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The Bisnow Weekender: How Are You Integrating AI?

National

January 25, 2024 Mark F. Bonner, Editor-in-Chief

Thanks for reading the Bisnow Weekender, my personally curated roundup of the most impactful news, notable quotes, binge-worthy show recommendations and other colorful highlights from the Bisnow world of commercial real estate and beyond.

It’s no longer theoretical: Artificial intelligence is transforming commercial real estate.

This week, Cushman & Wakefield announced a new partnership with Microsoft that it says will “enhance customer experience, improve operational efficiency, and increase competitive advantage” for its 52,000-member workforce. Last year, CBRE launched an artificial intelligence platform that is now being used to help maintain 1B SF of its portfolio.

JLL is predicting that the growth of the AI industry will create a wave of new occupiers and lead to increased real estate demand. In 2023, JLL expected AI companies’ demand to reach 17.2M SF in the U.S. The brokerage also launched “the first large language model purpose-built for the commercial real estate industry.”

“Using JLL GPT in our secure computing environment, our global real estate experts will be able to deliver faster, smarter insights to our clients,” JLL Chief Technology Officer Yao Morin said at the time.

Unsplash/Denise Bossarte

So, how are you using it? How have you deployed this technology in your business to enhance productivity, solve problems and make more money? What are the best practices for implementing successful digital transformation strategies in existing real estate businesses? And what steps can CRE take today to prepare for the challenges of tomorrow?

At Bisnow, we want to know — and we want you to help us educate the industry on AI’s practical uses at the grassroots level. We just launched a survey that is essentially a call for entries to help us lead this discussion. Our team will sift through the entries over the next few weeks, and we hope you and your team will participate in a March webinar, moderated by yours truly, to share your successful implementations and findings.

Also, if you happen to be in London next week, please think about attending A Revolution Unleashed: AI in the Digital Age of Real Estate, an event we are hosting that will explore the innovative ways AI is being utilized to advance real estate workflows.

— Mark F. Bonner, Bisnow Editor-in-Chief

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The Best Of Bisnow News: Jan. 22-26

Disruptions In Red Sea, Panama Canal Causing Supply Chain Snafus That Bring Déjà Vu For CRE — Bisnow National Reporter Patrick Sisson

What do Houthi rebels in the Red Sea and the climate change-strained Panama Canal have to do with real estate?

More than meets the eye. Once again, the intricate dynamics of commercial real estate are under scrutiny as it grapples with the ramifications of myriad geopolitical tensions.

Against this backdrop, for example, U.S. construction projects are finding themselves ensnared in a web of uncertainties tied to the supply chain. The prevailing sentiment among industry players is that this could be déjà vu all over again.

“If the crisis puts enough upward pressure on prices for a long enough period, it could become an inflation worry. That might lead the Federal Reserve, which communicated the possibility of cutting rates, to be more cautious. Any resulting delay in rate cuts would, in turn, delay the relief that many owners and investors had been counting on and make the current wave of refinancing more expensive for many,” Bisnow reports.

To be sure, this situation isn't yet at the level of the supply chain crisis that was born during the early days of the pandemic, but if the situation in Yemen and Panama were to fester for the remainder of the year, that upward pressure could morph into something far more serious.

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Ozempic Could Be The Next Big Curveball For Commercial Real Estate — Bisnow DFW Reporter Olivia Lueckemeyer

Diabetes drugs being prescribed for weight loss, like Ozempic and Mounjaro, are already altering consumer purchasing habits. In the short term, the retail sector is in line to adjust first. But widespread adoption of the drugs, known as GLP-1s, could have far-reaching and surprising implications for asset classes from housing to healthcare and beyond.

Nearly 24 million people, or roughly 7% of the population, are slated to be taking appetite suppressants by 2035. That has prompted longtime industry insiders like Roy Oppenheim to brace for what they believe could be the biggest disruption to real estate since the pandemic, on par with emerging and revolutionary technologies like artificial intelligence.

“After Covid, this will be the next big impact,” said Oppenheim, a real estate lawyer, partner and co-founder of Oppenheim Law in South Florida who has taken a keen interest in the relationship between the adoption of GLP-1s and commercial real estate.

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20-Year-Old Tax Shelter May Be The ‘Way Of The Future’ For America’s Aging Property Owners — Bisnow Houston Reporter Maddy McCarty

Delaware Statutory Trusts, which make use of 1031 tax exchanges and allow investors to shelter real estate properties from taxes, have been around since just after the turn of the millennium. But a rapidly aging generation is driving record equity into the market and a spate of new offerings and players into the space, including Hines and Starwood.

“As the DST world becomes more and more known … people are more comfortable with it. As you get more comfortable with it, you do it a little more easily. You tell your friends about it,” said Betty Friant, executive vice president and managing director of California-based Kay Properties & Investments, which offers access to a marketplace of DSTs and has participated in $30B of DST offerings.

Equity in the securitized 1031 market, 95% of which is now accounted for by DSTs, grew to $21.6B from 2021 to 2023, about 2.5 times the $9.16B in equity invested in the vehicles from 2017 to 2020, according to data from research firm Mountain Dell Consulting.

More Big News From The Week …

— Alternative Assets Gaining Ground Among Investors As Old Standards Like Retail And Office Fade

— ‘Shocking’ Plunge In Office Values Reveals Depth Of D.C.’s Looming Economic Crisis

— Retailers Back On Store Expansion Trail At 40,000-Person Conference, See Big Gains From AI

— Investors Eye Inflation And Recession Indicators As UK Outlook Starts To Brighten

— ‘An Expensive Lesson’: Data Center Developers Launch Efforts To Gain Support In Hostile Communities

My Slightly On/Off-Topic Media Diet

The U.S. Economy Grew At Blistering 3.3% Pace In Q4 While Inflation Pulled Back (CNBC): “The economy grew at a much more rapid pace than expected while inflation eased in the final three months of 2023, as the U.S. easily skirted a recession that many forecasters had thought was inevitable, the Commerce Department reported Thursday.”

ECB Holds Interest Rates Steady At 4% (The Financial Times): “Economists have been cutting their forecasts for eurozone growth and inflation this year after weak data on industrial production, producer prices, business orders and retail sales pointed to a slowing economy. Yet analysts still worry high wage growth and supply chain disruption caused by attacks on ships in the Red Sea could keep inflation high.”

Here's Why GDP Came In Hotter Than Expected (MarketWatch): “Government spending rose at a 3.3% annual pace, adding 0.6 percentage points to GDP. Federal spending was basically flat, with most of the increase coming from state and local governments. A shrinking trade deficit, what's more, added 0.4 percentage points to GDP. Take those two mini-rocket boosters out and GDP grew at a solid but slower 2.3% annual rate in the fourth quarter.”

SPAC Mania Is Dead. The SEC Wants To Keep It That Way (WSJ): “The Securities and Exchange Commission, which Gensler chairs, voted 3-2 Wednesday to adopt rules that seek to make it clearer to SPAC investors if they are getting a raw bargain. Once the rules take effect in about five months, according to lawyers familiar with the deals, they will likely drive another nail into the coffin of a recent Wall Street fad fueled by market froth and regulatory arbitrage.”

2024: The Public’s Priorities And Expectations (AP-NORC): “Foreign policy issues top the public’s agenda for 2024, followed by economic concerns. Education, the environment and climate change, and health care continue to be major concerns. Most Americans do not expect things to get better for themselves or the country in the upcoming year.”

U-Haul Announces Top Growth States Of 2023 (U-Haul): “Texas netted the largest number of movers in one-way U-Haul equipment in 2023, marking the third consecutive year it has finished atop the U-Haul Growth Index. Florida ranks right behind Texas among growth states for the third year in a row, followed by North Carolina, South Carolina and Tennessee. … For the fourth year in a row, California reflected the largest net loss of one-way movers.”

The Power Of Now (Axios): “Work and anxiety expand to fill the time we give it. Get it out of the way and you've freed up bandwidth — and liberated yourself from the dumb stuff we all do to avoid something hanging over our head. If you plunge in, you realize instantly if you need course-correction or follow-up, instead of pushing the distraction or disruption down the road.”

Bisnow Weekend Interview Preview

Data has long been a crucial component of the commercial real estate business, and having reliable, accurate data and information became even more important in the last two years as market conditions deteriorated. One of the go-to sources for industry data, particularly around distressed property, has been Manus Clancy, formerly with CRE loan data specialist Trepp.

In this week’s Weekend Interview, Bisnow Los Angeles Reporter Bianca Barragán spoke with Clancy, who this month moved to a senior management position at commercial real estate data and analytics company LightBox. Clancy spoke about the turmoil the market has faced and why he has some optimism about 2024.

Bisnow: As the new year unfolds, what trends are you keeping an eye on, and what's a bold prediction you have for 2024?

Clancy: I think my bold prediction would be, a lot of people use the term “survive until '25” for CRE — we're going through a turbulent time, it will be painful, economic activity in CRE will be muted — but I am more optimistic than most. We've already seen the yield on the 10-year Treasury drop 100 basis points. Short-term interest rates should start to come down. I think that we see a modest pickup in CRE economic activity in the first half of 2024 and a nice acceleration in the second half. I don't think we're talking about a lengthy and painful process like we saw in 1990 or in 2008. I think we bounce back sooner, and other than in office, the pain is shallower than sentiment would suggest. ... This isn't the Roaring '20s again, but I think we'll surpass some of the dire predictions that are out there.

The Weekend Interview goes live every Friday evening — head to www.bisnow.com over the weekend to check it out!

Jobs! Jobs! Jobs!

Here are this week’s top jobs over at Bisnow's careers platform, SelectLeaders. Reach out to SelectLeaders Managing Director Ryan Neale to learn more. You can email him at [email protected].

Director of Asset Management — Oversee a prominent West Coast affordable housing portfolio.

Head of Property Management — Lead property management for a $7B portfolio.

Vice President of Acquisitions and Asset Management — Lead acquisitions and asset management for a premier Southeast owner-operator.

Hey, Jay, What Are You Going To Binge This Weekend?

This Sunday is the best day of the NFL football season. I’ve already got bets on both of the unders. Detroit is just as likely to get blown out as they are to win, so I’ll also be sprinkling a bit on the Lions moneyline. And as much as I think the NFL would love to see Taylor Swift and the Kansas City Chiefs in Las Vegas for the Super Bowl, I’m not betting against Lamar Jackson. My family is otherwise in the middle of touring colleges with my daughter — we visited UNC and Duke last week — but her swim team is keeping us home in New Haven, Connecticut, this weekend. My son has an away hockey game on Saturday and says we’ll be listening to a rapper named Quadeca on the way. But when I’m not parenting, I’ll be plowing my way through Shameless as I’m running on the treadmill at the gym. I had no idea it was 11 seasons when I started! I’ve got Money Heist as the next show in my queue and am looking forward to starting the third season of Slow Horses.