Leveraging AI for Competitive Advantage in Real Estate Investing

Key Insights:

• • • AI is rapidly becoming table stakes. More than two-thirds of real estate firms have
      deployed AI for operations, maintenance, and tenant services.
    • Competitive advantage lies in integrated intelligence. Leaders are combining
      building data with alternative data sources for portfolio-level optimization.
    • AI accelerates and improves investment decisions. Processing vast data in
      minutes enables more accurate market and risk assessments.
    • Early mover advantage is closing fast. Strategic but immediate AI deployment
      is crucial to maintain competitive positioning.

Even in its earliest stages, Artificial Intelligence (AI) is already creating unprecedented opportunities for operational efficiency and potential value creation in real estate. According to a recent report from JLL, approximately two-thirds of institutional real estate firms have either deployed or are piloting AI solutions. At the same time, thanks to a recent MIT report, we know that the bar is high to extract value from those solutions. The gap is already widening between those organizations that see appreciable P&L impact from integrated AI pilots, and those that don’t.

AI Integration Across Real Estate Is Driving Efficiency Gains and Competitive Advantage

AI solutions in real estate have evolved from experimental to enterprise-ready at lightning speed, with applications across every property type and all functions. AI is already optimizing operations, driving more efficient underwriting, and enhancing customer service – and these will quickly become the industry norm. And with higher operating costs, labor shortages and margin compression, real estate owners are seeking lasting efficiency gains.

The real competitive frontier lies not in siloed operating improvements but in integrated intelligence that shifts the management paradigm. The proliferation of smart building systems, digital tenant interactions and targeted customer identification has created vast datasets that can be leveraged for new insights. With the right approach to syncing these new insights with proactive decision making, AI can fuel efficiencies and growth. For REITs and institutional investors, this means AI represents a fundamental opportunity for competitive advantage over the next decade, separating leaders from laggards.

How Can AI Improve Tenant Satisfaction and Reduce Costs?

AI has been deployed across real estate to various levels of effectiveness. Below are some of the sharpest ways AI is being used to connect the dots, improve outcomes, and achieve P&L impact:

Predictive analytics for proactive maintenance. Traditional property management operated on reactive maintenance models, addressing issues after they have occurred. While steps to a more proactive approach have been underway for years, AI accelerates this shift through predictive analytics. For example, leading property managers are adding sensors throughout their portfolios, monitoring everything from HVAC performance to elevator usage patterns. Machine learning algorithms analyze this data to predict equipment failures before they occur. AI-driven predictive maintenance programs will continue to improve, reducing emergency maintenance costs and improving tenant satisfaction.

AI-driven energy management delivers cost savings. AI-driven energy management systems are delivering cost savings while advancing sustainability objectives. AI systems optimize space allocation, HVAC, lighting and other building systems based on occupancy patterns, weather forecasts and energy pricing, predicting space needs and automatically adjusting environments before tenants arrive. Mobile applications provide turn-by-turn navigation within buildings and real-time availability of conference rooms and amenities.

Virtual assistants reduce staffing costs. On the tenant communications front, virtual assistants provide 24/7 support while reducing staffing costs. Currently, an estimated 60% or more of routine tenant inquiries can be resolved without human intervention, reducing response times and again, improving tenant satisfaction.

Improved health and safety through real-time monitoring and optimization. Post-pandemic, AI has become crucial for health and safety management, providing real-time monitoring and optimization of air quality, occupancy density and cleaning protocols. AI systems continuously monitor indoor air quality, automatically adjusting ventilation systems based on occupancy, outdoor conditions and air quality sensors.

Leaders in real estate are applying AI in these ways and more, staying ahead of tenant and property needs to increase satisfaction and drive efficiencies and real P&L gain.

How Can AI Enhance Investment Due Diligence and Improve Portfolio Optimization?

Beyond the front-line applications of AI, real estate investors seeking to unlock greater value potential from AI should intentionally apply its analytical horsepower to more than just traditional data sets. By integrating new and even non-traditional sources of data, REITs and institutional investors can make better sense of shifting trends and risk levels, making data-driven investment choices with more confidence and in less time.

High-powered analysis enables more dynamic perspective as markets evolve. AI can process huge quantities of data to identify patterns and risks, including real-time data from multiple sources, to provide dynamic market assessments that update continuously.  This can include demographic trends, employment statistics, transportation patterns and development pipelines. What was once a labor-intensive, time-consuming manual analysis can now be completed in a matter of minutes with the right data hygiene and inputs.

New data sets grow our understanding of past scenarios and what may lie ahead. This analytical power extends to alternative data sets sourced from relatively recent technologies. Today’s AI-enabled predictive models evaluate default probability, vacancy risk and market volatility with significantly greater accuracy because they can incorporate alternative data sources like satellite imagery, social media sentiment and mobile phone location data. AI processes satellite data to monitor construction progress, parking lot occupancy and economic activity indicators, providing real-time insights into property performance and local market trends. AI can also analyze social media and news sources to gauge neighborhood sentiment, retail foot traffic trends and emerging market dynamics. And mobile phone data provides insights into foot traffic patterns, demographic composition and spending behaviors. Combined, this 360-degree integration of behavioral, architectural, and economic data leads to a platform approach to performance management and risk mitigation at the property and portfolio level.

Where institutional investors can pull ahead of their peers is in leveraging an AI-enabled platform of insights for portfolio-level optimization. In a more responsive, anticipatory, and fine-tuned way, leaders in this space are already considering correlations, risk factors and return potential across thousands of potential investments simultaneously. 

What To Do Before the Window for Early Mover Advantage Closes

Leader positioning in the new AI reality remains a jump ball for a relatively small window of time. To unlock significant value creation opportunities, immediate implementation of strategic AI deployment is crucial for real estate firms seeking to maintain competitive positioning. Look for investment targets that are piloting AI with a focus on improving decisions, not just modernizing functions. Push existing portfolio companies to realize day-to-day efficiencies through smarter, integrated systems that loop intelligence and action together. Court new data sets that open different viewpoints into market performance to form a more dynamic, responsive risk management approach and optimize across your portfolio.  

Stephen Swett is a Partner at ICR with nearly 40 years of experience guiding public and private real estate companies—including REITs and emerging asset classes—through strategic messaging, capital markets transactions, and investor engagement that aligns with institutional priorities and expectations.