Technology impact in real estate returns: learning where the trapped value is.

Technology impact in real estate returns: learning where the trapped value is.
Matthew Candy
Global Managing Partner, Generative AI, IBM.

Artificial Intelligence (AI) seems to have landed very recently, but IBM has a long research & development track record in the field. Where you surprised by all the “buzz” that now hit the market?

AI has not been discovered recently. We can trace it back to the summer of 1956, where IBM started its work in this we are talking of over six decades (67 years) of research.

We see the “buzz” from last year as something positive because the world is finally understanding the power of this technology.

Truth be told that a lot of the hype is on the final consumer use of AI. The famous case of ChatGPT was so successful because OpenAI was able put a really simple product on top of a complex technology and consumers valued it, so for individuals it was quite positive.

IBM has been working more closely with large language models (LLM) for businesses. For enterprises, the increase of awareness is also great and essential for them to rethink the role of AI as part of their strategy, and not only a new IT tool.

In what ways do you think AI will reshape industries and the labour market? On your view will it be the less or more qualified jobs the ones getting hurt?

The power of generative AI is immense, particularly in the realm of knowledge work. It aids in tasks such as creating content, reviewing documents, and assisting people rather than outright replacing them. In this sense, at IBM we hold firm guidelines on the ethical implications of AI implementation, keeping the human factor present at all times.

AI has the potential to enable scaling within industries, much like the introduction of ATMs freed up time once spent on manual cash handling, leading to an increase in bank tellers rather than a decrease. The impact on the labour market will likely affect both less and more qualified jobs, but it will also create new types of jobs and roles.

Currently, IBM focuses on three main areas concerning AI application: customer care, digital labour, and the modularization and development lifecycle. AI aids in improving customer interactions, streamlining processes such as HR and talent acquisition (of 260.000 people in IBM 90% interact with AI on HR), and enhancing the understanding of code bases for development purposes.

Are we in the "suitcase phone" or "smartphone" era when it comes to AI?

Predictive AI has reached a high level of maturity, while generative AI, a more recent development (dates to around 2017), is still in its early stages. However, the benefits of generative AI are already becoming apparent. Additionally, smaller language models are gaining importance, particularly in financial models. The future differentiation for enterprises will lie in their ability to leverage data effectively to create innovative systems.

Can any company effectively utilize AI, and how can AI be monetized?

Indeed, any company can harness the power of AI. Monetizing AI involves creating new sources of value without destroying existing value. This can be achieved by developing new types of data and models, thereby creating new services and intersecting product and engineering efforts.

Also, monetizing is not always about increasing revenue, it is also about how much money you save by taking less time and increasing productivity!

At the beginning of 2024, IBM introduced “IBM Consulting Advantage”, an AI Services Platform and Library of Assistants to Empower Consultants, and early adopter teams saw productivity improvements of up to 50%. 

Digitalization is growing, but Real Estate continues to be fundamental, since we live and work in buildings. How is this industry being impacted?

The impact of AI on the real estate industry is significant. And the funny thing is that things like procurement, supply chain, marketing, IT, and customer services, are common factors to all industries.

Digging into the real estate sectors, one key area where AI is making strides is in retail through the personalization of the digital shopping experience, enhancing customer engagement and satisfaction. Moreover, AI is increasingly being used in advertising, optimizing strategies to target specific audiences more effectively.

The influence on the dynamics of the workforce is also significant, and here I want to highlight that AI is not just a tool… it's becoming an integral part of the workforce, similar to having an additional team member.

This will be the largest driver of GDP growth that we have seen in decades, ranging from 3 to 4 trillion euros worth of new economic benefits, and massive productivity gains in many areas of knowledge work within organizations.

Over 70% of the software real estate companies use in their business, will be infusing this technology, and whether they like it or not, it will impact their activity.

In the real estate industry between €110 and €180 billion of new value is going to get created purely through this one technology, from more efficient operating models and productivity, from better customer experience being able to retain tenants, generating new revenue streams and better use of the assets that investors already own.

What role should governments and regulators play in overseeing the development and deployment of AI technologies?

For any organization having doubts which tools are safe to use they should establish and put in practice an AI governance policy.

To deconstruct some myths, IBM has outlined some policies regarding this technology implementation. Firstly, AI is designed to assist rather than replace human workers, emphasizing augmentation rather than substitution. Secondly, IBM recognizes that data belongs to its creator, emphasizing the importance of data privacy and ownership. Lastly, there's a focus on assessing and mitigating the risks associated with AI use cases, ensuring responsible and ethical deployment.

Governments and regulators play a crucial role in ensuring the responsible development and deployment of AI technologies. Many countries are looking to the European Union as a benchmark for regulatory frameworks. It's essential for regulations to be precise and tailored to specific use cases. Attempting to regulate the technology itself can impede progress and innovation.

Collaboration between industry players and regulators is vital for effective oversight of AI technologies. Initiatives such as the “AI Alliance”, where IBM is a founding partner alongside META, promote open innovation and dialogue between stakeholders. By working together, industry and regulators can develop regulations that are informed by technological advancements and societal needs.

One of the main challenges is keeping pace with the rapid evolution of AI technologies. Regulations need to be flexible enough to adapt to new developments while still providing sufficient protection for consumers and society as a whole. Additionally, ensuring global consistency in regulation can be challenging given the diverse regulatory landscapes across different regions.

IBM view is very simple, we believe open and transparent innovation is essential to empower a broad spectrum of AI researchers, builders, and adopters with the information and tools needed to harness these advancements in ways that prioritize safety, diversity, economic opportunity and benefits to all.

Generative AI: Far more a human problem than a technology aspect

While the technology itself is remarkable, its true potential lies in how it's utilized by people. It's crucial to bring individuals along on the journey of AI adoption, equipping them with the necessary skills and knowledge to leverage its capabilities effectively. This involves teaching them how to use AI and encouraging them to ask better questions, fostering a culture of curiosity and innovation.

The adoption of AI within companies should start from the grassroots level, involving individuals who are closer to daily tasks. These individuals possess invaluable insights into the challenges and opportunities within their respective domains. By involving them in the adoption process, companies can ensure that AI solutions are tailored to meet their specific needs and requirements, driving greater efficiency and effectiveness in daily operations. Generative AI will serve as a huge democratizer of creativity.

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