Andrei Kasyanau is the cofounder and CEO at Glorium Technologies. Startup advisor and an expert in health and real estate tech.
Digital technologies have begun to make their mark on the real estate industry. We’re, of course, talking about the influence of AI on the sector. While this digital transformation has been slower here than in other fields, it’s now changing the entire industry.
The market size has shown rapid growth, considering the conservative nature of the sector. For example, in 2022, AI in real estate was valued at around $163 billion. By 2023, this figure had surged to approximately $226 billion, reflecting an annual growth rate of over 37%.
To put this into context, the overall global real estate market was valued at $3.9 trillion in 2023, growing to $4.12 trillion in 2024. Although AI currently represents a fraction of the total market, its rapid expansion underscores the increasing role of AI technologies in driving the industry’s future.
Real Estate Industry Before The Technological Boom
Before technological developments, the real estate industry relied heavily on manual processes. Agents and brokers maintained extensive networks of personal connections, often relying on word-of-mouth referrals and physical property listings to conduct business. Property and lead searches were also time-consuming experiences.
The stark contrast between the pre-tech real estate sector and the current AI-powered one highlights the transformative effect of the technology. It has been reshaping every facet of the industry, from property searches and valuations to customer interactions and market predictions.
How AI Is Changing The Real Estate Market
AI is gradually changing the industry, making property transactions more efficient, optimizing management and refining investment approaches. The 2024 New Delta Media Survey shows that 75% of leading brokerages in the U.S. have already adopted AI technologies and are slowly integrating them into their work.
These are some of the key areas where AI is making a difference:
Intelligent Lead Generation
AI solutions are changing the process by automating and refining lead qualification. These algorithms can analyze complex patterns in user behavior and demographic data to pinpoint individuals with a high tendency for property transactions.
Market Forecasting And Risk Assessment
Real estate industry professionals have been using predictive AI to find and analyze patterns and trends in market data and user behavior that human analysts might miss. These AI-powered predictive tools can help investors make more informed decisions about property purchases and sales.
Proactive Asset Management
Unexpected maintenance issues have long been a source of financial strain and tenant dissatisfaction for property management companies and landlords. However, predictive maintenance, strategic resource allocation, risk assessment and performance monitoring powered by AI aim to provide significant changes in asset management, improving customer satisfaction and reducing long-term costs.
Revolutionizing Property Valuation
AI-powered valuation models can analyze a wide range of data, including property characteristics, market trends and economic factors, to provide more accurate and reliable property assessments.
JLL Research states that AI and GenAI are among the top three solutions that are expected to have the most significant impact on real estate. Early adopters of AI technologies are already seeing results. For instance, my company implemented AI solutions in a real estate company to automate property price estimations and track market trends, leading to a notable boost in revenue. Our learning model was able to predict prices accurately and allow users to explore regional property value trends. We also assisted a real estate investment company with automating condition assessments, which helped increase listing engagement, reduce time-on-market and uncover more sellable features per property.
CAPE Analytics, for instance, has improved property valuation accuracy by 7.7% and helped clients reduce manual inspections by up to 50%, streamlining the decision-making process.
The Inevitability Of AI Integration In Real Estate
The real estate industry is at a critical juncture where AI adoption is viewed by many as essential for staying competitive. This creates competitive pressure, highlighting the necessity to understand AI in the industry. Early adopters of AI are already experiencing substantial benefits, such as increased efficiency, more accurate property valuations and improved customer service abilities.
There’s also the matter of consumer expectations. While experienced buyers have traditionally driven the real estate market, many tech-savvy individuals are becoming more involved and shaping its future direction. With shifting preferences and greater reliance on technology, Millennials and Gen-Z expect a more digital, personalized and tech-savvy real estate experience. Demographic shifts, changes in population dynamics and urbanization trends are also affecting the decisions of real estate company representatives. AI offers powerful tools to analyze these demographic shifts and predict emerging trends more accurately than traditional methods.
Cost efficiency is another factor that drives many real estate companies to invest in AI solutions. AI is transforming real estate economics by automating routine tasks and enabling predictive maintenance, leading to significant cost savings.
Is Investing In AI Solutions Worth It?
The integration of AI applications in real estate is still in its early stages, with significant room for growth and innovation. Forty-five percent of venture-backed companies in this space are in early development phases, with 20% at the incubator or seed stage and 25% securing early VC funding. Only 15% have progressed to late-stage VC rounds, highlighting that the sector is still young and has immense potential for growth.
Experts are still exploring the full range of AI capabilities and how they’ll change the way we approach the real estate market. Approximately 49% of real estate business owners have observed cost reductions due to AI adoption, with potential operational cost savings of up to 15%.
While it’s worth investing in AI solutions and staying informed and strategic, it’s essential to note that implementing AI solutions, especially in a conservative sector like real estate, requires careful planning and a professional approach. Start by assessing your team’s AI expertise and aligning it with long-term goals. Integrate reliable data sources, stay agile with market changes and build an interdisciplinary team to monitor and adjust AI tools regularly. Specific business needs, data availability and your team’s expertise will influence the success of your AI implementation.
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