AI Has Quietly Become Part Of Industrial Real Estate Development

Artificial intelligence has become a subtle but increasingly important partner for the industrial development sector in the Northeast, local leaders say.

AI has reached a fever pitch across real estate, fueling data center demand and pushing the government to issue guidance this week related to its use for fair housing.

In industrial real estate, AI tools are integrating into the site selection, underwriting and build-out process to great success, Marcus Daniels, vice president at NAI Michael, said during the Bisnow Industrial and Logistics Summit held in Conshohocken last week.

“We're seeing a lot of companies are optimizing as it relates to predicting likely traffic from a distance perspective, where to best locate those sites,” said Daniels, whose firm represents warehouse developers ranging 500K SF and above.

“I’m a huge fan,” he added.

Prologis is among the industrial companies using AI for site selection. It invested $20M last fall in TestFit, an AI-boosted software tool already used by those on the multifamily side to test the feasibility of a certain site for development. 

Nearly 40% of members of the Site Selectors Guild nationally said in a January poll that they are using generative AI in some capacity for a client’s project selection, though they noted limitations of the technology.

NAI Michael might use AI down the road to analyze the cost-effectiveness and timeline to list and sell a redevelopment, Daniels said. Some of his clients ask to use AI-fueled underwriting tools to clear the mountain of paperwork required to buy and build a warehouse out of the way as soon as possible.

Mesh Consulting, a Philadelphia-area surveying firm, uses drones every week to help map out sites for its clients, said Heidi Thomas, a business development executive, and those drones have AI-boosted tools. Using a tablet that is wirelessly connected to the camera of the drone, the tablet integrates Google Maps, allowing the drone to shoot a picture and provide an outline map.

“We used to have to walk a construction site, taking measurements every few feet,” she said. 

Several major firms are investing in AI for industrial real estate.

CBRE’s Smart FM for facilities management is used in 1B SF of property and can automate the maintenance of industrial property. That planning and other AI-related building mechanisms can simulate the way a building could withstand time, Blackstone's Chief Technology Officer John Stecker said in a podcast. The Philadelphia chapter of International Facilities Management Association introduced its members to the tool at an event last week.

The next step for the development of AI is to follow Amazon’s lead and use it to efficiently create and map out the schedules of the building’s development itself, Daniels said.

“Greater efficiencies with building maintenance, managing social capital improvements that are going to need to be done and ultimately reducing operating expenses for the investors so that the landlords can remain competitive in the market, these are these little details that make a difference on a price per square foot basis,” Daniels said.

Indeed, firms that use AI in some capacity have a 6% productivity boost, according to a Harvard Business Review article.

However, as AI grows more capable, jobs could be at risk, Daniels said. In particular, AI could be integrated as a construction site manager by automating some tasks. That could happen in the next two decades, he said.

“I don’t want jobs to be displaced. A lot of construction workers that feed their families depend on work like this,” Daniels said.

But AI isn’t going away. 

“I think that that is going to be the future of construction,” he said. “I think that we're going to see a lot more robotics, both from residential and commercial, for the development of industrial warehouses, shopping centers and multifamily apartment buildings.”