Of all the changes sweeping the industrial property sector, none have captured our imaginations like AI and its more familiar subset, Generative AI (hello, ChatGPT!).
But generative AI is just the tip of a technological tidal wave driving subtle, but significant, shifts across the industry. And while the unknowns around AI are endless, there are some certainties we can latch onto.
From fuelling growth in alternative property sectors to accelerating sustainability as a core business goal, we explore three ways AI is shaking up industrial.
1) The race for data centre space is on
Global demand for data centres is exploding thanks to our insatiable appetite for technology, including AI, in every facet of our lives.
In fact, in CBRE’s 2023 Investor Intentions Survey, data centres ranked as the second most popular alternative sector for investment among respondents. (Beaten only by healthcare-related properties.)
Data sovereignty laws are also fuelling the growth of emerging data centre markets. As national security concerns increase, governments are mandating in-country data storage to safeguard sensitive information. Case in point: the handling and storage of Australian health data, which is subject to stringent legislative requirements.
Data centres come in a range of sizes, but the number of new hyperscale facilities – which host larger, cloud-based businesses – is growing at an especially rapid rate. Globally, 314 hyperscale sites are in development. And according to WIN member organisation JLL, that number will exceed 1,000 by the end of 2024.
The US is leading the charge on hyperscale development. But facilities like Next DC’s M3 in Melbourne are becoming more common in Australia, driving extensive hyperscale growth here, too.
The key barrier to data centre growth in the Asia-Pacific? Supply chain delays causing a shortage of data centre components, and access to power and planning constraints resulting in inadequate supply to meet demand.
2) Agents and tenants are chasing AI-fuelled efficiencies
Across the industrial landscape, tenants are turning to AI for efficiencies across operations – whether that’s a reduction in warehouse labour or to find energy savings within facilities.
Similar trends are emerging in the industrial property industry itself.
Over 500 companies worldwide are providing AI-powered services to the real estate industry, fulfilling a variety of functions like:
- Asset valuation using satellite image processing
- Construction site monitoring through reality capture
- Automated facility management based on the results of data mining
But perhaps the most significant area AI will impact is data capture and analysis to improve leasing and investment transactions.
AI can analyse data quickly to identify patterns and provide tailored investment recommendations based on investor goals, risk tolerance and market conditions.
An example of the technology in action is JLL’s Capital Markets Quants. It combines AI and machine learning with on-the-ground, human expertise to identify market trends and opportunities. It then delivers tailored client strategies and guides business decisions for owners and investors.
Using AI in this way could significantly alter the daily work of portfolio or asset managers. With less time required to gather data, they are free to innovate in other areas.
3) Landlords and investors are keen on AI – but don’t know what to do next
In JLL’s 2023 Global Real Estate Technology Survey, investors, developers and corporate occupiers ranked AI as a top-three tech expected to have the most impact on real estate in the next three years.
But the same survey uncovered something else: this cohort’s knowledge about AI and machine learning is low compared to other disruptors like blockchain, robotics and virtual reality.
Matthew Lee, National Director and Head of Industrial Occupier Services at JLL, explains:
‘My team regularly fields requests from developers for information about AI. They want to know what inclusions they should design into their facilities so that they’re ready to support tenants using new AI technologies.’
Although no clear guidelines are in place, investors and developers can do one thing to prepare facilities for AI: they can prioritise initiatives that increase asset sustainability – especially energy and water use.
This recommendation is based on JLL’s 2023 Global Data Centre Outlook, which highlights sustainability and energy efficiency as top priorities for users, operators and investors.
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