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What Is Generative AI and How Does It Factor into the World of Proptech?
Everyone is talking about artificial intelligence (AI) lately. There are a variety of AI companies that are making headlines and conversation is centered on where this technology could go in the future. For those in the proptech sector, it’s reasonable to wonder if AI is going to have an impact on the industry as time goes on.
If you aren’t overly familiar with AI, you may not realize that there are several different types. One of the most discussed in 2023 is generative AI. It’s also the type of AI you should be aware of if the proptech industry is important to you. Generative AI incorporates an algorithm that can make new content, such as video, simulations, text, images, code, and audio.
Huge breakthroughs in generative AI have made it clear that it’s here to stay. It offers massive benefits to the world at large and could be a major source of change in the content creation world as it becomes smarter and more capable. This article will delve into what generative AI is, what it is capable of, and how it plays into proptech as a sector.
What Is Generative AI All About?
For creative people who want to go further with their skills and abilities, generative AI could be the perfect solution. It’s capable of creating all sorts of exciting and impressive content, ranging from songs and paintings to full virtual universes.
It might sound as if it’s something to be used for fun and entertainment – and it can be. However, generative AI has a huge number of practical uses and those are expanding every day. Need to optimize your business practices? AI can help. Looking for a few great product ideas? It can assist with that too.
Right now, generative AI is a new frontier and everyone is getting into it. For those in proptech, you can make use of it as well. All it takes is an understanding of the technology and the will to move into the future.
AI Tech Making Waves Among Consumers
Most people have heard of ChatGPT. GPT stands for generative pre-trained transformer and the chatbot by this name is getting a ton of attention. It’s free to use and can provide amazing answers to a wide variety of questions when asked.
ChatGPT was created by OpenAI and was released toward the end of 2022. Most people who have used it say it’s the best chatbot that has ever been made. It’s also highly popular with over a million people trying it out in only five days.
People are using ChatGPT for creative efforts, like jokes, poems, essays, and code. This has also caused some content creators, from professors to copywriters, to worry that their livelihoods may be on the line.
Some people may be frightened by the future of AI, but there are also many benefits of the technology. Since being deployed on a wide scale, it has already had huge impacts on several industries. For example, it has assisted with high-resolution weather forecasts and has been shown to do well with medical image analysis.
Think that AI is just a trend and will fade out? That’s valid but a 2022 McKinsey survey indicates that the adoption of AI has doubled in just five years and investments in it are rising at that same pace. Throw in all the tasks generative AI can do and it’s unlikely to fade away anytime soon.
How Generative AI Could Revolutionize Proptech Efforts in the Future
Tons of amazing AI solutions came out in 2022, including StableDiffusion, Midjourney, and DALL-E, as well as ChatGPT. These huge developments are backed by $49 billion in venture capital invested in AI over the last year. This is an increase of 40% compared to 2021.
With such a huge boom in generative AI, it might seem strange that few people are talking about how this technology will impact real estate moving forward. After all, real estate is a $50 trillion asset class and one of the biggest drivers of the global economy.
If you’re here as a tech entrepreneur in the real estate sector, right now you have an opportunity that you may not yet be tapping. As AI becomes more and more commonplace, use cases will be seen in all sorts of proptech, including sustainability and construction, mortgage listings, and real estate searches.
Below we’ll delve into how generative AI could alter different aspects of real estate and what you can do to be a part of this massive change. Take a look at the topics that interest you and let yourself imagine a world where all of these things can be done more easily with the help of generative AI.
Real Estate Agencies
One of the things that brick-and-mortar agencies have to contend with is being as competitive as agents online. In many cases, online agents are less expensive. However, the insightful and personal aspects of a human agent cannot be understated.
Is AI a way to help human agents stay on top? It might sound crazy but it actually could be a fantastic option. Having an AI assistant to help human agents could soon be a reality for major agencies. You get the human aspect combined with the massive amounts of data that AI can bring to the table. Even the most experienced and educated human could benefit from the help of AI with a huge amount of knowledge and the ability to quickly note patterns.
When you combine great information with amazing customer skills, humans make themselves indispensable with the help of AI. Agents with lots of great data delivered quickly through AI assistants working in the background could be a future scenario we see sooner rather than later.
Developers and Investors
Investing relies on several things, such as analytics, modeling, and data. Tools like Excel have been in use for decades to manage property investments. However, these simpler models have been overshadowed by more complex analytics. As generative AI becomes more common, many property investors will have the means to use these models.
This doesn’t mean that AI should choose a person’s investments. Your human intelligence is what should make those decisions. However, AI can provide data on trends so investors can be more skilled at identifying opportunities for investments, understanding yields, and having access to demographic data.
Compared to agency solutions, this has seen less progress but there’s still time. It remains to be seen whether generative AI can help with investment in the real estate market. However, it’s certainly something to watch as we move into the future.
Manager and Surveyors
One of the biggest areas where AI has had a huge impact is in terms of management and similar tasks. A report from 2017 shows 42 functions around surveying, 11 of which could quickly advance with technology, seven that may be vulnerable, and 22 that will see some form of impact.
Where humans are an integral part of the process, there will be less change. This includes roles like management, physical maintenance, sales, and organization. However, changes may be coming in areas like space analysis, legal documentation, lease management, property information, and several more.
Using IoT (Internet of Things) devices, such as cameras and sensors, helps provide data that is used to manage and maintain properties. This kind of technology can provide insights into how people interact with buildings. When AI Is added to the mix, all the data can be used to create predictive models for future development and preventative maintenance.
Builders and Architects
When it comes to construction, this is an area where robots may take over for some humans. A skills shortage paired with a demand for new construction is a dilemma that new technology could assist with. This may help with demand and some studies have been done on robotic manufacturing so it could be more common moving forward.
However, architectural elements are less likely to go the same way as humans are essential in the process. The human element of design is something that most people favor over the built environments that machines can create. However, the use and capture of data could make life easier for those in this sector.
By creating more effective designs and automating some of the tedious tasks, the design process as a whole may speed up. This can create better efficiency for architects to be creative and offer new designs. Using IoT with AI can also ensure all architects have the needed information to create good use of space through effective design.
Will Generative AI Impact Residential Real Estate Tech?
You can see above the many ways that AI can have an impact on real estate tech. But you might be curious how this will impact residential projects specifically. It’s a good question and one that anyone in proptech should be aware of as we move forward into the new future of real estate.
The new gen of generative AI and chatbots that we’re starting to see out there in the world could make some huge changes. We aren’t talking about a single alteration throughout the industry. No, generative AI could impact everything from how we handle valuations to the way the brokerages run as we move into the future.
The hype about new chatbots (and similar technologies) has accelerated AI technology and it doesn’t look likely to slow down anytime soon. As the AI revolution moves forward, the “location, location, location” mantra common in real estate may change. Start thinking “data, data, data” instead.
Those who are on the cusp of this technology can speak about machine learning tools creating more accurate and rapid real-time valuations for homes. However, it goes far beyond that. Generative AI can be used to change agent-client and broker-agent relationships, identify owners who might want to sell, and even provide excellent marketing material
Everyone is looking to get into proptech, which is evidenced by the $8 billion debt and equity investments made in the first six months of 2022. However, how much AI will be allowed to influence things depends on investor feelings, established investor strategies, and whether the major firms move forward to incorporate this tech into their workflow.
This is why the whole thing can be seen as tactical. Some companies are sure to sit back and see what happens. Others will jump ahead to get an edge over their competition. No matter what side of the street someone is on, knowing what’s going on is essential.
Unlike in some industries, people aren’t jumping the gun to fund AI for proptech. However, everyone is watching and this could change on a dime. You might notice when looking at startups that any AI features are heavily advertised. It’s expected that investments in this space will rise as 2023 goes on.
Different Thoughts from Both Sides of the Aisle
The thoughts you’ll hear about real estate and AI will largely depend on who you speak to. For instance, one partner at a venture capital company in the proptech sector notes seeing huge opportunities right now. People who fall into this category are going to be more likely to jump on and get involved in hopes that AI becomes a staple of the industry.
You’ll also hear some say that within the next six months, proptech firms using AI are going to take off and be impossible to beat. There’s no way to be certain that’s true but it would certainly alter the trajectory of the year. Extra investments based on generative AI could lead to much more funding than was possible in 2022.
Many of the largest venture capital firms in proptech are constantly looking for a way to run into and make money off of the latest trends. Companies that make big use of web3 and crypto in real estate could be the same ones who are riding the initial waves of AI. However, remember that those two techs never ended up reaching the heights that proponents expected.
On the other side of the fence is an entirely different type of investor. Unlike the ones who dove into tokenization and blockchain startups, they held back and watched. Many of them are doing the same thing now in terms of generative AI technology. If you listen to them, throwing money at a startup simply for offering generative AI is something that should be questioned.
In contrast, other VC investors are ready to make huge moves in the pursuit of new technology. These tend to be the firms that want to invest in transformative technology. It shouldn’t be any real surprise that there is just as much dedication from these individuals. After all, people have been saying for ages that real estate needs to update its tech.
Transformative Technology in the Modern World
Those who pay attention to the daily news may be familiar with the fact that tech is seeing some changes. Huge layoffs and other issues are a constant headline, even for the most successful tech brands. Innovators need to be sure that their efforts are going into models that will stick around, and not be immediately redundant when new technology comes out.
This is a particular problem in the listings world. Just like Microsoft Bing and ChatGPT have threatened Google, a startup with enough generative AI power could push through and take away the success seen in earlier success stories told by companies like Redfin, Trulia, and Zillow.
For instance, a Washington-based startup called Plunk is focusing on AI and machine learning as a way to value homes quickly and more accurately than expected. Brian Lent, co-founder and CEO, hopes for the company to become “Bloomberg for residential real estate.”
One of the ways this is in the works is through the use of at least double the analysis factors of data sources like Zillow Zestimate. It’s also important for the company to remove all possible biases with the product. The result is a real-time, highly robust, actionable home valuation process.
What does this look like for the homeowner involved? This person can upload a few photos of a bathroom remodel and the home’s market value will be recalculated so quickly it is mind-boggling. Plunk can also be used by investors searching for rental properties. The California Association of Realtors and the National Association of Realtors are already investing so there may be something to it.
One of the things that agents have been dealing with in recent years is feeling far less capable. When agents are competing with online services, it can be a real challenge to come out on top. Anyone can check out Zestimate and argue the value of a home, even if the analysis used to create that value isn’t always right.
Agents need more tools to make them as useful as possible. More tools can give them the ability to educate homeowners while also making sure that homes are valued appropriately. AI could be the answer to that.
Will the Future Surpass the Past?
While there are many reasons to look excitedly toward the future of AI in terms of proptech, you have to look at both sides of the equation. For instance, Opendoor came out with a home valuation algorithm expected to beat the traditional methods but found itself dealing with issues from the housing downturn. Looking back, the brand lost almost $1 billion in the third quarter of 2022.
Even some of the people out there talking about the benefits of AI note that some will have an easier time incorporating this technology to make a difference. For instance, a brand with a huge number of customer relationships and massive data sets is going to be ahead by default. After all, data is required to train AI models and make them smart enough to handle the job.
As an example, look at Austin-based startup Milestones.AI. The brand is looking to create a system for home management. The basic idea is that residential property data profiles can be fed into generative AI as a way to determine when to put a property on the market. It can also be used to connect agents with leads or note when to bring in maintenance. The problem is that not only exceptional programming is needed, but also tons of data entry.
CEO Dustin Gray has said that it could take a decade to reach the level of smartness they want. One solution is to move forward with working with title companies that have millions of transactions a year. This would make it easier to build a database with the needed information. At this time, the firm has a couple hundred thousand users and has raised over $15M in venture capital.
Another thing to be aware of is that even the best AI at the moment can end up giving out the wrong answers. It all comes down to the dataset and intelligence behind the AI. Because of this, some believe that startups are less likely to succeed than existing brands.
Look at Zillow for a quick example. Instead of getting up in arms about AI startups coming in and bankrupting them, they’re rolling with the punches. Zestimate already uses machine learning and an AI search function has been in place since the start of the year. The brand plans to refine listings to add more natural language interactions and is looking to create more realistic 3D tours.
The real question is whether people are going to make meaningful investment decisions and how dollars will impact this type of technology in the proptech world. Right now, we’re all just waiting to see how things pan out and whether AI is truly the technology that will change the future.
It isn’t new for the proptech industry to be slower to adopt new tech. However, generative AI is one area where this shouldn’t happen. Major tech advancements are a great way to remain competitive in this industry. Many companies are moving forward and doing new things to create better results and you want to be a part of that group – not the ones who are left behind.
Generative AI is a great addition to proptech but that doesn’t mean forgetting the human element. It’s important to make use of both to succeed and stay a contender as the world’s technology expands at a rapid pace. The examples in this article are just a few of the ways that things could change over the next few years.