David vs. Goliath: Are Smaller CRE Firms Outpacing Larger Competitors in AI Adoption?

For a long time, large firms and investment institutions have held influence over the CRE market at large. However, that trend could slow as smaller, more dynamic firms adopt advanced technology solutions like Prophia.

Photo Courtesy of "Mile High CRE", 1624 Market St. Denver, CO, Market Center, managed by Seattle-based Urban Renaissance Group

In many ways, it pays to be part of a large firm when participating in the CRE market. Larger firms typically work with bigger budgets, they have the funding to back innovative projects, and they often have stacked teams that can supercharge bandwidth. However, there are drawbacks.

Larger teams can suffer from data silos and data accessibility challenges which can be difficult to share business intelligence and make the best decision for portfolio growth. It can also be difficult to quickly make changes to internal processes that aren’t running efficiently or adopt new tools. This inability to move quickly can be particularly problematic in a market landscape where successful technology adoption is leading to greater deal momentum, leasing, and investment opportunities.

“There’s a lot of capital right now waiting on the sidelines ready to make a deal, and I think the folks that can move quickly will benefit, and the folks that will move quickly have technology at their fingertips.”

Micheal Hickey, VP of Investment at Business Property Development

Discover some of the ways smaller firms in the market, like Business Property Development in Seattle, are successfully adopting AI and transforming their speed-to-leasing ahead of many of the larger firms as they struggle to modernize key business operations.

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Big Vs Small CRE Firms
Why Many Regional Firms Have the Upper Hand in the Market
The Fundamentals of AI Adoption
Prophia Impacts Teams of Every Size

Big Vs Small Real Estate Investment Companies

The CRE industry is about as diverse as it is vast. Firms take many different shapes and sizes with varying investment frameworks, investor and partner relationships, team structures, portfolio diversity, etc. This also includes the size of a portfolio.

Large private equity firms, family offices, and advisory funds can manage $100B in real estate assets in major markets around the world, employing millions of real estate experts to run operations and effectively manage capital.

If they aren’t experts before they are hired by a large CRE fund, individuals who work for big shops often become highly specialized in one area of business. For instance, an Acquisition Analyst at a large firm will devote their time to underwriting deals and evaluating investment opportunities, but they “likely won’t have visibility into capital projects performed after acquisition,” summarizes Break Into CRE.

Why Many Regional Firms Have the Upper Hand Today

CRE firms with smaller portfolios and leaner teams are often forced to be protective of their time and energy. In many ways, this inclination leads to resourcefulness that gives them the upper hand when serving their clients and working internally.

Take Business Property Development as an example. With 60+ tenants and a dedicated team of 5, they were able to collaborate both internally and with Prophia throughout their AI adoption venture which led to swift onboarding and implementation that impacts their leasing momentum to this day.

Just like their close-knit relationship with their clients, smaller firm agents benefit from working closely with their AI vendor-of-choice to learn the ins and outs of a new system and quickly include it in day-to-day business activities.

In addition to possessing a more dynamic team, many smaller CRE firms also ascribe to the “quality over quantity” adage. This has immense benefits when serving clients and making investment moves, but also when it comes to innovation. These institutions do not have the same time and resources as multi-international firms, making them quality experts when it comes to vetting new technology.

These unique features, which many may see as shortcomings or limitations, benefit regional CRE firms when it comes to being quick to action with AI and process modernization.  

Big or Small, CRE Firms Need to Follow These Fundamentals to Successfully Adopt AI

Whether handling a vast portfolio or smaller investments, there's a growing need to accelerate CRE leasing activity while maintaining accuracy and minimizing risk amid today’s economic challenges. Yet, traditional methods of manual lease abstraction and data verification, processes that many legacy institutions still use, hinder swift deal execution and data accuracy.

Enter Prophia, a vertical AI system built to automate and expedite manual exercises in portfolio data management. Many small to mid-size firms in major markets have taken the step to improve their speed-to-leasing with Prophia’s AI, and all it took for them was a calculated AI adoption strategy.

Start with “clean” data

AI adoption doesn’t have to be disruptive or convoluted, and there are simple steps teams of various sizes and bandwidths can take to introduce AI into their operations, starting with a data clean-up. AI is only as reliable as the quality of the input data. Teams should run a thorough examination of their proprietary lease and tenant before adopting any AI-based solutions.

Look for specialization

Checking the quality of an AI provider's training is also important when adopting AI. Small firms rely on specialized, private data for critical decision-making and investor protection. However, many AI systems today rely on public data, leading to suboptimal outcomes. An effective AI integration strategy involves leveraging solutions trained on industry-specific, private datasets, such as machine learning models trained on proprietary CRE data.

Consider portfolio growth

Real estate owners prioritize growth despite market challenges. For BPD, that included acquiring multi-tenant retail properties near major roadways in the Seattle area and, in the future, will include expanding into industry flex spaces. Regardless of the growth strategy, AI adoption discussions should align with business goals to ensure tool compatibility and support.

Verify the vendor’s track record

When assessing technology vendors, teams should focus on track record and expertise. Look for providers that employ experienced data scientists and engineers, and then ask for a history of successful implementations. This will set up any regional operator to find a tech partner that will impact their business for the long haul.

How Prophia Makes Teams of Any Size More Efficient

As a trusted PropTech vendor, Prophia makes many daily operations simpler and streamlined for both lean CRE teams and teams with many resources at their disposal. They may have different strengths and weaknesses, but what is universal among all of these organizations is a need for better task automation, data accuracy, less time spent on menial tasks, and more time for strategy.

Automated lease abstraction

Prophia offers unmatched lease abstraction capabilities, enhancing daily and quarterly operations for CRE teams. With advanced features like AI-generated hyperlinks, users seamlessly navigate from abstract to original lease language, eliminating the need for additional screens or tabs.

“I have Prophia open as my Homepage in every meeting because before Prophia it was always a scramble to pull up the lease language in meetings.”

- Maura Murphy, Property Management, Tourmaline Capital Partners

The in-document search function empowers users to locate specific terms or clauses efficiently, even in PDFs lacking search functionality. Prophia's AI also tracks changes across your entire portfolio.

Streamlined encumbrance tracking

With Prophia, small teams can track tenant rights, options, encumbrances, and critical dates seamlessly. This is incredibly impactful for operators who manage multiple tenants within a single property. Additionally, the platform enables easy export and upload of lease documents, ensuring knowledge sharing to stay ahead of evolving needs. More importantly, automating encumbrance tracking also facilitates better risk mitigation which is incredibly important for avoiding contract violations and any resulting fees.

Faster due diligence

One of the greatest benefits Prophia offers CRE teams is the ability to move quickly through due diligence. Prophia makes it possible for leasing, asset management, and legal teams to run doc reconciliation, uncover information gaps, and increase their speed-to-leasing. This has a direct impact on property cash flow and ROI.

Human errors are really hard to detect in Property Management. The lease report helps us verify that all lease terms are correct because it goes directly back to the lease document. The confidence in our data is there.

Jeff Vorhies, Director of Investments, URG

Time saved and dollars recovered

With key tasks automated by Prophia’s AI and a greater portion of time devoted to portfolio growth, acquisitions, expansions, and more, management teams can re-allocate a significant portion of their time to ROI-generating activities. Moreover, when Prophia uncovers restrictions or exclusions on a space, it minimizes CRE firms’ exposure even allowing them to recoup dollars lost due to human error.

Regardless of team size, market challenges, or growth strategy, AI will be the greatest differentiator when it comes to competing in the markets of today and tomorrow. With concerted investments in the right tools and successful use of innovation, the “Davids” of the CRE world will continue to gain Goliath-like strength, taking on bigger and better deals than their perceived “limited” bandwidth allows.

If you would like to harness the power of AI specifically designed for CRE, contact the Prophia team to learn about automating lease abstraction and saving valuable time in day-to-day business operations.