Boardroom Briefings: From bricks to bots

AI is reshaping the real estate industry, offering advantages to firms that adapt and risks for those that don’t. Early adopters are driving innovation, while others face obstacles like data, regulation and cost implications. What does the future hold for AI use in real estate?

Property owners are conflicted. An ongoing debate in the industry recognises that real estate is closely connected to the strength of the labour market. A reduction in workforce due to the adoption of AI could mean a requirement for less space, particularly in the office market. There are, however, sectors which wouldn't feel the metaphorical pinch to the same extent, such as hospitality or senior living facilities, where there will still be a requirement for space to house paying customers. 

The use of AI in real estate

Whether you are an investor, landlord, property manager or asset manager, there are ways of extracting benefit from AI. It can help make things quicker, smarter, easier, and in turn potentially help achieve the marginal gains which, in recent years, have been hard to come by. 

The key drivers behind AI adoption are plain and clear to see: operational efficiency equating to cost reduction, data and decision analytics, asset and product innovation and sustainability. 

Sustainability in property management 

ESG has been the buzzword of the last few years, with tenants increasingly looking for space that fulfils their core values. This may positively influence staff retention and consumer choices alike, not to mention help meet net zero targets. AI can be leveraged in trying to maximise ESG credentials for a particular building. A number of London's newest offices buildings have been pioneers for this cutting edge technology which sees AI being used to adjust lighting, heating and ventilation based on how many people are in a room or even the weather outside (even if London's weather is largely predictable!). We have already seen buildings with smart, green features beginning to command rent / valuation premiums. 

Data and decision analytics 

Take leases as a prime example. Previously several pairs of eyes would spend hours reviewing the fine print. This might seem like an acceptably prudent exercise when managing a single let property ahead of the granting of a 25 year lease, as an example. However, for every instance such as this there are many multi tenanted properties that churn new leases through every week or two, such as large shopping centres or industrial estates . AI can be used to streamline this process, flagging anomalies as it goes. This in turn frees up the real estate experts to focus on strategy and direction. 

Asset and product innovation  

AI tools have been developed for predictive maintenance to mitigate larger works in the future, energy management and space optimisation. A 2024 report conducted by Deloitte suggested that predictive maintenance alone can cut repair costs by 25 - 30% and reduce equipment downtime by up to 50%, negating the dreaded “lift out of order” sign the Monday after a weekend charity fun run.  

Challenges facing the real estate industry 

Of course, with every opportunity there lies barriers to adoption and hurdles to overcome. One of the major challenges is the breadth of legacy data available to open sources that AI feeds into. Many of the documents that contain useful information might, for example, be scanned in non-uniform formats making information difficult to extract. The transparency of key data in certain real estate submarkets will still be limited and not available to all. There are significant concerns that if the data that AI systems are trained on contain bias, the output will only amplify this which could unfair influence a number of things including investment decisions, valuations or rental pricing.  

Above all else however is the societal barrier. Humans by their very nature enjoy stability and are hesitant of change. This could result in things like landlords being unmotivated to commit to significant investment in new technology until the financial case is clear and there is proof that upgrades will provide return on investment, especially in older buildings with structural limitations. One thing is for sure , the gap between modern AI enabled real estate and old, undigitised real estate will grow causing a risk of obsolescence for the latter.  

To use AI or to not use AI 

Moving forward, while the integration of AI into the real estate sector offers clear benefits in accelerating transactions - which could provide a much needed boost in a stagnant market - and in identifying opportunities to reduce operational expenditure for property owners, we must remain mindful of the associated risks. In particular, the legal landscape surrounding AI is still underdeveloped and the absence of clear regulatory frameworks presents potential liabilities. As the industry moves forward, balancing innovation with caution will be critical to ensuring both progress and protection.  

Ogier Global's Real Estate Services team  

At Ogier, our agility and adaptability are key strengths that allow us to support clients to navigate the ever-evolving trends they may encounter. Our corporate and fiduciary services division boasts a dedicated team of professionals specialising in the setup, administration and management of real estate holding structures. Our team works alongside Ogier's other service divisions to provide practical legal advice and consulting. With experience working on the largest and most complex real estate transactions in the UK and Europe, we provide a fully integrated service offering.  

To learn more, contact Tom Stevenson. 

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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