The internet revolution transformed real estate and made Amazon a property powerhouse. AI will shake things up even more

Brendan Wallace

<p>In the mid-1990s, the internet and information technology didn’t merely disrupt industries, they rewrote the rules for corporate survival. CEO turnover rates surged, company lifespans shrank, and entire business models were upended. Today, AI will fundamentally reshuffle the deck for corporate America on an even grander scale. This revolution will not only intensify volatility but will also force leaders to adapt decisively or risk becoming obsolete.</p><div class="paywall-selector"></div><div class="paywall">



<p>The last major technological revolution sent CEO turnover rates soaring from 10% annually between 1950 to 1990 to nearly 25% in the years following the dot-com boom. Meanwhile, the average lifespan of an S&amp;P 500 company plummeted from an average of 61 years in 1960 to just 30 years by the late 1990s. While multiple factors contributed to this trend, the correlation with the digital revolution is undeniable. Transformative technologies don’t just change industries—they can destabilize leadership and reshape entire markets. AI will accelerate this turbulence, forcing companies and leaders to adapt or risk obsolescence.</p>



<p>AI’s disruptive force won’t be confined to any single sector. It will reshape industries across the board, challenging long-standing business models and redefining competitive advantages. But at Fifth Wall, our focus is on real estate, a sector that has historically lagged in technological adoption yet stands to be one of the most profoundly impacted. By examining AI’s implications through the lens of real estate—including operations, demand for space, and energy—we can better understand the broader forces at play and what it will take for companies to adapt, survive, and lead in this next era.&nbsp;&nbsp;</p>



<h2 class="wp-block-heading">Operations overhaul</h2>



<p>In a capitalist society, technological innovation propels entrepreneurs to tackle the real<em>—and even imagined—</em>problems, making our lives and businesses faster, cheaper, and more efficient. Today, entrepreneurs around the world are channeling this drive into AI applications that slash costs across diverse sectors—from legal and accounting work to permitting, architecture, design, appraisal, financing, servicing, and property management.</p>



<p>Real estate companies stand to benefit from these innovations, yet they face a constant challenge: keeping pace with rapidly evolving technology. With any groundbreaking technology, second- and third-order effects often get overlooked. In real estate, AI-powered operational solutions fall into these categories.</p>



<p>During prior tech revolutions, now-household names like <a href="https://fortune.com/company/alphabet/" target="_blank">Google</a>, <a href="https://fortune.com/company/salesforce-com/" target="_blank">Salesforce</a>, and <a href="https://fortune.com/company/facebook/" target="_blank">Meta</a> dominated headlines; meanwhile, the quieter transformations in real estate were equally profound. For instance, while logistics real estate existed long before the internet, the advent of e-commerce has propelled it into a new era. Although e-commerce still accounts for just a fraction<em>—</em>17%—of total retail sales across the U.S., its explosive growth has generated insatiable demand for warehouses. It has completely transformed the landscape, exemplified by the rise of <a href="https://fortune.com/company/amazon-com/" target="_blank">Amazon</a> as America’s largest private-sector tenant.</p>



<h2 class="wp-block-heading">Demand for space</h2>



<p>Real estate is the art and science of commercializing space—a principle that first ignited during the first industrial revolution in the 19th century. Back then, the replacement of human and animal power with steam engines and motors unleashed unprecedented factory productivity and laid the groundwork for the modern real estate industry.</p>



<p>Today, the AI revolution<em>—</em>often dubbed the next industrial revolution<em>—</em>is set to upend the way that we use space. By supplanting human intelligence with synthetic intelligence, AI will redefine the modern economy, remaking our urban landscapes and the very fabric of the real estate sector. Just as the internet revolution led to decimated giants like <a href="https://fortune.com/longform/sears-couldve-been-amazon/">Sears</a> and <a href="https://fortune.com/2023/04/14/netflix-cofounder-marc-randolph-recalls-blockbuster-rejecting-chance-to-buy-it/">Blockbuster</a><em>—</em>both failed to anticipate the cascading effects of digital transformation<em>—</em>AI will challenge firms that choose to overlook its implications on space demand.</p>



<p>On the other hand, the companies that recognize and strategically adapt to these changes<em>—</em>akin to how <a href="https://www.prologis.com/">Prologis</a>, <a href="https://www.digitalrealty.com/">Digital Realty</a>, and <a href="https://www.americantower.com/us/">American Tower</a> capitalized on the internet era—will experience unprecedented growth and lead the market into a new bold future.</p>



<h2 class="wp-block-heading">The real estate and energy sectors collide</h2>



<p>Perhaps the least obvious<em>—</em>but no less critical<em>—</em>derivative of the AI revolution is energy. AI’s transformative power hinges on the ability to generate and sustain the massive energy that’s required by its systems. Two formidable challenges stand in the way of an unbridled AI revolution: an insufficient energy supply and a grid that is <a href="file:///AI%20energy%20demand%20means%20innovation%20must%20crackle%20in%20an%20unlikely%20place/%20Electric%20utilities">not yet robust or reliable enough</a> to support this burgeoning demand. Today, data centers consume approximately 3% of U.S. electricity. By 2040, some projections suggest that this figure could soar as high as 20%, even with aggressive investments in solar and new nuclear capacity.</p>



<p>For the past century, real estate simply needed a stable grid connection to power homes, offices, and even data centers. However, as energy-intensive AI data centers are projected to grow at an annual compound rate of over 40%, the energy requirements will skyrocket. Securing grid connections for new developments will become increasingly challenging—forcing property owners to either develop their own energy solution or face lengthy delays.</p>



<p>Yet, this energy challenge also presents a significant opportunity. Real estate firms that invest in renewable energy generation and storage can unlock entirely new revenue streams. The convergence of real estate and energy is already underway; forward-thinking REITs are embracing this reality. Consider <a href="https://fortune.com/company/prologis/" target="_blank">Prologis</a>, which currently harnesses 500 megawatts of rooftop solar and storage capacity and has plans to expand that to 6 gigawatts. Ultimately, the AI revolution will accelerate the strategic collision of real estate and energy sectors, a massive opportunity for those firms that are willing to innovate and invest in this nexus.</p>



<h2 class="wp-block-heading">Embrace the AI revolution</h2>



<p>As we stand at the precipice of a new era, the choice is clear: Now is the time to act. The AI revolution is not a distant promise but a present reality—reshaping operations, redefining the demand for space, and challenging our energy infrastructures. Visionary leaders must harness this transformative power to drive innovation, secure competitive advantages, and chart a meaningful course for the future. Those who invest decisively in AI will lead tomorrow, while those who hesitate risk obsolescence.</p>



<p><em>The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.</em></p></div>

Transformative technologies don’t just change industries—they can destabilize leadership and reshape entire markets.

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