The Commercial Market of Tomorrow

The Commercial Market of Tomorrow

Since the industrial revolution, human history has been defined by the advancement of machinery and its ability to surpass our own capabilities.

For the next generation, the defining fuel for commercial real estate investment will be Artificial Intelligence.  This technology will determine success and failure of entire portfolios over the course of the next decade.

According to a study by Oxford University in 2013, as many as 47% of all jobs in the United States are at risk of “computerization.”  This will change the structure of the global work force, economy, and consequently the real estate market.

The following are sectors in the commercial real estate industry which could be impacted by the advancement of AI technology over the course of the next decade.  All of these examples have both positive and negative factors which investors will need to consider as they look to structure their portfolios.

Medical Office Tenants on the Rise. 

It is no secret that AI technology is already being used in the current medical community. New technology continues to meet the rigorous guidelines set forth by the FDA every day, allowing medical professionals to either be accompanied or assisted by robots for anything from routine patient checkups, to more complex surgical practices.

As these machines continue to fill a critical need for the booming world population, commercial real estate developers will use this advancement to fuel the next development boom focused on smaller medical centers.

IBM has already premiered its new Watson Oncology Computing System which will change how medical professionals both detect and treat cancer.  With the use of the IBM system and many others like it, we may see a migration of oncologist and other specialized medical professionals from large hospital campuses to smaller localized offices.

Vehicle Hubs. 

Per the American Trucking Association, there are an estimated 3.5 million professional truck drivers in the United States alone.  But, over the course of the next five years as driverless technology cuts through the red tape set forth by both state and federal regulations, a change is expected to take place.

The impact of driverless technology will no doubt change the American economy both positively and negatively.  With a drop in overall transportation costs, many industries will see a rise in profits, but there is also the risk that 1.7 million drivers will lose their current positions – impacting the employment rate and possibly the economy as a whole.

Commercial real estate investors who reserve funds for capital improvement to warehouse spaces can expect to attract a new type of client as these driverless semis will require more square footage than their predecessors to house not only inventory but expansive maintenance equipment for repairs of the motion sensors, cameras, laser light systems, and computer software.

As companies like Otto Motors with backing from UBER perfect the design of their self-driving semis, previously vacant industrial spaces will receive a second life through capital improvements required to house these new transportation centers.

Additional Fluctuation in Office Occupancy

Still recovering from the “Work from Home Boom,” office buildings are expected to experience another significant drop in the square footage consumed by tenants, especially in the fields of accounting, legal, and direct marketing services.

Advancements in technology are presenting a new bottom line for these companies, one that will value an AI service over an employee.

The industry expected to be impacted greatly is the legal sector, over 100,000 jobs have a high chance of being automated over the course of the next 20 years.  This would consist mainly of support staff positions related to the tasks of due diligence, electronic discovery, and contract review.

Lowered Construction Costs with Shorter Time Frames

As if commercial real estate developers needed another reason to take on a large number of projects, it appears that lower construction costs and shorter development time frames will drive the current development boom past 2020.

There is a slew of current AI technology companies which are pushing toward semi-automated machines replacing the need for large construction crews.

For example, Construction Robotics has already turned the industry upside down with their SAM100.  The first commercially available bricklaying robot for onsite masonry construction, SAM (Semi-Automated Mason) has a daily output of 1,200 bricks, which is two to three times more productive than its human counterpart.

The AI revolution is already here, and it will only grow as engineers continue to surpass human limitations through robotics.  For commercial investors, it is extremely important to monitor these advancements as closely as one would monitor fluctuating interest rates.  As these machines continue to change the way we work and live, the structure and use of commercial assets will need to change with it.

If you would like to know about additional advancements in technology and how they will affect future markets, feel free to connect with us on Twitter or Facebook where we post weekly updates on tech which will change the industry #TechThursday.

And if you would like to learn about how to invest in a commercial asset while the market is still in transition, follow the link below to register for one of our upcoming Commercial Property Academy Live Events.

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