The meteoric growth of AI and cloud computing is great news for the commercial real estate industry and the economy overall.
Companies will invest roughly $6.7 trillion in capital expenditures on data center infrastructure globally by 2030, according to McKinsey, and $3 trillion or so will go toward real estate and infrastructure. AI and cloud computing companies are also helping boost office markets.
At the same time, however, the AI frenzy can leave us feeling a little untethered and a bit behind the game in our own work lives, especially when, according to Harvard Business School professor Karim Lakhani, AI is lowering the cost of expertise.
Lakhani, by the way, is the same professor credited with coining business’ new mantra: “AI won’t replace humans, but humans with AI will replace humans without AI.”
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And anyone who has used an AI-driven tool to streamline analysis, marketing, research or communication knows that AI does help you work faster and more efficiently, sometimes in astonishing ways.
Despite the AI frenzy, however, there are a few things to keep mind that should help you feel more grounded.
AI implementation is gradual
AI is not moving into business as quickly as data center demand will have us believe. It will roll out gradually, giving astute investors time to figure out how best to use it to their advantage.
At NAREIT’s REITWeek Investor conference in June, Andrew Power, CEO of Digital Realty, said the actual use cases for AI are still fairly low, since many of the solutions are still being built. “We are building infrastructure for the infrastructure,” Power said.
AI cannot replace innovation
AI is essentially derivative: It feeds off vast amounts of existing data. It cannot come up with completely original ideas, though some would argue the contrary. But it can speed up innovation, allowing companies to come up with solutions faster and edge out the competition.
AI won’t beat intuition
AI can enhance what commercial real estate executives know, but it cannot replace that gut feeling that comes from experience—the good ones and the bad ones. It can, however, provide the data analysis necessary to make instinct into shareable insights. Intuition can also help you detect AI hallucinations, which experts say are getting worse as the use of AI grows.
AI will never be a local expert
Local market knowledge and connections will remain critical. AI can quickly analyze data and maps but it cannot provide the context and the nuances that familiarity and longevity can bring. It can, however, facilitate networking by pinpointing potential customers and help customize solutions. And while AI has the potential to commoditize or democratize real estate information, there will be a greater value on insider information that is shared between humans. It also cannot form relationships.
AI will not change the essentials of sound commercial real estate investing, but it has the potential to make it a more efficient process and to free executives from mundane tasks so that they have more time for innovating, deal making and networking.