Artificial Intelligence in CRE
As retailers adopt AI technologies to optimize their daily operations and improve customer experiences, the demand for AI-enabled retail spaces is increasing. According to Precedence Research, global artificial intelligence in the retail market was valued at $8.41 billion in 2022 and is estimated to reach $45.74 billion by 2032, showing substantial growth in the coming years. Embracing AI’s potential in CRE can enhance property value and competitiveness and position investors for long-term success in a tech-driven real estate market.
Benefits for Tenants
Expanding Customer Reach
Artificial Intelligence has the potential to target a more diverse range of customers in the retail industry. Levi Strauss & Co., a prominent retail brand, revealed its plans to utilize AI on its website to present models with more diverse body types since it currently only showcases one model for each product online. In an interview with NRF, the company revealed that “it is physically impossible to shoot every single product at every single size at the SKU level.” Thus, AI technology can play a crucial role by “creating supplemental images and unlocking a future” where Levi can offer a more personalized and engaging shopping experience.
This proactive approach not only addresses the need for diverse representation but also encourages customer confidence in their purchasing decisions. As NRF’s interview with Levi Strauss & Co. highlights, the AI-generated models can greatly assist customers in understanding the size and fit of their chosen attire, potentially reducing online garment returns. With the technology’s potential to revolutionize the shopping experience, retail tenants can leverage AI to provide an optimized retail journey and connect with a broader customer base.
Inventory Management
AI tools can be particularly useful in effectively managing store inventory. According to the Wall Street Journal, Google Cloud has developed an innovative AI tool designed to help big-box retailers improve their inventory tracking. The algorithm can recognize and analyze consumer packaged goods products on shelves through videos and images captured by the retailer’s “own ceiling-mounted cameras, camera-equipped self-driving robots, or store associates.” Through this software, retailers can maintain stock levels and accurately predict demand, mitigating excess inventory, reducing costs, and improving customer service. Additionally, the technology can forecast future sales, analyze historical data, and predict demand patterns to minimize carrying costs and prevent understock and overstock situations.
Marketing
Ananda Chakravarty, Vice President of Research at IDC Retail Insights, highlights the transformative potential of AI in retail marketing in an interview with NRF. With AI technology, a computer system can analyze customer engagement, behavior, and past purchases to create personalized email campaigns tailored to individual customers. This level of personalization fosters a genuine one-to-one relationship between retailers and their customers. By leveraging AI in marketing efforts, tenants can efficiently reach millions of customers with the right copy assets and images, enhancing customer engagement and ultimately driving sales. According to McKinsey, 76% of consumers are more likely to purchase from brands that personalize. AI’s ability to create highly personalized marketing campaigns enables tenants to deliver targeted content, boost customer satisfaction, and establish long-lasting relationships with their clientele in the competitive retail landscape.
Benefits for Brokers
Enhanced Market Analysis
Advanced AI marketing tools offer real estate agents the power to deliver invaluable insights to their clients. Leveraging predictive analytics, AI software solutions can analyze vast data sets to identify consumer behavior trends and historical demand patterns. As a result, brokers gain the ability to make well-informed, data-driven decisions on optimal tenant locations and target demographics, enhancing their effectiveness in the market. In retail properties, AI can analyze foot traffic data and assess competitor presence to select prime locations with the highest potential for success.
Streamlined Lead Generation
AI-powered tools have revolutionized how real estate agents identify potential clients, streamlining lead generation through sophisticated data analysis. ReminderMedia highlights the ability of AI “to scan data from various sources, including social media, websites, and public records, to identify potential leads and score them based on their likelihood to convert.” By analyzing online behavior, AI not only identifies individuals actively seeking retail spaces but also excels in matching clients to retail building sales, presenting brokers with a curated pool of high-potential leads aligned with their target market. This transformative technology enhances the efficiency of agents’ lead generation while saving valuable time, empowering agents to concentrate on fostering client relationships and sealing deals, both in terms of tenant matching and property sales.
Personalized Client Services
AI platforms can analyze clients’ preferences and past interactions to find highly customized property recommendations. These tailored suggestions showcase the broker’s attentiveness to the unique needs of retail businesses. Further, brokers can deliver a personalized and seamless experience to their clients, helping businesses find the ideal space to thrive and grow in the competitive retail market. AI can also provide interactive virtual tours of retail spaces. This immersive experience would allow clients to explore potential locations at their own convenience. Through augmented reality, tenants can take a look at the store layout and the overall ambiance of the space, which are significant considerations for retail tenants. Such interactive tours are beneficial for retail clients seeking to assess the suitability of spaces for their business needs.
Benefits for Owners
Smart Buildings
Smart buildings with AI-driven features may become more attractive to retailers seeking innovative and sustainable spaces. These smart buildings integrate AI-powered features such as energy efficiency and data-driven tenant services. Through the Internet of Things, building systems like lighting, HVAC, and security can be automated, monitored, and controlled in real time using smart sensors and interconnected devices. This automation enhances energy efficiency, leading to reduced operational expenses and improved occupant comfort and safety. Additionally, AI systems enable monitoring of energy usage, allowing property owners to identify areas for optimization and make informed decisions to reduce energy waste and achieve sustainability objectives. By leveraging AI in smart buildings, property stakeholders can optimize resource allocation and proactively implement energy-efficient measures.
Predictive Maintenance
AI-powered predictive maintenance tools offer substantial benefits to owners in the retail industry. By monitoring the condition of retail properties and predicting when maintenance is required, AI enables owners to address potential issues before they escalate. This predictive capability ensures timely maintenance to increase cost savings, leading to increased property value as well. Liquid Web, a customer support company, explains that these AI tools have the capacity to “detect anomalies and failure patterns, learn from them, and predict future issues,” resulting in lower downtime as problems can be prevented before they occur. Thus, with AI-driven predictive maintenance, owners can efficiently optimize their property management practices and enhance the overall performance of their retail assets.
Improved Tenant Retention
Artificial intelligence tools are also beneficial to retail owners due to their ability to provide personalized and accurate tenant data. Aswani Yadavilli, the VP of Analytics at Accion Labs, defines Tenant Personalization as the “process of using data analytics and machine learning to segment tenants based on their preferences and behaviors, and then tailoring communication, services, and amenities to enhance the tenant experience.” This approach can ensure that tenants are satisfied with their establishment, which ultimately contributes to a higher tenant retention rate. With AI’s ability to comprehend tenant preferences and anticipate their needs, owners can foster meaningful relationships with tenants, which is beneficial to both parties.
Takeaways
Artificial Intelligence in retail brings numerous benefits to brokers, owners, and tenants alike. Brokers can leverage AI for enhanced market analysis, lead generation, and personalized client services. Owners can create smart buildings, implement predictive maintenance, and improve tenant retention. Tenants can enjoy personalized shopping experiences, data-backed marketing strategies, and efficient inventory management. As AI continues to shape the retail landscape, embracing these technological advancements can lead to increased efficiency, profitability, and success for all stakeholders involved in the retail industry.
