Generative AI (genAI) is transforming the commercial real estate (CRE) industry. From accelerating due diligence to streamlining lease abstraction, genAI tools promise significant efficiency gains across the deal lifecycle. But with this promise comes a responsibility: CRE firms should balance innovation and efficiency with appropriate privacy and security guardrails, as well as internal controls to ensure accuracy and completeness. When used strategically and with proper controls in place, AI can deliver substantial value while mitigating risks.
Using AI to Streamline CRE Operations
Lease Abstraction and Document Review
genAI can accelerate lease review by quickly identifying and summarizing key provisions like rent escalations, default and cure periods, termination rights, and co-tenancy clauses. This is particularly useful during acquisitions and financing, where quick access to lease data helps assess tenant credit and future cash flow. genAI can compare drafts of leases and loan documents, spotting changes or missing language, saving time and ensuring accuracy.
Post-Loan Closing Tracking and Summaries
Once a deal closes, gen AI tools can extract and organize key deliverables such as tenant reporting dates, insurance renewals, lease expirations, and financial covenants tied to a loan. This reduces the risk of missed deadlines and keeps compliance and asset performance on track.
A “Running Head Start” on Acquisitions
Due diligence involves sifting through a high volume of paperwork, including zoning memos, title documents, environmental reports, engineering studies, and more. AI-powered tools can extract and synthesize information from these sources, giving acquisition teams a running head start. Title commitments can be generated faster, and potential use restrictions or easements can be flagged early, reducing transaction timelines and increasing deal confidence.
Automated Valuation Models (AVMs)
AVMs combine local economic indicators, comparable sales, and market data to deliver real-time property valuations. These tools can help firms evaluate opportunities more quickly, especially in competitive bidding situations where time is of the essence.
Marketing, Client Alerts, and Content Generation
AI can also support marketing and business development. Tools can draft listing descriptions, summarize zoning board or planning commission decisions, and even generate content for clients tied to regulatory updates or newsworthy industry events. These communications can be tailored by audience or geography, efficiently allowing firms to stay top-of-mind with clients while reducing manual work.
Keep These Cautions in Mind When Using AI
AI Is Never a Substitute for Human Judgment
Despite its capabilities, generative AI is not infallible. It can “hallucinate” or fabricate information, misinterpret language, or present outputs with misplaced confidence and without proper attribution. Over-reliance on AI increases the risk of material errors and even malpractice. Always apply a second layer of human review, particularly for legal or contractual work. Accuracy trumps speed.
Understand the Legal and Ethical Landscape
Many AI models are trained on publicly available content, some of which may be copyrighted. With copyright litigation making its way through the courts, it’s currently difficult for end users to know whether a particular output violates intellectual property rights. When in doubt, rely on verified sources and ensure attribution is clear.
Regulatory and Antitrust Concerns Are Rising
To date, there is a patchwork of state-specific legislation governing the use of genAI and federal overlay. Illustrating that point is the fact that cities like San Francisco, Providence, Minneapolis, Jersey City, and Philadelphia have outlawed algorithmic pricing tools to set rents.
CRE firms using AI in rent-setting or investment underwriting should monitor this space closely.
Client Expectations and Disclosure Requirements
Some clients prohibit the use of genAI when handling their work. Others may only allow approved tools or even expect AI use to reduce fees. Regardless of your internal policies, client requirements will ultimately govern how genAI is deployed on a project. Disclose any use of AI clearly in your engagement letters or contracts.
For commercial real estate firms, genAI can offer meaningful efficiencies in document review, valuations, deal execution, and client service. The key to leveraging AI effectively is a strategic, well-managed rollout. Implementing AI without clear protocols, staff training, and robust planning increases risk, potentially exposing cybersecurity vulnerabilities and the risk of data breaches. Like any other digital tool connected to your firm’s network, AI systems must meet strict cybersecurity standards, including access controls, data encryption, and real-time threat monitoring. AI tools often expand the number of network entry points, making strong security measures essential. When deployed thoughtfully, however, AI can enhance operations, support decision-making, and deliver real business value.
