AI and real estate: Fear or awe
By Amor Maclang – October 24, 2017
https://businessmirror.com.ph/
THIS is part of my ongoing series on technology and real estate. The focus is on artificial intelligence (AI), which has been casting a dark shadow on the Philippine business-process outsourcing (BPO) industry. How about in another legacy business as real estate?
What is artificial intelligence? According to the Oxford dictionary, AI is “the theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making and translation between languages.”
Artificial intelligence has great potential to disrupt existing industries and traditional work practices across the world. And the Philippines is no exception. On October 5, Urban Land Institute Philippines held its latest REal Talk, this time focusing on the advent of technological advancements and its effects on the real-estate industry, specifically the dawning of AI, at the Gallery of A Space Greenbelt.
With a primary slant on the office sector, “REal Talk-Ex Machina: The Impact of Artificial Intelligence on Real Estate,” featured resource speaker Andrew Haskins, the executive director for research of Colliers International for the Asia region. While the occupier and investor property markets across Asia remain healthy, automation has steadily become a tangible threat to demand in the office sector.
He reiterated that the demand is not only in terms of office space, but also in terms of talent. But this will also push for the support of high-value human roles, and actually help drive human productivity. The clear solution to this is that firms must learn to evolve by investing further on their source of human talent; they will need to be more efficient, collaborative and feature highly trained staff.
The sectors and roles most likely to be affected by AI are those with routinary and replicable tasks, such as telemarketers, accountants and retail, salespeople. Sectors, such as manufacturing, hospitality, agriculture and retail, will feel the impact of the automation in the job sector the most. As artificial intelligence will replace roles that can be highly automated to increase efficiency and productivity, the work force must concentrate on high-value, decision-making roles, thus driving down the headcount and workspace requirements.
High-value roles that will remain relatively unaffected by automation include those of creative roles, high level of customer interaction, programming and data science analysts. A positive note to take in is that the majority of jobs in the future are those that do not exist yet in the present—allowing for innovation and technology.
The inevitability of AI should result in industries embracing the possibilities. Artificial intelligence should complement human roles, not replace them. The landscape of real estate is already changing, from drones being used to survey lands and virtual-reality technology that allows investors and prospective buyers to inspect properties. These functions will still be controlled by humans. Overall, a machine is only as good as the human managing them.
Automation has also allowed for a shift in the workplace, from the traditional office spaces to more flexible and activity-based workplaces. The changing needs of the work force will drive the need to alternative workplace solutions to allow for more efficient use of space. Increasing connectivity will allow for employees to be more mobile and work remotely, thus increasing the need for space that is more shared and collaborative.
The increase of the Generation Y and millennial demographic segment within the work force has allowed for dynamic office-space designs. The underutilization of space among traditional offices is clear—on average, there is 30 percent to 40 percent of space that no one uses. An efficient office design will reduce costs and also become a way of attracting talent.
Across Asia, higher trade flows and growth in e-commerce are driving industrial and logistics property, while in various markets retail property is stabilizing. For the office market, automation is less than a threat than high rents and poor infrastructure. Robust demand, driven by Chinese capital, suggests that low yields may fall even further in the second half of 2017.
To provide a more detailed local view, Dinbo Macaranas, senior manager for research at Colliers International Philippines, presented the impact of automation on the Philippine property market for the office sector.
The local market is facing unexpected demand headwinds with the BPO sector’s demand declining to 31 percent in the first half of 2017, from the usual 60 percent of the recent years, developers are struck of the fears amid the oversupply of available commercial space. Reasons for this are difficult to pinpoint—those cited include the Trump administration and the economic nationalism in the US, as well as the BPO industry’s talent-recruitment difficulties due to the reskill demand threat from automation. While the Philippine Offshore Gaming Operator industry—an expanding market in Metro Manila—takes up the demand left by the BPO industry, this will still result in a supply surplus by the end of the year, leaving a vacancy of 6.3 percent in the office sector.
Both speakers acknowledged that infrastructure and data improvement will drive the speed of progress of artificial intelligence in the Philippines. In fact, several developers and occupiers have already begun incorporating AI-ready features in their workplace, which increases both productivity and lessens real-estate costs. The impact of artificial intelligence will be felt increasingly in the next decade, with routine roles being replaced and increase in demand for flexible working spaces.
The audience responded positively to the insights and asked on what solutions could be done to future-proof their businesses. Andrew Haskins noted that proactive developers will need to adopt designs of intelligent buildings and equip their spaces with advanced technology that occupiers will eventually need. Companies will also need to invest substantially to reskill their existing work force to maintain relevant in the next coming years.
The Urban Land Institute (ULI) is an international, membership-based nonprofit research and education organization. Founded in 1936, the institute now has more than 40,000 members worldwide, representing the entire spectrum of land-use and real-estate development disciplines working in private enterprise and public service. ULI Philippines, the local chapter of the global real-estate organization, embodies the mission to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide by hosting these talks that allow discussion regarding the real-estate industry and its multiple facets.
