When Wall Street panicked over the so-called "AI scare trade," commercial real estate brokerages were caught in the crossfire. On February 10, investors dumped shares of CBRE, JLL, Cushman & Wakefield, Newmark and Marcus & Millichap, sending their stocks down sharply within two days by 19.9%, 19.1%, 23.8%, 17%, and 8.1%, respectively.
They weren't alone. Insurance brokers, wealth managers, financial data providers, legal tech firms, and enterprise software vendors all took similar hits, as investors fretted that artificial intelligence could erode fee-based revenue models across professional services.
But analysts say the market's reaction was more reflex than reason.
"We view market concerns as overstated due to a combination of fragmented CRE end markets and the noncore nature of real estate activities for many clients," Morningstar analyst Sean Dunlop told Reuters.
AI has already reshaped operations across commercial real estate, trimming staffing needs in back-office functions.
"We need substantially fewer back-office people than we did 15 years ago," said Gordon Lamphere, vice president at Van Vlissingen and Co., in an interview with GlobeSt.com. However, he added, that doesn't mean most firms are going to become obsolete.
"There's this idea that's overblown — that there's going to be one broker who will be able to do every transaction with one click of a button."
Technology still has limits, Lamphere noted. "You have to go to sites, understand a wide array of things in a building, and check these models because they're not perfect. It does reduce time, but it doesn't eliminate the worker."
For investors, the worry centers on AI's potential to squeeze brokerage and underwriting fees — core sources of revenue for publicly traded firms.
"We're seeing an uptick in users relying on ChatGPT in particular to read leases and provide redline feedback," said Cory Camp, a brokerage advisor at Equitable Commercial Realty, or ECR.
"It's not realistic that it would completely replace fees, but more that it would help aid in efficiency through improved turnaround times."
Despite advances in automation, experts say CRE remains fundamentally relationship-driven. Brokers still gather off-market intelligence, negotiate directly with buyers and sellers, and guide deals to close — work that algorithms can't easily replicate.
"The closest you could get would be an API plugin to something like CoStar," Camp said. "But that would still require a license, and CoStar wouldn't likely support this as a long-term solution."
Still, some areas of the business could feel pressure as AI adoption grows. Rent collection, invoice processing, lease extraction, underwriting, valuations and energy monitoring may all face tighter margins.
"You can't really overbill for things anymore," Lamphere added. "Increasingly, more and more management companies can provide world-class value."
In other words, while AI is reshaping commercial real estate, it's not replacing the people who drive it — at least not yet anyways.
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