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With the rise of artificial intelligence (AI) comes an opportunity for more successful commercial real estate investments. Financial advisers can use various tools to help clients analyze and make the best purchase decisions. Here's why and how stakeholders should leverage the latest technologies for their property investments.
The Benefits of Technology for Commercial Real Estate Investments
Although AI adoption in commercial real estate investing is still evolving, 76% of industry professionals surveyed by Deloitte said their companies are researching, piloting, or beginning to implement these tools and processes. Those well underway in maximizing AI integrations do so for financial analysis and planning, risk management and internal auditing.
The survey comes as market reports suggest property technology (PropTech) is expected to have a 15.8% compound annual growth rate from 2022 to 2023. Much of this pertains to the widespread implementation of the Internet of Things, machine learning (ML), AI tools and virtual reality (VR) within the real estate industry.
From an adviser's standpoint, utilizing new technologies optimizes the ability to assist investors with commercial real estate ventures. Some of the benefits of using advanced solutions include:
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Conducting more comprehensive investigations on properties to deliver accurate insights for better decision-making.
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The ability to anticipate market trends and property performance based on historical data.
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Identifying potential factors requiring effective risk management strategies.
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Engaging investors using digital tours, enhancing the client experience and highlighting emerging prospects.
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Saving time and initiative by automating repetitive tasks.
Investing Wisely With These 5 Cutting-Edge Technologies
Investing in commercial real estate is not a decision that should be made lightly. It's critical to consider the advantages and disadvantages of purchasing a property before spending the money. Leveraging these five technologies can improve commercial investment analyses before investors make an offer.
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Property Valuation With AI and Machine Learning
Of all the tools utilized in commercial real estate investing, AI and ML software are among the most prominent in analyzing property valuation.
ML algorithms populate historical property value data, enabling financial advisers and investors to recognize long-term trends and cycles and discuss these valuable insights. They can then make well-informed, low-risk investment decisions based on past performance and future predictions.
It's important to note that while AI tools are revolutionizing property investment strategies, the choice of a professional for guidance in real estate transactions remains crucial.
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Spatial Analysis Using GIS
Advisers must assist investors in choosing the correct location when investing in a commercial property. Geographic information systems (GIS) are ideal for spatial analysis, enabling the identification of patterns within an area, including its attributes, demographics and environmental risks.
For example, GIS data helps pinpoint high-demand locations with access to popular amenities. It also makes it easier to select sites for new developments.
For commercial spaces, GIS models highlight potential retail store locations based on neighborhood demographics, traffic patterns and nearby competitors. Likewise, investors may want to ensure an office building is near public transportation or that a warehouse has sufficient access and storage to fulfill logistical requirements.
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Risk Assessment With Algorithms
Algorithm-based technologies can improve risk assessments and aid sound commercial real estate investments. For example, AI and ML tools can detect early signs of economic turmoil and market fluctuations, forcing investors to reassess their portfolios to account for losses.
Likewise, the property itself could carry its own risks. Financial advisers should relay critical environmental hazards and potential damage, such as whether the space is in a flood zone. Also, what's the liquidity risk? Would they be able to raise rent during inflation? What are the odds that they overlook interest rate changes, making it more likely to miss out on lower rates?
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VR for Improved Visualization
VR has transformed how investors search for and assess commercial real estate. These tools allow advisers to deliver virtual property tours so users can walk through the space without stepping inside.
VR can save a lot of time when weeding out potential properties for interested parties. They can even begin to visualize and plan for necessary renovations, which may affect their budget.
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ML Models for Forecasting Market Trends
ML models have advanced predictive capabilities for forecasting future trends in commercial real estate. This gives financial advisers an idea of market conditions and promotes more dynamic investment decisions.
Forecasting tools make it easier to capitalize on upcoming real estate opportunities and respond to economic volatility accordingly. These models also become more precise over time, giving advisers and investors a competitive edge in real estate offers and ensuring a strategy that aligns with clients' goals.
A Bright Future for Commercial Real Estate Investments
It's an exciting time to be a financial adviser for commercial real estate investments. These tools enable leaning into the most advanced technologies to help investors get the best returns — and they’ll only get better as the technology progresses.
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