Why artificial intelligence has become invaluable for developers

Why artificial intelligence has become invaluable for developers

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Although it may seem a bit simplistic, the core skill of real estate development often boils down to one word: decisions.

A project developer may have over 200 vendors to communicate with regarding price, schedule, materials and a host of other factors, juggling spreadsheets and details that could disrupt a project from its schedule and of its budget if this information is not easy to find and reference. when making project decisions.

Keeping track of this multitude is the first step on the road to success for any developer. With the advancement of modern technology – especially artificial intelligence (AI) – developers are finding that the drudgery of tracking and entering thousands of vital details is going the way of the rotary phone.

Adoption of AI by the commercial real estate (CRE) industry has been dramatically accelerated by the uncertainty caused by the COVID-19 pandemic, as commercial real estate players have embraced the ability of AI. IA to provide clearer solutions.

To understand the full potential of AI, tech industry experts estimate that over time, AI will automate 80% of all physical work, 70% of data processing, and 64% of data collection tasks. data.

By translating this into CRE-specific functions, AI can help create and improve a multitude of crucial processes. It can help you reduce overall project expenses, add more visibility to project cost tracking, and reduce the information time needed to make quick, informed decisions and improve results at every stage of the project schedule. development. At a time when inflation, rising interest rates and fears of recession are driving up costs, using automation and machine learning to increase access to critical information and eliminate burdens administrative can help offset expenses.

It turns out that AI has emerged at a critical time for the commercial real estate industry. According to a 2021 survey of more than 500 construction project developers and owners by International Data Corporation, 78% were over budget and on average 70 days behind their original timeline estimates. In an era of higher interest rates on construction loans, a few months delay can add hundreds of thousands of dollars in debt servicing costs.

The study also acknowledged “the importance of centralizing data” noting that “better performance on budget and on schedule often corresponded to the adoption of integrated technology.”

The benefits of AI are numerous for developers. AI can integrate historical project and vendor data to produce accurate, up-to-date assessments of many aspects of a project, from budget projections to true vendor value.

AI also allows this data to be continuously updated without any human intervention, as each new invoice, contract and transaction can be automatically integrated with existing data.

For example, Northspyre, a cloud-based intelligence platform for developers, analyzes all elements of real estate development, automates administrative tasks, eliminates data entry and intuitively generates key financial reports on complex projects, ensuring more predictable and accurate results. Northspyre eliminates 80% of administrative tasks. Plus, it gives project managers a more complete view of the information needed to make decisions while removing bottlenecks in the decision-making process. This reduced cost overruns in the development process by 22-66%.

The company puts AI at the service of developers by synchronizing with established email-based workflows to extract data from documents such as invoices, change orders and proposals. The technology then sorts the data, making it easily searchable and reportable. The result is fewer errors and less time.

Peter Chavkin is a member of the management of Biddle Real Estate Ventures, a client of Northspyre. Chavkin sees Northspyre’s AI capabilities as invaluable for completing projects on time and within budget.

“Using Northspyre’s AI gives Biddle proactive project insights, allowing us to be agile in our decision-making,” Chavkin said. “The ability to pivot quickly based on real-time data and forecasts has been invaluable in the current climate, when our industry has been hit hard by soaring material costs. Previously, when a vendor alerted our project teams about a pending change order, it often took over a month for the change order to be issued and reach our executive decision makers. In other words, we were making project-level management decisions without a full understanding of the true cost exposure of our projects – which is unfortunately standard operating procedure for most development companies. With Northspyre, these potential cost exposures are immediately captured in the system, and the entire team has access to this data.

According to the U.S. Bureau of Labor Statistics, building material costs rose nearly 20% in 2021, the largest single-year increase on record. JLL predicted that developers would spend 6% more on specific projects than the previous year, with costs expected to rise another 6% in 2022.

It is now possible for developers to leverage AI to help mitigate these increases at virtually any stage of a project.

At the budgeting stage, AI processes all financial and planning information, eliminating low-value tasks and providing critical insights into budget considerations that drive proactive decision-making while mitigating risk.

Proactive decision making isn’t something most developers have the luxury of doing, given that project data is often stored in emails and Excel sheets and even in workbooks. AI tracks every budget line in your project and calculates complex projections, and will notify you if one is on the rise. Unlike reviewing monthly financial statements and discovering a budget overrun, skilled teams have the ability to make real-time adjustments and help prevent the overspending from occurring.

When developers use AI on every one of their projects, the proactive insights provided result in significant cost savings. It’s human nature to stick to the comfort of doing things the way they’ve always been done. It’s also human nature to see businesses rise and fall through this comfort. For developers who don’t want to see their business become the commercial real estate equivalent of Blockbuster or Kodak, now is a good time to think about how old your current process is.

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