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05.30.2024

AI is coming: Is the real estate and development industry ready?

Toronto panel discusses the vast potential impact in just one sector: Marketing and preconstruction sales

Much has been written about the sweeping societal impacts of artificial intelligence, but real estate developers are only beginning to open their eyes to the potential benefits of implementing AI in their sales strategies.

Used properly, the founder of Carrie Soave and Associates told RENX, AI could conceivably replace their marketing departments and lower overhead.

“AI is replacing the marketing department,” Carrie Soave, an AI consultant and licensed realtor, stated. “I consult for a developer and we’re implementing custom bots for each of their departments to streamline their standard operating procedures internally, but we’re doing a big add-on in their marketing department.

“We are identifying who their target market is and we’re starting with data — so sales numbers, stats and identifying what demographic is most likely to purchase preconstruction.”

The next step, Soave continued, is to develop “a full persona paint point” — with “persona” being the operative word, in that it is much more intricate than a typical buyer profile. This would be followed by a marketing plan, then ad and social media campaigns which target that wide-breadth persona.

Soave is not only advocating for AI, she’s utilizing the technology. She launched her consultancy practice six months ago, but apart from one human employee, Soave and Associates relies on AI’s efficacy for its quotidian business operations.

AI as a sales disruptor

No wonder, then, that Soave was part of a panel at the Windsor Arms Hotel in Toronto’s Yorkville neighbourhood on May 7, during which high-producing realtors — the so-called “VIP brokers” to whom developers open projects before the public — assembled to hear how AI is changing the nature of preconstruction condo sales.

The reason these brokers are invaluable to developers is their access to high-net-worth investors who have come to expect early access to the best units in development and are integral to developers satisfying lenders’ most stringent construction financing criterion: a baseline sales threshold.

The event in which Soave participated was hosted by Lanterra Developments and moderated by its chairman Mark Mandelbaum, who explored the timely, if potentially jarring, issue of adapting to a new reality. Lanterra is celebrating its 25th year in business.

Mandelbaum said third-party brokers like those in attendance were afterthoughts when he co-founded Lanterra Developments. However, he has come to understand and appreciate their place in the preconstruction ecosystem. 

“That’s what you have to do in order to get financing,” Mandelbaum said. “That’s the way that fuels the market.”

Change is looming, however, because while VIP brokers remain today’s third party in the preconstruction sales ecosystem, change and efficiency already loom large.

Innovation changing preconstruction ecosystem

New to the party isn’t merely AI, it’s also the innovative companies that harness its ability to help developers truncate the sales chain and ameliorate profit margins in the process.

Soave and Associates isn’t alone in this burgeoning space.

Senara is a Greater Toronto Area (GTA)-based firm that has flipped the script by using AI to equip preconstruction condo investors with every possible salient detail, and in doing so they should reap optimal ROIs.

Senara’s CEO Reagan Zuzarte explained, however, the platform can also be used by and benefit developers to satisfy investor demands, using real-time information to ultimately entice the very buyers they need to secure financing.

“What we’ve developed crunches a lot of data, something near real-time, to provide (mostly) the investor base with opportunities, but helping them understand what might fit their parameters, including what they’re looking for on ROIs; what their risk threshold is, what their regional comfort is, what kind of builds they use,” Zuzarte said, adding that Senara started locally in the GTA and has become active in Calgary and Florida. 

Among the myriad data points Senara’s AI algorithm will soon crunch is the Bank of Canada’s seemingly imminent — so say most observers — interest rate cuts. 

And according to Zuzarte, that will bring investors out of the woodwork.

“They might get off the sidelines — rate hikes were designed to cause demand destruction, right? — but we’re listening to the tea leaves,” he said. “Rates being reduced should bring activity back to the market, and in preconstruction specifically.”

Developers waiting to launch housing projects

Zuzarte’s prognosis might not be off the mark, according to the COO of one of the GTA’s premier high-rise developers, who said projects have been delayed in anticipation of improved market conditions for developers and buyers alike.

But Scott McLellan also said that until his company Plaza Corp., gets “a sense or a buzz” that interest rates will meaningfully, not conjecturally, decline, the company won’t jump into murky waters.

“We haven’t been in an environment recently that would put us in a position to launch a project,” he stated.

And it’s for that reason, McLellan added, Plaza Corp. has no imminent plans to introduce AI into its marketing and sales initiatives. 

But he quickly cautioned that AI is on the company’s radar, and that the firm has quietly explored both its disruptive and augmentative capabilities, having already broached the subject with advertising firms which work with the developer. 

While economic headwinds remain top of mind for the developer as it waits anxiously to launch projects, McLellan noted that accurate AI modelling has already been able to attenuate buyer concerns about buying product that hasn’t yet been built, proving that it’s here to stay.

“Without a doubt, it’s coming,” he continued. “It’s going to help the whole process.”

Source: RENX

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