI project.
However, the potential for Predictive AI to improve the performance (‘productivity’) of actual physical real estate is enormous. Because buildings can be configured to generate a tsunami of data. Given the current and future potential to ‘sense’ the world around us there are endless use cases for utilising Predictive AI to predict what will happen to A given B and C.
We’ve hardly started optimising how our real estate operates. Ultimately the purpose of real estate is to enable its users to be as happy, healthy and/or productive as they are capable of being. We need to be creating spaces and places that provide the perfect environment for people to do whatever it is that they need to do, when and where they need to do it. It is the user experience of space that really matters. And that is something Predictive AI can really help with. And great user experiences are highly conducive to optimal productivity.
Generative AI on the other hand is much more of a GPT - a General Purpose Technology. Meaning a technology that permeates everything, rather than one designed for a specific purpose. If any task involves language, imagery or computer code then Generative AI has a use. It can help us read, write, create, analyse and understand at a scale and speed hitherto unimaginable. We can all do many things faster, better, cheaper. As a personal productivity tool Generative AI is a superpower.
A way to think about these two types of AI is that Predictive AI is for the quantitative aspects of our industry and Generative AI is for the qualitative. Sometimes we’ll need one, other times the other, and often we’ll need both. Between them there are few areas of the real estate industry that will not be impacted by their existence.
As such, leaning into ‘AI’ is likely to reap huge benefits. At an individual level it sets one apart, at a corporate level it adds differentiation and competitive advantage, and at a national level it could make the UK a magnet for talent, and position our industry as the global thought leader and exemplar of cutting edge real estate. This position is there to be had; no country is standing out as yet.
The real estate industry faces two huge challenges: decarbonising the built environment AND providing the right buildings for the ‘industries of the future’.There is no doubt that AI is going to be a major factor in both. Or should be.
Historically the real estate industry has been a technological laggard. Going forward this has to change. We have very long project cycles. A large development can easily stretch to 5, 10 years. And a decade in tech equates to 100X increase in computational power. So we need to be futurists. What is needed and what’ll have value in the future? Where will we work, what work will we do, where will we live, how will we live? All these questions will be answered through an AI powered lens. Demand, and supply, will be impacted by AI. We will be living in an AI mediated world.
Leaning into AI should massively increase productivity across the UK real estate sector. It would be hard for it not to. The question is whether the industry has the leadership to make it happen?
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Written as part of Bidwell’s ‘The Productivity Engine‘ Report. (https://www.bidwells.co.uk/insights-reports-events/productivity-engine-report/)