The use of artificial intelligence will change the commercial real estate landscape. However, the timing and extent of the economic effects are still uncertain at present, as are the consequences for commercial real estate (CRE). The current white paper by Cushman & Wakefield "AI Impact on Commercial Real Estate: The Next 10 Years" uses four scenarios with different probabilities to make general forecasts and applies them to the different types of real estate use and to the individual regions EMEA, America and Asia-Pacific.
Baseline scenario – Office Demand Recalibrates Before Strengthening
In the baseline scenario (probability: 50%), AI adoption occurs gradually and productivity gains support stronger economic growth over time.
Kevin Thorpe, Chief Economist and Head of Global Research at Cushman & Wakefield, says: "Office demand is not eliminated by AI, but it is reshaped. In the near term, businesses focus on efficiency and hiring slows as organizations adapt new technologies. Over time, however, stronger productivity, higher corporate profitability, and new business formation support renewed office demand." Thorpe adds, “The more important story is not whether office demand grows, but where it grows. AI is likely to accelerate existing bifurcation trends, increasing demand for high-quality, flexible space in leading talent markets while placing greater pressure on lower-quality commodity assets.”
Growth and productivity-driven scenario leads to demand in all sectors
With a 15 percent probability of occurrence, this growth scenario requires accelerated AI penetration, productivity and efficiency gains, and the harnessing and reinvestment of productivity gains. Start-ups and new professions are strengthening the demand for high-quality, flexible office space, rapidly decreasing vacancies and a focus on top quality.
For retail, logistics and multi-family buildings/residential, this scenario reinforces already favourable dynamics. Stronger growth in household income is supporting retail demand. Higher throughput and capital expenditures are driving demand for logistics space. Improved income and asset formation support the demand for apartment buildings or living space. Richard Pickering, Director of Strategic Foresight & Intelligence EMEA at Cushman & Wakefield, comments: "In this projection, the impact of AI can be seen in a positive combination of efficiency and demand, and a subsequent accelerated and broad-based reduction of vacancies."
Adverse scenario based on "dot-com experiences"
The projection of this scenario, which is estimated to have a probability of occurrence of 25 percent, is based on experiences of the "dot com" upswing and consolidation period at the end of the 1990s / beginning of the 2000s. Although transformative Internet technology brought long-term economic gains, it had to survive a period of overinvestment, followed by corporate bankruptcies and financial market crises caused by the so-called "dot-com bubble".
”The cyclical downturn is felt across all property sectors, though office experiences the greatest near-term pressure due to slower office-based employment growth and delayed occupier expansion plans.”
Adverse scenario of increased displacement by AI
In this scenario, the probability of which is seen by the authors at five percent, the increasing displacement of human labor by AI comes into play. Productivity is rising, employment and demand remain weak, leading to structurally higher office vacancies and strongly polarizing market performance according to quality and adaptability.
For offices, this leads to persistently weak office occupancy and structurally increased vacancy rates over the entire forecast horizon, even without a recession. The decline in vacancy is minimal and market development is increasingly polarized based on the quality and adaptability of assets.
For retail, logistics and multi-family housing/residential, the impact is more restrained, but still negative compared to the baseline scenario. Vacancies in retail and apartment buildings are rising due to the lack of income growth. The vacancy rate remains elevated in the logistics sector as automation dampens the labour-driven demand for space. Structural supply constraints support price and demand developments in these sectors. However, the growth impulse of the baseline or growth- and productivity-driven scenario is missing.
Kevin Thorpe concludes: "Our research suggests that AI is more likely to expand the economy than shrink it. The key question for real estate is not whether demand disappears, but how demand is redistributed across markets, property types, and asset quality. AL increases the dispersion of outcomes, making location, quality, flexibility, and access to talent increasingly important determinants of performance.”
