As we enter 2023, AI solutions are becoming more prevalent in the commercial real estate (CRE) industry as many businesses continue to transform the finance function in an effort to decrease back-office operational costs. In the last few years, automation and AI have taken the commercial real estate industry by storm, disrupting the traditional standard of manually sorting through paper invoices and resident applications to enhance the resident experience with real-time virtual chat bots.
These solutions were not only popular, but became a necessity in the aftermath of the Coronavirus outbreak. Property managers sought to continue high value community engagement, with a virtual or social distanced approach to maintain tenant retention.
Today, property managers, investors, homeowners, agents, lenders, and real estate entrepreneurs alike benefit from the innovative technology developments taking place, gaining a competitive edge.
AI technology is here to stay, so what can we look forward to in this upcoming year?
Let’s take a look at 5 AI technology trends to expect in 2023:
Predictive analytics use data, statistical algorithms, and machine learning techniques to identify the likelihood of future outcomes based on historical data. Solid data and analytics are essential to successful CRE finance operations and change management, especially in 2023 when budgets are tightening.
AI can be used to analyze large amounts of financial data, such as property and market data, to identify trends and patterns that can help provide insights. It can forecast trends and patterns in the market, such as changes in demand for rental properties or shifts in property values. This can help property owners and investors make more informed decisions about their properties and predict future performance. Companies like Geophy use machine learning based automated models to calculate real time valuations that pull from their data lake and updates in real time with every new data point. Its data lake includes economic, demographic, and property-related characteristics such as size, age and tenants, along with location-related information such as nearby retail and entertainment properties. Having this information at your disposal enables more informed acquisition decisions and deal negotiations while reducing potential for human bias.
Lease abstraction is used to track the terms and conditions of leases for properties, such as office buildings, retail spaces, and warehouses. AI algorithms can be trained to recognize and extract specific data points from lease agreements, such as the tenant's name, the rental rate, and the length of the lease term. AI helps identify patterns and trends that might not be immediately apparent to humans like lease terms, rent payments, and renewal options. It can then input this information into a database for easy tracking and management.
For example, Mobius’s automated lease abstraction Xtract.io can scan a document to extract prominent data containing crucial financial and legal information and deliver the details in a Word or Excel sheet. Not only does it not require human touch, it cuts down on the long, labor intensive process of analyzing, identifying, and uploading data. With AI extracting this information, your finance team can get more time back to work on other initiatives and mitigate avoidable human error.
Managing multiple properties or associations as separate entities, with separate chart of accounts can make the accounts payable process extremely complicated. RPA tools have enabled real estate finance teams to semi-automate their invoice processing by using OCR to code the invoice to the GL using rules and templates.
Invoice processing involves receiving, reviewing, and approving invoices for goods and services that are related to the ownership and operation of a property. This includes invoices for things like utilities, maintenance, and repairs. AI algorithms can be trained to recognize and extract data from invoices, such as the vendor, invoice amount, and date, and input it into accounting systems. Unlike RPA solutions, AI algorithms can carry out decision oriented tasks when it comes to invoices with hundreds of line items. This can save time and reduce the risk of errors that can occur when data is manually entered due to exceptions or paper invoices. AI can be used to hyper-automate the process of reviewing and approving invoices for payment, which can also help save time and increase ROI.
Tenant screening typically involves reviewing the tenant's credit history, employment history, and criminal background to assess their financial stability. AI can automate the tenant screening process by analyzing large amounts of data quickly and accurately, as well as analyze credit reports and other financial data to predict the likelihood of a tenant defaulting on rent payments.
This process is typically time-consuming, but companies such as RealPage have incorporated AI into their tenant screening process in order to get the most accurate assessment of prospects in the most efficient way possible. RealPage’s screening tools analyze tenant credit, rental history, and financial information and use a new scoring system to help landlords and property managers identify potential tenants who are likely to be reliable and responsible, and determine whether they are a good fit for a rental property. This game changing technology helps save time and money by reducing the risk of unpaid rent and eviction processes. It can also avoid potential human bias and give potential tenants an opportunity to live somewhere they may have been disqualified for in the past.
Chatbots and virtual assistants
Chatbots and virtual assistants are AI-powered software programs that are designed to communicate with humans through text or voice interactions. In CRE, they can be used to improve customer service, and reduce the workload of property management staff by automating tasks. These tools can help property managers and other professionals communicate with tenants, answer frequently asked questions, provide information about available properties, or handle maintenance requests in real time.
Property management software, Yardi has incorporated the use of AI-powered chatbots in order to improve customer service for property managers, providing assistance through chat, text, and email. If a tenant has a unique question, such as unit availability, or maintenance request that needs to be addressed, they can utilize Yardi’s RentCafe Chat IQ and get accurate answers in real time. Chat bots are a great way to avoid delayed response, improve customer service, and optimize rate conversion to help prospects continue ont their leasing journey. Trained with natural language processing AI and customized responses, virtual assistants can help to improve the efficiency of the property management process and reduce the workload of property management staff.
While these AI trends are great for companies that have already made the choice to digitally transform their AP process, many CRE companies seek to cut tech spending in the upcoming year. According to Deloitte’s 2023 CRE Outlook, many companies anticipate some level of technology cost-cutting at their companies, and fewer than half expect to see any increase at all. It’s easy to only focus on cost-cutting during challenging times, but the best companies strategically invest for growth during a recession. Technology has long been considered a recession-proof investment, however, that technology needs to be the right technology.
Real estate executives should look to invest in true AI, technology that is always learning and improving on a never-ending feedback loop of information-rich data. They should also expect automation solutions to improve their data insights in order to inform better decision making, save companies labor overhead by automating tasks, and help leaders drill down into their spend through intelligent data analytics. CRE companies are utilizing AI to reduce the risk of error, increase ROI, boost productivity, and improve decision-making. Make 2023 the year your company leverages AI to free employees from mind numbing tasks.
Automation has been an integral part of invoice processing over the last decade, and with the help of AI, you can reap the full benefits to unlock faster and more accurate accounting.
Download our Real Estate Guide to avoid invoice processing errors and learn critical steps in optimizing your AP process.