Technology is disrupting the residential and commercial real estate industry and artificial intelligence (AI) is at the forefront of this change.  Advances in the real estate industry using AI are seen in a variety of areas such as predicting loan defaults, deal matching, automatic document scanning, image recognition, investor analytics, lead generation, and predicting zoning developments.

One particularly interesting example is Seattle based start-up, Everyhome. Everyhome developed a software product called CityBldr (https://www.citybldr.com), which uses an AI platform to identify underused properties for developers and then ranks those underused properties based on their development potential.  In addition, the software can identify land parcels that can be assembled for development.  The software even takes this information a step further by estimating the anticipated return on investment. The system can access millions of data points for buyers including sales figures, permit applications, traffic, and location. In fact, Forbes placed CityBldr as #1 on its list of Artificial Intelligent Takeover Companies in September 2017.  The startup initially applied its software only to King County in the State of Washington. Thereafter, CityBldr rolled out its model to counties in California including Los Angeles, San Diego, and San Francisco.

Investors are increasingly looking to invest in real estate companies that are using AI and other sophisticated technologies.  Los Angeles based company, Fifth Wall (https://fifthwall.com), for example, is focused exclusively on real estate technology including how to incorporate AI to make their companies more profitable.  One of Fifth Wall’s investments is Aquicore.  Aquicore is a commercial real estate platform that permits its users to optimize the performance of its assets.  This is using AI to identify both leaders and laggards in their portfolios, standardizing business processes, and driving building team engagement and accountability. Fifth Wall just raised a 503 million dollar real estate fund – making it the largest active Los Angeles area venture capital fund.  Fifth Wall focuses on property technology, which is a growing sector that uses technology to achieve great efficiencies.  Fifth Wall is funded by a number of domestic and international real estate companies including, CBRE, Cushman & Wakefield, Hines, Invesco, Lennar, Macerich, Marriott, MetLife, Related, Starwood, and many others.

The move into using AI and other technology in the field of real estate is further illustrated by Compass (www.Compass.com), an American real estate technology company founded in 2012 and headquartered in New York City.  Compass is among the first real estate companies to build a proprietary mobile app for its real estate agents.  Compass operates in 21 U.S. markets.  In fact, just last month, Compass announced that it raised 370 million dollars in a Series G financing, bringing the total funding raised to over 1.5 billion. Investors in this last round of financing include Canada Pension Plan Investment Board and SoftBank Vision Fund.

Today AI is being used from the inception of a real estate deal to the final closing stages.  Examples include (i) chatbots (which allow a virtual assistant to answer routine questions about property management), (ii) investor analytics (which monitor growth and income goals), (iii) predicting loan defaults, (iv) analyzing historical data to assist in underwriting financial transactions, (v) generating reports with information customized by the client, and (vi) deal matching.

Although real estate has dragged behind other industries to incorporate AI into their day to day operations, the recent investments into real estate technology signals that the tide has changed.  Those who embrace technology are likely to fare better than those who are doing “business as usual.”

What innovations in AI and other sophisticated technologies are you using to make your real estate business more profitable?

Linda S. Koffman

Gipson Hoffman & Pancione

Linda S. Koffman
tel:+1 310 557 8822
email:lkoffman@ghplaw.com

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