How will your world of real estate investing change as a mega firm (e.g., CoStar) combines their massive (and constantly updated) all-knowing realty database (CoStar is well on their way) with an effective artificial intelligence program capable of making better and faster decision than your team (we may already be there)?

Add in a connection with a money-raising machine (pick your favorite Wall Street Firm).

And a Federal government now with a tolerance (some would say preference) for MASSIVE private companies.

How do local real estate firms find their place in this soon-to-be brave new world?

ARTIFICIAL INTELLIGENCE – WHAT AND HOW?

Alan Turning presented the case for artificial intelligence initially in 1950. What we then lacked was means for a machine to efficiently store gathered data and to quickly retrieve and process the data into the information needed to perform.

There have been quantitative leaps in technology, so that now we are moving from machine learning (e.g., programs created to teach a machine) to deep learning (e.g., where computer learning occurs beyond what was initially programmed).

Artificial intelligence is already operating in other industries (e.g., particularly in medicine where massive databases—the Veterans Administration—exist from which machines can discern patterns to diagnose the condition and recommended treatment of the patient). CoStar is building the database, which may one day rival what is available in the medical world!

ADAPTING TO ARTIFICIAL INTELLIGENCE (“AI”)

AI is a tool which will allow – by the end of this decade – predictive models on when an owner will be ready to sell…and maybe before the owner recognizes the desire! AI will analyze CONSTANTLY updated information on tenant leases, mortgage terms, financial condition, marital and family conditions, local government attitudes, and prior behavior to target (and maybe initiate) potential transactions.

AI could also reduce the value of financial intermediaries (e.g., broker dealers, registered investment advisors, registered representatives) and the need for financial regulators (e.g., SEC, FINRA, NASSA) and sponsors (e.g., REITs, BDC, DSTs) as the marriage of opportunity and money moves primarily online.

AI is already impacting the relationship of tenants and management.  Some apartments have eliminated an office on the property – which reduces staffing needs – where now all communication is by telephone and online, whether to lease an apartment or generate a maintenance ticket.  And as more equipment “talk” with a central computer, maintenance will more often be anticipated, and repairs will be made before a machine breaks down.

BOTTOM LINE

Artificial intelligence has already arrived and is being embraced and installed across all industries. 

We need consider our future function, when much of what we now bring to the dance is accomplished faster and better and cheaper than what we could once do on our very best day.

AI is not to be feared.

It does need be recognized, and WE need to now do the adapting to a power never before available in our world of real estate.

MONEYBALL has come to real property! May the odds always be in your favor.