How AI Is Changing Commercial Real Estate Leasing Forever

0:00 How many times when you know, when you're a broker and you go into a meeting, do you start off and you don't know that much about them or you sort of Googled it on the way in the door? You know, like, who am I meeting with and what's their priorities again? And AI is amazing at prepping people to be prepared to understand that business, ask the right questions, which can lead you to a much better real estate conclusion than we could have previously. Elephant in the room AI, what are we doing incorporating that into leasing and where do you see it going in? The oh, absolutely. The next, actually just a very exciting moment for commercial real estate and a really exciting moment for businesses that are willing to transform themselves and people who are willing to lead into change. And that's something that is part of our culture here at Newmark, being that we're very entrepreneurial and always about serving our clients in the best way that we possibly can. So this just feels like a moment that's been coming for a long time and we're really excited edit about it. And if I was to breakdown where I think it's really impacting the leasing environment, I would start by saying, you know, the amazing ability to 1st understand your clients business.

1:06 How many times you know, when you're a broker and you go into a meeting, do you start off and you don't know that much about them or you sort of googled it on the way in the door? You know, like what who am I meeting with and what's their priorities again? And the foundation of every single great real estate strategy is how do you connect that real estate strategy to the business strategy to the people strategy. And AI is amazing at prepping people to be prepared to understand that business, ask the right questions, which can lead you to a much better, better real estate conclusion than we could have previously. And one that's different for every business, right? Aviva? It's not going to be the same if you're, you know, a financial services business versus a technology business, high growth business versus one that's, you know, doing something else, being plateauing a little bit more correcting, all of them are different.

1:54 And understanding that really helps you drive that leasing strategy. It's so funny. So I remember when I started in the biz, I started at a small brokerage with like no training, no nothing. And I remember like I got my first deal going and I was like, Long story short, I had to figure out how to write an LOI. Oh yeah. And it was like, well, you got to call this guy and he'll give you the template and, and then you're like deciphering the template. And now with the AI and and this is a good thing and a bad thing, but now with AI, anybody could just go on, say, write me an and LOI hear the terms. And I'm not saying that's a good use case for LOI in our world because generally it's not. And you should consult a professional if you need a commercial lease. However, it's interesting what you said about understanding the client.

2:41 Oh, yeah. So, yeah, you just touched on the data strategy though as well, right? So now it's commoditized the fact that anyone can prompt just an LOI, right? So you can get it in 10 seconds flat like that can happen. But you touched on it exactly. Why are you reaching out to a commercial real estate expert to do it? Well, it's because they know the data that backs it. And I'm not saying that the data, and you know, there's the data can be right in the LLM's too to get it there. But it's not at the asset level. It doesn't understand the asset level specifics that you need to yet in order to choose which space you're going to. It doesn't know how high the ceilings are. It doesn't know the core depth. It doesn't know the three other tenants and what they just had a concession on. And so this really changes the value that we deliver to be true negotiation. Understand that business, putting you in the right building, in the right location, but also how do you, you know, drive that forward?

3:32 It's really exciting when you think about that, right? It's commoditizing some stuff, but it's making the rest of us a lot better than we've ever been. Right. And we're having a lot of conversations, right, about AI as it pertains to our business. And we're seeing some like, OK, it's very natural to talk about the bad use cases, right? Owner a hack appraisal on ChatGPT and gets one number. But then the reality of the it's like you said, there is not actually this proprietary data that is needed to carry a transaction through, right? Like we're enhancing our service as tenant reps, leasing agents, et cetera, as opposed to subbing it out with a robot and then pushing the paper. So I suppose where I'm going with that is humans.

4:14 You know we live to see another day here as commercial real estate professionals, as humans and not as robots. Absolutely. And also the relationship component, right. So the relationship component still continues to matter. But really brokers are the ones who have the most recent feedback about what's happening in that market, the concept of live data, what's happening right now, What was the bid ask spread when someone gave you that asking rent, which could be repeated by a large language model, Did they actually pay that asking rent? What other sessions did they get? But the great thing is, is for great brokerages like Newmark, our ability to understand how to negotiate and what are the other things, the data that we have to drive our clients results, it compounds. And how exciting is that, right? So the difference between the great getting greater and the commoditized getting more commoditized will continue to spread. And that's really why in the age of AI you want to lean into being the best that you can at your trade, right? If you're if you're really leaning into having great deep market knowledge and deep client experience, that's going to transcend every market cycle.

5:13 That gives me hope. Glad to do. It yeah. How do you see you all incorporating AI into the business in the next year? 2 years. Five years. So I mean, I personally think in that, you know, maybe 2 years of time is a little short, but by five years, it will touch every aspect of our business. And I think it's very likely that it'll touch every aspect of our business by two years from now. And so when I think about it and you know, I was a broker in Silicon Valley in San Francisco for many years. So I've been thinking about it for a long time, a lot longer than the last six weeks. I've been thinking about it since 2018 or so when, you know, open AI and those companies first started emerging on the scene in San Francisco so long ago.

5:54 But to me, it's, it's just a really core easy principle is you want to automate the stuff that you don't need to pay attention to. And that's incredibly important. And even when it's nerve wracking because you think it's your secret thing, if you know that it can be automated, you know, my view is you want to take that out and you want to figure out a way to make that better, better. And then you want to make sure that you're amplifying people. But this is going to take a lot of change management. And that's really going to be the challenge for the industry and all businesses right now is how quickly can your people evolve to a new reality where some of the things we're used to doing to fill our time is going to be automated and others you have the ability to amplify to a new dimension. How do you solve different problems, better problems?

6:35 You know, how do you actually create more value? And that challenge is not going to be something where you can rest on what you did five years ago. You need to lean forward into what's possible now. And I think that's like, you know, human nature doesn't want to adapt, right? You have your cell phone. You know, we all loved our Blackberries, and we didn't think there was anything on the other side. And now we all love our iPhones. And, like, you would never get something other than an iPhone. I feel that internally with new technology, the average age of a commercial real estate broker in America is 55 years old. Really. Yes, it's. Interesting. How do we? I'm trying to think of a great way to say, so say you're a 7 figure broker and you're 55 years old, you don't need AI from your immediate understanding and you have that physical like I don't want to incorporate anymore tech into this.

7:24 What would you say to that broker when it comes to incorporating AI into the business to encourage them? Well, I think I'd look back at the last big change that we had and how we adopted to it. So if I think about when I first started in the industry, I was a very early LinkedIn adopter, very early in the social networking phase because I started in 2005, the company was brand new. It was in my home market and that's how I actually, you know, met a majority of my clients back then because I didn't have a network in commercial real estate as a 22 year old entering the industry. So what did I do? I got on LinkedIn, I crafted my little messages and I sent it to people in a connection. There weren't even messaging back then. You just had to figure out how to get in front of people. And that was a way I did it.

8:05 I even, you know, I emailed people, I cold called people, but I really leaned into that social networking impact in my early career because that was the wave when I was starting in the business. And I recall a lot of people that I was working with in the time that were more senior brokers who were like, you're doing what on what network and you know, how is this going to work? You're never going to get a client from it, but we all know results, you know, they show. And so if we look at what happened then and apply it to now is I think it's a tremendous opportunity for anyone who adopts AI, but particularly that next generation of brokers that are entering the industry that can think differently. How can we do it to solve my own generation's problems or the generation that's coming right after me? How is the workplace going to evolve because of this? And what do I understand more natively because of where I'm coming from it and simultaneously going back to the people that are the average age that you talked about, I think for them, overtime, they get it.

8:58 Who's not on LinkedIn now, right? It's like there's always this technology curve of early adopters and laggards. And my view is like, if the laggards are doing great and they're producing, then they can take their time to adopt at the period. That's right for them. At some point it will happen. People told me they'd never be on LinkedIn. Now there's people posting every other week. It's just how it goes, right? So just a matter of time and finding what's right for you. That's funny. You're like, I see you, Todd, you're in LinkedIn. No, it's you're preaching to the choir when it comes to social media and integrating it into our business. And I continue to encourage all commercial real estate professionals to do so. But let's let's let's get into it in 2026. What is the differentiator between a property that's leasing and a property that is not leasing? Great question.

9:45 And it's definitely a market in which you're finding winners and everybody else isn't there. So but you know who's winning might be evolving a little bit. So I mean, look, we cover all of North America. So there's a lot of nuance to that question, but I'll dive into a couple specifics. So you know who's winning right now? Trophy is continuing to win and we have talked about about it. So, you know, we could talk about it again for a very long time, but we know that Trophy is winning. Why? Because it's aligning to great talent strategies in great cities that have great talent and great amenities. And they're offering something that's driving that business forward. People aren't just leasing that space because, you know, they think it's going to do nothing for their business. They consider the real estate a performance enhancer that's really going to make that revenue RIP, right.

10:27 And their earnings RIP and they they think it's something they should invest in because of that. And so trophies, certainly, you know, something there. The other winner, this is like, this is my contrarian viewpoint, right, is in San Francisco at the end of last year, end of 2025, we saw something that will surprise everybody because it's not what we've been talking about for a while, which was that Class B started to pop. And everyone's like, oh, we thought that there was winners and then there was stuff that's getting converted. And you know what else is there? There's nothing, right? It's just that's going to sit there forever. But we started to see it and what it was really about was a very specific thing within Class B. How ready is this space for occupancy? Why? Because there's more new businesses that are starting right now that are rethinking themselves.

11:09 Like this is a kind of interesting stat for you. When we track our tenant demand across the country, 72% of the tenants are looking for the same or more space, but they're still looking on the average when we look at completed deals at less space than pre pandemic. So everyone's like, how do I rectify this growth with this contraction? And what I think it's about is business churn, right? So you've got bigger like businesses they've been around a long time that are being disrupted, they're shedding space, they're thinking differently. But at the same moment in time, you have these new businesses that are emerging in every category. And it's not just San Francisco and New York, it's across multiple different markets that are emerging and saying we're starting to grow. And I think going back to like, how do you win as a landlord on that?

11:54 You need to create great space. That's certainly part of it or space that at least meets the tenant demand in your local area. You know, if you're in the suburbs, you might need to have the same amenity packages in the city because it's a different set. But you really that look of like, is it ready right now? Can I move in? And obviously we work spent an amazing contributor to the whole entire real estate ecosystem by how quick their space is ready. But landlords who are also competing on that dimension seem to be winning as well. It's funny, I run a portfolio of Small Bay Industrial in Denver, Co Denver's a unique market with Small Bay because we were the first to recreationally legalize cannabis. It there's a whole party for Small Bay and you know, I'm going to table the history lesson, but I have spent not personally, I'm signing checks for more money to bring units into reality. And by reality, I mean make them presentable than in the last year 18 months than the previous ten combined. Because pre pandemic it was you were just lucky to get a small base base.

12:57 Take it or leave it. And post pandemic things are a little different and the tenant expectations are a little different. And you know, I used to rent horror stories with no bathroom and nobody cared. And now it's like this isn't getting leased. Like I'm not saying I'm not asking, but it's like you said, like if it's not move in ready, if the tenant can't walk in and imagine themselves in the space, you got to another vacant month. And everybody knows. I always say vacancy is the only four letter word in commercial real estate. That's great, I haven't heard of that before. So it's very interesting. I'm seeing parallels in our market and clean up your spaces landlords, it ain't 2018 anymore and invest into your asset and it will feed you.

13:42 It's interesting, I think 2026 is one of the first years in my history that I really feel like retail, industrial and office have a lot of commonality between them. You know, the big blocks are getting leased very quickly. Like you said, moving ready really matters, having more amenities. Like there's all sorts of things that are parallels across all three dimensions of the industry that it's not always the case. Sometimes one's going up and one's going down, but they feel very stabilized right now in the market with very consistent trend lines, which is exciting for the real estate industry. What do you see as the most common deal killer today? I always think the most common deal killer is someone who doesn't want to listen to the other your side. So it is not a physical characteristic. It is a characteristic of negotiation that we can all improve, which is if you listen to what the other person's looking for, you know, whether that's a landlord or a tenant, you're going to be in a better position to try to solve for it than if you just try to, you know, only do your way. I know sometimes it's like, man, I don't even know if you really wanted to do the deal in the 1st place, but OK, so you're in a really interesting market.

14:47 Well, you live and work in San Francisco, hotbed for media commercial real estate mania. Is Office space dying from San Francisco out? No, no, no, no. Not from San Francisco, not from New York, not from Dallas, not from anywhere in the country right now. Is it dying? I think it's being repurposed. And what was the kind of drivers before the pandemic are certainly different now. Although I promised myself I would stop saying the word pandemic or return to office or any of these words anymore because I think we buried them all in 2025. You know, five years later, we should certainly be in a new chapter, you know, by now.

15:28 But I think that the, the market has repurposed itself and it's, it's actually created a moment where businesses are aligning their real estate strategy and business strategy even more than they ever did before. So that's an opportunity for the sector. But you know, if you're looking at space that hasn't moved in a long time, whether that's retail, industrial or office, it's a time to revisit what your value to the market is. Because one trend we're seeing too is what is sitting. If it sits for a certain period of time without leasing, it sits a long time. Like stuff can sit for a while if you're not thinking about how it's going to meet the businesses needs now. And those landlords are going to have a bad time. So Liz, this is just now a personal question that came up.

16:09 You're the director of leasing at Newmark. If you had to choose and you only had two doors to choose, tenant Rep or repping the landlord, which would you choose and why? This is an interesting one and pretty hard for me to answer because as you know, I did both. So I'm going to answer it more nuanced, which is I think when you're early in your career, it's great to choose tenant Rep because it really helps you learn the market and learn the businesses and tour every single market. But then as you mature in your career, I like the landlord side too, because then you understand the market well and it's about how do you really attract users? But your deep experience can help you do that. So I mean, there's really no right answer here, but that's my my nuanced way of saying I like both. But maybe if I had to choose, I'd segment it by when you're when you are in your career.

16:56 Fair. I think that that aligns with like the very natural progression of learning the business, right? Everybody just wants to go in, hit the phones and sell buildings, but what makes those buildings run the leases within that? And we need to understand how those work in order to sell them. Yes, yes, absolutely. I mean, leasing is really the foundation of the real estate industry, right? Because if you don't have a space, then how do you create the value? It's that combination of those two people coming together or two companies coming together, That's where that value creation moment is. So if you're a new broker, don't count out leasing. Honestly, I love leasing. I think if you're a senior broker, I love leasing, but I'm just a warehouse peddler. Liz, what are the biggest opportunities right now for owners and investors in commercial real estate? Well, it depends if the owner investor already has their property or if they're trying to buy new properties. So we'll kind of break it down into those two. If you already have your property, then I think the biggest opportunity is to, as we've said, understand the tenant demand in the market and what those tenants really looking for and then position your asset to meet it. So as an example, if you're in a high growth tech market where things are moving really quickly, you want to get your space ready to lease, right?

18:12 You want to be probably a little more flexible on term or give them expansion options because that's going to facilitate their growth. But if you're in a trophy building in New York, that might not be the best strategy. You know, you might want to make sure that it's available to condition that they can they can customize it for their own use. And if you're investing in real estate and you're looking for where to expand and you know, similar yet slightly different answer, which is look at where those demand trends are, Look at the industry trends, you know what's going on. Like, you know, look at the advanced manufacturing trend in America right now. How many companies are coming through American dynamism right now and building Like that's a really compelling, you know, segment. And I know we've talked about data centers a lot in the real estate industry, but you know what's coming after that?

18:55 What's the adjacencies to that big boom? AI companies is certainly one of them as well, where you can kind of position your asset for success. That was good. That was very, very good. You're smart. I am enjoying talking to you very much. You're very intelligent. It's nice to talk to. Anytime. So before I let you go, we always end with the same question. Liz, what is your commercial real estate secret? So my commercial real estate secret is to always be as resilient as humanly possible. And I think this is something that you learn in different chapters in your life. You know, I had a situation when I was a relatively younger broker. I think I was four or five years in the industry and I was pitching my first really big deal and it was with a CEO on the other side of the tour. So we're not talking a small 1.

19:42 You know, we were talking, this is probably my largest client ever at the time. And I'm pitching him on the property and I'm telling him everything about it. And I'm telling him about the demand in the market and why he needs to buy this asset so we can have our tenant that we already had leased it. Like this is what we need to do. And as I'm doing it, a bird literally poops on my face. Like, you can't take this back. Like, and you know, it's kind of a silly story, but I think it's very indicative of the real estate market that sometimes when you are going for it and gunning for it and you know that you're right that things can go a little awry. And that's a funny slash kind of stinky awry. But you know, it's a funny story, but it shows. What did I do? I was like, OK, do you have time? If I go to the bathroom, he's like, not really.

20:22 I was like, I'll wipe it off. I'm going to keep going. He ended up buying that property and we did a 300,000 square foot lease on it less than six months later. So when you're convicted in the market, you're convicted. So be resilient when things don't go well, but also just be convicted. Well, if there is ever a question if getting pooped on by a bird was lucky, it sounds like that was it is and that was your lucky day. It was my lucky day. Wow, that's no, I agree it. I mean, if you're not resilient, this is not the business for you. But if you can get over that emotional hurdle of getting kicked in the teeth, you know, at 8:00 AM incessantly, then you can see amazing success and some might even enjoy it. So.

21:07 Yes. I don't know if I've ever enjoyed getting kicked to the teeth, but I have become more resilient.