The Impact of AI on Real Estate
The article explores the application of insights from APM, RICS and McKinsey into the impact of AI on Real Estate projects, the challenges associated and the business response strategies.
This blog draws insights from reputable sources relevant to Real Estate projects to provide you with valuable information about the impact of AI on real estate project teams from the data perspective. We have carefully analysed and synthesised key findings from the Royal Institute of Chartered Surveyors (RICS) and the Association for Project Management (APM) supported by McKinsey:
The intention is to bring you a comprehensive understanding of how AI is poised to reshape the real estate industry. By condensing and presenting the most pertinent details, we aim to provide actionable insights that will help you navigate the evolving landscape with more confidence.
Setting the scene
The real estate industry is no stranger to transformation, and with the rapid advancements in technology, it is now on the brink of another significant shift. Artificial intelligence (AI) is emerging as a powerful tool, in the sector, and its potential impact on real estate project teams is profound. As organisations increasingly recognise the value of AI, the adoption of AI capabilities has soared, with the average number of utilised AI capabilities nearly doubling from 1.9 in 2018 to 3.8 in 2022, according to a report by McKinsey.
In an era where labour availability is changing due to events like Brexit, the real estate industry faces challenges such as a shrinking workforce and rising labour costs. However, these challenges also present an opportunity to explore AI-driven solutions. As noted by the Royal Institution of Chartered Surveyors (RICS), the need for automation becomes more evident as organisations seek to streamline processes, reduce costs, and enhance productivity. AI offers the potential to address these needs effectively by automating routine tasks, augmenting decision-making processes, and unlocking new avenues for innovation.
The convergence of AI technologies and the real estate sector has the potential to reshape how project teams operate, collaborate, and deliver results. In this blog, we will explore the transformative power of AI in real estate project teams, examining its impact on the business. By understanding the potential benefits and challenges associated with AI implementation, real estate professionals can stay ahead of the curve and harness the full potential of this revolutionary technology.
As AI continues to gain momentum, it is becoming increasingly clear that companies investing in AI technologies and practices are reaping substantial financial returns and gaining a competitive edge. According to McKinsey, organisations that have achieved the highest financial returns from AI are outpacing their competitors by making larger investments, adopting advanced practices, and attracting diverse talent. This underscores the importance for real estate construction leaders to recognise the potential business impact of AI and embrace it as a strategic imperative.
Increasing project success rate
One of the significant advantages of AI, as highlighted by APM, is its potential to increase project success rates while reducing the likelihood of failure. By leveraging AI-driven solutions, real estate project teams can enhance decision-making processes, optimise resource allocation, and mitigate risks. The novelty factor associated with being an early adopter of AI can also confer competitive advantages, enabling organisations to demonstrate innovation and capture market share.
Massive productivity gains
The automation potential in the real estate sector is substantial, with estimates suggesting that up to 40% of tasks could be automated (RICS)—a figure echoed by reports from PwC and McKinsey. While digital technologies beyond AI can drive productivity improvements, AI stands out as a game-changer. Despite the preference some clients may have for the human touch, AI has the potential to unlock unprecedented productivity gains that far surpass traditional human processes. Real estate construction leadership must recognise that AI-driven automation can revolutionise operations, streamline workflows, and deliver efficiency gains that go beyond what was possible before.
Replacement of menial jobs with repetitive tasks
The insights from McKinsey, APM, and RICS, APM further emphasize that AI has the capability to replace menial jobs that involve repetitive tasks. By automating mundane and repetitive activities, AI frees up human resources for higher-value tasks, fostering a more efficient and productive workforce.
Net increase in jobs
Contrary to concerns about job displacement, there is an interesting argument put forth by RICS that the rise of AI in the real estate industry will lead to a net increase in jobs. Drawing parallels with previous technological advancements, such as e-commerce and retail, which experienced a net gain of jobs as a result of technological disruption, the introduction of AI is expected to create new job opportunities. However, it is crucial for business leaders to adapt and upskill their workforce to align with the changing demands of AI-driven processes.
The impact of AI on real estate construction businesses extends beyond the operational realm. It has the potential to catalyse a paradigm shift, causing disruptions that surpass those witnessed during the technology-driven changes of the 1990s (RICS). The availability of affordable AI technologies makes fixed capital investments more accessible, ensuring that businesses of varying sizes can leverage the transformative power of AI. Real estate construction leadership must embrace this shift, proactively reengineer business processes, and capitalise on the competitive advantages that AI offers.
Challenges to Adopting AI
While the potential of AI in the real estate sector is vast, its adoption does not come without challenges. Real estate professionals must be mindful of these challenges and take proactive steps to address them in order to leverage the benefits that AI offers fully.
One significant challenge highlighted by RICS is the human factor. AI, despite its capabilities, cannot fully replace the human touch and expertise that are vital for building trust and establishing rapport with customers and partners in the real estate industry. The personal interactions and nuanced decision-making processes that rely on human intuition and experience remain essential for successful real estate transactions. Real estate professionals must strike a balance between embracing AI technologies and maintaining the human element that adds value to their work.
Regulations and Ethics
The regulation and ethics surrounding AI implementation in the real estate sector also pose challenges. AI raises legal and ethical concerns such as privacy, security, accountability, and transparency. Regulators and stakeholders need to collaborate to develop frameworks and guidelines that address these issues, ensuring that AI adoption in real estate is governed by ethical principles and safeguards.
Overcoming fears of marginalising humans
Overcoming fears of marginalising humans is another challenge that must be tackled. The introduction of AI technologies can sometimes create apprehension among professionals, with concerns about job displacement and diminishing interpersonal interactions. It is crucial for leaders in the real estate sector to communicate the benefits of AI adoption clearly, emphasising that AI is intended to augment human capabilities rather than replace them. By offering training and upskilling opportunities, organisations can empower their workforce to embrace AI and navigate the changing landscape.
Data Quality, Availability and Interoperability
Technical feasibility is an important consideration in AI adoption. While AI has the potential to revolutionise decision-making processes and optimise operations, its effectiveness relies heavily on the quality and availability of data. As noted by APM, the real estate sector often faces challenges in terms of data quality and accessibility. Standardising data sources. data schemas and investing in data infrastructure are crucial steps in overcoming this challenge. With increasing tools available to leverage the technology is also crucial to help ensure interoperability of data to enable the industry-level knowledge sharing.
Sharing the social and economic impact
Ensuring that the social and economic benefits of AI are shared across society is another challenge that needs to be addressed. Real estate professionals must be mindful of the potential impact of AI adoption on various stakeholders, including employees, customers, and the broader community. By implementing responsible AI strategies and considering the broader implications, organisations can ensure that AI becomes a catalyst for positive change in the real estate sector.
What should businesses consider doing about this now?
As business leaders in the real estate sector, it is essential to approach AI adoption strategically and proactively address the challenges that come with it. Drawing insights from reputable sources such as RICS, APM, and McKinsey, the following recommendations can guide you in effectively harnessing the potential of AI while maximising its benefits:
Take a balanced approach (RICS):
Recognise that doing nothing is also an option. Assess the specific needs and objectives of your organisation and consider whether AI adoption aligns with your overall business strategy. It is crucial to evaluate the extent to which AI-based solutions can complement or substitute existing service delivery methods in a way that adds value to your operations.
Develop a holistic business and AI strategy (RICS):
While considering AI adoption, it is important to integrate your business strategy with AI strategy. These should not be uncoupled but instead, work in harmony to drive organisational success. Examine how AI can enhance your operations, improve decision-making, and drive efficiency across your real estate project teams.
Leverage data intelligently (APM):
Ensure access to structured internal, external, and synthetic data. Establish structured data management practices to organise and maintain your data effectively. This includes implementing data governance frameworks, data quality control measures, and data integration processes. By structuring your data, you can unlock its full potential for AI initiatives.
Justify the need for AI (APM):
Clearly articulate the organisational "why" behind adopting AI technologies. Justification is essential to garner support from stakeholders and ensure a cohesive understanding of the value that AI can bring to your business. Align your AI initiatives with strategic objectives and articulate how they contribute to project efficiency and overall success.
Establish an AI leadership role (McKinsey):
Appoint a leader who is responsible for driving AI initiatives and is empowered to collaborate across business units and functions. This leader should possess a deep understanding of AI technologies, project delivery, and the organisation's goals. Their role is to champion AI adoption, facilitate cross-functional collaboration, and ensure that AI initiatives align with the broader corporate strategy.
Implement a comprehensive measurement framework (McKinsey):
Develop a systematic approach to track the incremental impact of AI initiatives. Establish a set of key performance indicators (KPIs) that align with your organisational goals and track their progress over time. This enables you to measure the effectiveness of AI adoption and make data-informed decisions to optimise outcomes.
Establish structured data management and standard tools (APM, McKinsey):
Ensure you have robust data management practices in place, including standardised tools to create production-ready data pipelines. By establishing structured data management processes, you can improve data accessibility, quality, and interoperability, enabling better utilisation of AI technologies. Additionally, adopting standardised tools for AI development and deployment can streamline processes, improve efficiency, and facilitate collaboration between AI and data science teams.
Foster collaboration and capability building (McKinsey):
Promote collaboration between AI and data science teams and business development units. Encourage knowledge sharing and cross-pollination of ideas to drive innovation. Additionally, invest in a well-defined capability-building program to enhance the AI skills of your technology team. This will ensure that your organisation is equipped with the necessary expertise to leverage AI effectively.
By embracing these recommendations, real estate business leaders can navigate the challenges associated with AI adoption, capitalise on its transformative potential, and drive sustainable growth and success in the evolving real estate landscape.
Our Point of View
At InForecast, we envision a near future where the adoption of AI in real estate project teams reaches a pivotal point. As AI technologies continue to advance and mature, the resulting productivity improvements in real estate project teams will become increasingly evident. The automation, optimisation, and intelligent decision-making capabilities offered by AI will lead to significant efficiency gains, streamlining processes, and enhancing project outcomes. Eventually, these productivity increases will reach a tipping point, creating substantial differences in cost structures compared to traditional approaches, At InForecast, we believe that the pivotal point for widespread AI adoption in real estate project teams will likely occur when the cost of adopting AI technology is approximately 10 times less than the anticipated benefits it brings, based on our team's experience with driving organisational change.
Reaching this pivotal point will require a combination of technological advancements, industry-wide collaboration, and a proactive mindset from business leaders. As AI continues to evolve, it is essential for real estate organisations to stay informed, monitor market trends, and assess the potential benefits against the costs of adoption.
How we help address the challenges
At InForecast, we are dedicated to empowering businesses in the real estate sector with the digital transformation necessary to harness the full potential of AI. Here's how we actively contribute to this journey:
Reducing the barriers to the adoption of AI
Our team develops state-of-the-art data and AI tools that are designed with simplicity and usability in mind enabled by our customer-centric focus. We understand that the adoption of AI can be intimidating for some organisations, which is why our tools are tailored to reduce barriers and facilitate seamless integration into project delivery processes. By leveraging our cutting-edge solutions, businesses can embrace AI technologies confidently and unlock new levels of efficiency and success.
Promoting interoperability of data and standards
At InForecast, we work towards scalable and industry-recognised standards throughout the development of our solutions. We recognise the importance of compatibility and interoperability within digital ecosystems. By utilising widely adopted standards such as ISO 19650, we help ensure that our tools seamlessly integrate with existing technologies and systems, fostering a cohesive and interconnected digital environment.
Enhanced Integration Capabilities
We prioritise the development of scalable data integrations (e.g. APIs) that enable seamless integration with existing technology stacks, including central data warehousing solutions. We understand that organisations have established systems and workflows in place, and our goal is to enhance and complement these frameworks by providing flexible and robust integration options. By integrating our solutions into existing ecosystems, businesses can leverage the power of AI while building upon their current technology investments.
Through our commitment to developing cutting-edge tools, adhering to industry standards, and facilitating seamless integration, InForecast strives to be a trusted partner on the digital transformation journey. We are here to support businesses in embracing AI, enabling them to drive innovation, improve decision-making, and unlock new opportunities in the real estate sector.