I am only at the elementary level when it comes to technology and especially AI, but these are already producing major changes in building design and operation, and there are far bigger changes coming through AI. I have some involvement in the energy management and building management systems business, but am not technically qualified. What I do know has vast implications for CRE.

It started with LED lighting which is now common and a commodity. That has now been supplanted by building systems and controls which interface with the lights, thermostats, water and other building systems to produce up to 70% energy savings and material labor savings. By being able to automatically control how much heat or AC is needed for a given space based on occupancy, time of day and purpose of use, there can be these major savings. Bathrooms can be monitored for how many people go in and out and can be then programmed to tell cleaners when they need to clean based on usage levels instead of on a set schedule. Data can be collected to allow managers to far better control lighting and HVA based on when areas are used more or less.

All of this can now be done wirelessly, so there is no need to run copper when doing a retrofit. It means no disrupting the paint. No running copper. No long time to install, thereby making installation far more cost effective, and maintenance much less costly.

AI is now moving into the building management space. It is now possible to install sensors to feed data from the lights and thermostats and other inputs into a processor which then uses that data to learn how to operate the spaces in a much more efficient way with no human input at all. The AI code actually learns from the data input and over time it resets to HVAC, lighting, water flow or other systems as the data tells it more information. The point is that not only does the building run far more efficiently, and save energy and water, but also it reduces maintenance staff and human monitoring.

The other huge potential savings is the elimination of copper wiring in many areas. The sensors are operated by very long life automatically rechargeable batteries. So there is no need to run copper to the sensors nor between the sensors and the processors. There is also no need in retro fits to run copper to redo the lights or other things that are already wired.

For warehouses and distribution, there have already been huge steps to automate these operations and eliminate humans. There is now far more coming through applying AI and through driverless long haul trucks and better loading of containers. This has implications for less employee parking, which may mean more footprint for the building. Driverless trucks may require different configurations of access and parking than trucks do today. This may mean a lot of cost savings in development. It is clear that AI is now moving into property management and the cost savings in installation and operations of buildings will be very materially impacted.

Impacts for the economy: Energy savings in buildings can be as much as 70%. That is a lot of oil burning saved at the power plant and less staff. Oil demand may have peaked this year, and with fracking now able to be done at $40 or much less, the cost of oil will likely never exceed $60 again in the US. As AI takes over more and more roles, there will be less demand for a wide variety of jobs, including well educated professionals.

Just look at portfolio management. Now 70% of fund stock trades are executed by computers. Stock selection is now done by computers and not humans in many cases. Stock execution is done by the client in many cases. Lawyer work is now starting to be done by computers and one program runs in the courtroom, to help litigators frame questions as testimony is being given by taking witness answers and searching the database to check veracity or frame new questions. In healthcare, more and more analysis and treatment is done by machine.

Long-haul trucks will soon be driverless, which means a truck can drive from New York to Los Angeles without stopping other than to recharge batteries. That means product delivered much faster and at far less cost. It means deliveries to automated warehouses can be made at any time of day or night and robotically unloaded.

There are now spreadsheet templates for all sorts of uses, so what took an analyst maybe a week to construct in a detailed worksheet can now be done in hours, and maybe at some point with AI pulling the needed data from other files automatically.

So consider this: fewer financial professionals, fewer stock pickers, less legal support, fewer warehouse employees, and on and on to where will be far less labor of all levels needed in ten years. This has huge implications for the economy, but also for office space

The advances in AI are well beyond the ability of most of us to even grasp. I barely understand the basics. But what I do understand are many of the huge implications for the economy, CRE and life in general. The rate of creation of new applications and uses is speeding up at an accelerating pace. This will lead to major disruptions of labor, uses of office spaces, or the lack of need for portions of traditional offices, disruptions of needs for retail; and even some grocery stores.

The point of all of this is, everyone needs to get educated very quickly as to what is really starting to happen in AI, and all the applications that will begin flowing very soon. It is impossible to really fully understand all the ramifications and the timing, but I am certain that unless you get yourself educated on AI and what is coming, then in five years you will be way behind, and potentially financially damaged because things will start to happen that you had no idea were coming. Someone should run a conference for CRE with some AI and equipment provider experts as speakers. You need to be ahead of the wave that is coming over the next several years.

The views expressed are the author's own.

Instant Insights /

Technology is Going to Change Development and Property Management

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