Findings from The Digitalisation Study 2024: AI as the Next Game Changer in Real Estate?

Despite the widespread discussion around digitalisation in real estate over the last few years, the industry continues to struggle with fully integrating digital solutions. One of the most eye-catching statistics from the study is that only 3% of companies report that they have achieved digital excellence (the state of full digital transformation) – a figure that has more than halved from the previous year’s results. The majority of respondents find themselves stuck in the establishment phase, a kind of plateau where digital solutions are being adopted but are not fully integrated across processes.

However, within this apparent inactivity lies opportunity. Investors willing to break the mould and lead the way out of this digital stagnation can benefit from a corresponding advantage known as the early adopter bonus. While many market participants hesitate, those who act early can put their properties in pole position. As the demand for modern, transparent and energy-efficient properties will undoubtedly continue to grow – digital excellence eventually becoming the standard – those slower to adopt will not only miss out on a competitive advantage, but will be put under increasingly significant pressure as they try to keep up.

Experts in the AI industry are also optimistic about the situation. In an interview as part of the Digitalisation Study 2024, Jörg Bienert, Chairman of the AI Federal Association, notes that the way forward in achieving digital excellence may require a more dynamic approach, where smaller firms collaborate with specialised service providers to stay competitive. This collaborative method aligns with Susteco’s platform, which emphasises partnerships between real estate firms and sustainability-focused tech providers. By leveraging AI through these partnerships, companies can better integrate sustainability practices into their operations without needing to build costly in-house expertise.

While widespread digital excellence may still be a long way off, real estate is largely an industry ready to embrace AI. When asked in which areas real estate players see AI becoming an essential tool in the sector’s digital toolkit, 79% said they believe AI can mitigate the challenges posed by labour shortages and demographic shifts, which is becoming more of a pressing issue as the real estate workforce ages. AI’s ability to automate routine tasks and optimise processes presents a much-needed solution in an industry historically reliant on manual, labour-intensive work.

In addition, 81% see AI as having the potential to significantly automate property management processes, with the technology already being used or planned for use in applications ranging from energy management to document analysis. Moreover, 78% of companies report either utilising or intending to implement internal chatbots to streamline customer service and tenant communication processes. Anne Keilholz, Board Member at GAG Immobilien AG, affirms that AI has already made inroads in areas like text generation, particularly for tenant correspondence, but notes that broader applications, especially in process automation, are still in development.

Despite AI's growing presence, the study highlights other entrenched barriers that continue to hinder digital progress. A lack of skilled personnel remains a significant obstacle, with 80% of respondents citing a shortage of qualified staff as a key challenge. Data-related issues, including non-transparent structures and inadequate data quality, were also flagged as major problems. In fact, the issue of poor data quality has become more acute over the past year, as more companies seek to leverage AI. Gerald Kremer, COO of Union Investment Real Estate GmbH, told the study: “The data needed must first be made accessible. Based on this, AI can enable increasingly data-driven decisions… However, it simply takes a long time for people to trust that a correct decision will be made when the decision-making process is unclear.”

This urgency for streamlined data-driven decision-making presents another opportunity in alignment with Susteco. AI helps analyse large data sets to make informed decisions on building performance, sustainability metrics and future investments. This is essential for meeting environmental standards and achieving energy efficiency targets. AI can help property owners and managers assess the sustainability of their assets and identify areas for improvement, leading to more environmentally responsible operations.

Interestingly, only 19% of respondents view data protection, security, or ethical issues as the primary challenge in AI implementation. This relatively low concern reflects a broader optimism about AI's capabilities, although it raises questions about the industry's preparedness to address potential risks. Tom Braegelmann from Annerton Rechtsanwaltsgesellschaft GmbH offers reassurance, stating, “Tenant personal data processed by a language model doesn’t pose any special challenges compared to other types of data processing.” Such insights suggest a growing confidence in navigating the complexities of data governance while integrating AI solutions.

While process automation through AI remains the exception rather than the rule, the study indicates that AI’s potential is already being realised in certain areas. 30% of companies that use AI for energy management report high levels of process automation. Given the increasing emphasis on sustainability, AI's role in optimising energy consumption is expected to grow in importance, helping companies meet environmental targets while reducing operational costs. In this context, the integration of AI with sustainability goals is particularly notable. By automating energy use and optimising resources, AI not only enhances operational efficiency but also contributes to the sector’s environmental responsibilities.

The Digitalisation Study 2024 paints a complex picture of an industry in transition. While AI is indeed emerging as a game changer driving the next wave of digitalisation in real estate, its success will depend on collaborative efforts between companies and specialised service providers. Smaller firms may not have the resources to fully embrace AI on their own, but by working with external partners, they can implement AI solutions more effectively.

Despite the optimism surrounding AI, the study shows that the real estate industry faces significant challenges in fully achieving its digital potential. Investments in digitalisation have declined overall, and the persistence of data and personnel issues indicates that more targeted investment is needed. As Prof. Joachim Hohmann from Rheinland-Pfälzische Technical University of Kaiserslautern-Landau notes, AI’s full impact will only be realised when underfunded sectors like PropTech receive the necessary financial and institutional support.

What is for sure is that the need for digital transformation in real estate is not going to go away. When the market picks up, it is those willing to act now that will reap the rewards.