How is AI Changing Commercial and Residential Real Estate?

This is the second blog in our AI series as to the effects of AI in the real estate industry.  Our first blog discussed the use of AI in real estate marketing.  This blog discusses the impact of AI both in acquiring land for AI data centers and infrastructure and in developing evolving architecture.

 In an earlier blog, we discussed the use of Artificial Intelligence in providing insight into  operational and market analysis in both residential and commercial real estate that we simply have not contemplated. Perhaps most critical is how AI is changing the overall real estate market.

What is happening to available land space?

With the AI boom, there has been a substantial proliferation of data centers. Why? AI models can use as much energy as a small town, requiring a vast number of servers to continuously keep up with our digital processing needs. These data centers require massive, flat land parcels to support their tremendous infrastructure and computing facilities. Also needed are abundant water-cooling systems as well as high speed fiber optic networks for providing data transfer with minimal delay.  As a result, the development of AI data centers overlaps directly with prime residential areas, creating conflicts as to prime real estate.

Since tech companies have tremendous financial resources, land that may have been projected for new residential neighborhoods or attainable housing projects are now being used for servers and data centers. Simply put, it is virtually impossible to compete with the tech giants who purchase raw land for future data operations.

Even if such data centers are built near residential neighborhoods, the constant power and water demand of data centers place a strain on local utilities, potentially diverting or, alternatively, increasing costs for residential neighborhoods. In fact, Bloomberg reported that A1 data centers are distorting the normal flow of electricity for millions of Americans, especially as power grids throughout the United States have aging power equipment and fragile power grids.

 What about land values near the data centers?

When land is acquired at a huge premium for data centers, the land around the “tech center” is also valued at a higher price, which places increased, inflated prices on the surrounding land. Inevitably, should a developer wish to build homes near the center, the inflated costs are passed on to the homebuyer. Then, questions relating to the affordability of the American Dream of purchasing a home becomes an issue. If the land is zoned for commercial use, the developer will still ultimately pass along any increased or inflated pricing to commercial tenants. This scenario, again, raises the issue of affordability.

 What about the use of AI in residential and commercial real estate design?

With ever-evolving changes in Artificial Intelligence, how and what we need in our physical space will continue to change. Neighborhoods will reflect, for instance, fewer garages and parking lots as more self-driving cars become everyday items and more people use ridesharing services not requiring parking spaces. Drones may be used more commonly for pickup and drop offs of packages, letters, and overall commerce.

There are AI tools that determine architectural design, energy efficiency, size, and space needs by testing how such design choices may affect traffic, temperature, energy, and consumption usage before any house or property is even built. Even if this is not yet quite mainstream, the fact is that AI has the capability to shape the way we live, work, and play and will continue to do so.

AI has, for quite a while, been used in virtual staging of real property. AI tools can digitally redesign a home’s interior by changing an office, for instance, to a nursery to provide a potential buyer with the ability to envision how the change would look. Taking this to a larger extreme, AI may be used to not only create the architectural design that you wish but also create smart building systems with efficient temperature, health and welfare monitoring of residents, and safety, and energy controls.

What does this all mean?

Aside from the use of AI in the real estate industry , the need for land to support data centers and their infrastructure is massive and may collide with original land objectives. However, our traditional concepts of physical space and living requirements are evolving which may reeducate us as to what our needs are.

Should you have any questions or need assistance with a real estate purchase or sale, our title company, Weston Title & Escrow, Inc. is able to help you and can be reached at 954-384-6168. Should you have any legal questions about a potential purchase or sale or another legal matter, our team at Oppenheim Law can be reached at 954-384-6114.