Few CRE companies have achieved their AI goals. Here’s why

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and emerging opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. become a member to receive future editions straight to your inbox.

Modernization of the commercial real estate market has historically been slow, but it still appears to be accelerating the adoption of artificial intelligence.

Companies are moving beyond initial testing and discovery to more targeted applications aimed at redefining value, according to a new survey from JLL.

The survey of more than 1,500 top CRE investors and user decision-makers from a variety of industries found that organizations are making AI a priority in their technology budgets, even though it is still in its infancy. They are also moving away from using it solely for efficiency to focusing on how they can grow their business.

JLL said 88% of investors, property owners and homeowners have begun an AI pilot, with most pursuing an average of five use cases at a time. More than 90% of residents are conducting corporate real estate AI pilots, according to the report. Compare this to just 5% starting AI pilots two years ago. Adoption is fast but not entirely easy.

Only 5% of participants said they met all program goals, while nearly half said they met two to three goals. Most of the efforts are still experimental without much growth.

“If you think about commercial real estate, it’s traditionally not a fast adopter of technology and is generally skeptical,” said Yao Morin, JLL’s chief technology officer. “So it’s pretty surprising to me that the number of adoptions is that high. What’s not surprising, though, is that only 5% actually think they’ve met all the goals. That’s pretty much in line with a lot of other industries.”

The reason they couldn’t score was because the goal line moved. Companies have moved beyond simply wanting to do certain tasks faster or for so-called operational efficiency. They are now tying AI to revenue goals.

For example, some are using it to help them improve investment risk models and make investment and portfolio decisions based on AI outputs. This will require major changes to fundamental ways of working.

“When you really start to move towards the revenue side, the margin expansion side, it’s going to take a lot more than just using a technology,” Morin explained. “You can’t say, ‘So, I’m saving you 10% to do this particular thing.’ Companies actually need to rethink their business models to rethink how they organize to capture the savings.”

And so companies are investing heavily in artificial intelligence, despite economic headwinds. More than half of the investors surveyed by JLL managed to achieve a significant budget increase in this area in the last two years. Their No. 1 spend is on strategic consulting on technology or AI, and many report that their budgets have increased solely because of AI. From now on, spending goes towards improving the infrastructure for both cybersecurity and data security measures, as well as artificial intelligence integration.

What he found truly surprising, Morin said, was that while most companies thought they would start using AI for simple tasks or low-risk, low-hanging fruit, that wasn’t the case at all.

“Our survey showed the exact opposite. Beyond this initial skeptical phase, we are reaching a point of sophistication where companies are focusing on competitive advantage for truly pressing business problems, using AI to solve. [just] those simple low-risk operations.”