We’re slow to build on Artificial Intelligence
The UK real estate sector is adopting AI too slowly, writes Scott Ritchie
Everyone is talking about it – but is Artificial Intelligence really having an impact on how business is done in real estate?
I recently took part in a round table of developers, operators, funders, and industry bodies to discuss whether its effects were being felt in Scotland and the rest of the UK.
US real estate expert Brad Hargreaves joined as keynote speaker via Teams to share his experience of how AI is being deployed across the Atlantic.
Use of AI within real estate there has grown rapidly in the past two to three years – particularly within Build to Rent and student living projects.
Yes, there is a lot of hype, but there are also now tangible efficiencies, savings and NOI (Net Operating Income) improvements being generated on the operating side.
A recent study in the US showed Build to Rent operations (known as Multifamily in the US) are near the top of the AI adoption curve in terms of how aggressively real estate operators have embraced its use.
It was clear from the feedback in the room that the UK real estate sector was well behind by comparison.
A worry was expressed that politicians and regulators in Scotland and the rest of the UK aren’t focusing enough attention on how the economy will be impacted, or could benefit, if the right conditions can be created for new technologies and services to be built on this side of the Atlantic, to grab a slice of the potential economic benefits.
Another key issue discussed at the round table was the expansion of a key resource needed to power AI in real estate – data centres.
The demand for power to run them is already creating a strain on interconnection capacity and the electric grid system in the US.
However, there is community pushback due to concerns about energy costs, environmental impacts and the fact data centres don’t bring with them significant numbers of local jobs compared to a factory or an office occupying a similar site.
There is a question mark in the US over planning permissions for data centres and a feeling that unless an answer is found to the community benefit question, the window for building major new ones may close rapidly.
Similar issues are already arising in the UK and Europe, but there were concerns expressed around the table that at a global level, data centres could not be entirely outsourced due to infrastructure security concerns – so a homegrown solution for each locality is needed.
There was no consensus from UK-based businesses around the table that they would feel a direct benefit from AI in their real estate work in the immediate future.
In fact, there were concerns raised that it could have a negative impact on jobs, pricing and legal liabilities.
It was highlighted that in venture finance circles, there is a debate on where AI gains are going to land. Will it be with end users, or just big tech companies?
And will real estate business owners be willing to share their confidential commercial data with external AI software vendors from a risk perspective – or if it could be used to train an AI model that their competitors will also benefit from?
These are questions for which there may be no clear answer just yet – or until AI use matures within the real estate sector.
Scott Ritchie is a Partner, Shepherd & Wedderburn