In this article, you’ll discover:

• The rise of AI tools like Cakebot and their impact on lease management.
• How AI’s capabilities compare to traditional commercial brokers.
• The challenges and limitations of relying solely on AI for lease analysis.
• The importance of human expertise in navigating complex lease agreements. 

The evolution of Artificial Intelligence (AI) has been barreling through various industries, presenting the potential to disrupt established norms and even invalidate certain skillsets and careers.

With estimates suggesting that AI could replace a third portion of white-collar jobs, it’s impossible to ignore the massive disruption and multi-billion-dollar potential it represents. So, as AI continues to march forward, one question arises: Are commercial brokers next in line to be phased out?

While the full extent of AI’s impact on the commercial real estate (CRE) world is yet to be realized, Leasecake, a prominent provider of lease management software, has taken a significant step forward.

They’ve introduced Cakebot, an innovative AI-powered conversational bot and lease summarization tool designed to revolutionize the way business owners and operators navigate the complexities of lease agreements. Cakebot promises to streamline processes and empower users with newfound efficiency, ushering in a potential transformation in the CRE industry. But can its capabilities replace brokers? 

Leasebot Evolution

From providing writing assistance to investment advice, artificial intelligence is rapidly becoming a staple in corporate America. While it’s estimated that consumer-facing roles or other specialties can never be mimicked by AI, new innovations are being introduced daily.

And now, the commercial real estate world is the latest industry to watch and wait how new technology will influence the way things are done.

Cakebot is a new lease management software that uses advanced language models to simplify the leasing process. It can quickly analyze complex lease agreements, provide answers to lease-related questions, and offer clear and concise summaries of critical clauses in the lease. In essence, Cakebot is designed to make dealing with leases easier and more efficient.

In theory, lease management AI software has incredibly powerful potential. Corporate leases are notoriously complex and many CRE portfolios are handled by busy professionals wearing many hats. This means that a program that has the ability to spit out industry insights could be extremely valuable…That is, if it works.

To show off the program’s prowess, Leasecake submitted the bot’s response to a sample common area maintenance term. GlobeSt published the results of the Cakebot’s analysis which was broken down into the key points:

• “The Tenant is responsible for a share of expenses related to maintaining shared areas (CAM charges).
• These expenses cover things like landscaping, parking lot care, security, lighting, signage, and property management.
• The Tenant’s share is calculated based on the size of their rented space compared to the total property size.
• The Tenant pays their CAM portion monthly in advance.
• Once a year, the Landlord compares actual CAM costs to the estimated payments and adjusts for any differences.
• The Tenant will either receive an invoice for additional payment or a credit if they overpaid”

Not too bad. Rather than pouring over a document for hours, the bot extracts critical information and summarizes it into digestible excerpts. Of course, this time-saving potential could introduce an upheaval of the CRE industry where brokers in which brokers are currently denoted with the consuming task.

The Chief Product Officer of Leasecake explained,

But this begs the question, should a multi-year, multi-million-dollar investment only be devoted a few seconds of analysis?

While appearing to save you time initially, it could gravely cost you in the long run-in money and complications. Time is not the only component to landing you the lowest price and most optimal terms, and beyond that, AI lease bots face multi-faceted challenges. Let’s explore why you should probably keep your broker’s number. 

Challenges With AI Lease Analysis

AI lease management software is not yet perfect, with complexities stemming from various factors.

The most formidable challenge lies in dealing with the intricate nature of lease agreements. These contracts often feature context-dependent clauses, making it difficult to create a universal AI model. Corporate leases are notoriously complex and play just a singular role in the overall health of a portfolio. Understanding the nuances of diverse lease structures, including triple-net leases, gross leases, or modified gross leases, adds layers of complexity to the AI’s comprehension.

Not only this, but ambiguity within lease clauses, often featuring vague language or conflicting terms, necessitates human judgment and legal expertise to resolve effectively.

Interconnected terms within a lease add another layer of complexity, as the interpretation of one clause may rely on the context provided by others. Similarly, much lease analysis calls for the trained eye of seeing what is not there. Since leases are drawn up by landlords’ legal teams and brokers, they are written to benefit them.

Often, things can go missing between the lines. It takes an informed real estate professional to identify where there is room to improve not only the listed terms, but also when clauses are lost in omission. Corporate leases are written with the intent of defending the landlord’s interest. So, tenants need to play offense.

Lying By Omission? 

It is not enough to simply review the terms outlined in the lease they roll out. The language can make it appear that you are getting a deal, when they are still profiting.

So, one of the biggest pitfall tenants face when potentially negotiating according to lease bot software is whether the program is just analyzing the terms the landlord includes, without considering certain features may have been left out.

AI operates based on predefined algorithms and data. If tenant rights and clauses are not explicitly programmed into the system or fall outside the system’s trained parameters, the AI may not recognize them. This could limit tenants’ ability to exercise certain rights not covered by the AI’s algorithms.

Furthermore, keeping pace with evolving lease laws is crucial for AI models, requiring continuous updates and training to remain current and legally compliant. Data security is paramount, as the software must handle sensitive lease data while adhering to strict data privacy and security standards, further intensifying the development and deployment complexity.

Furthermore, the software must grapple with the variability in lease laws and regulations, which can significantly differ from one jurisdiction to another. Managing local legal nuances and interpretations becomes intricate, especially when dealing with a portfolio of properties spread across various regions. Document variability compounds the challenge, as lease documents come in different formats, layouts, and languages. Ensuring accurate handling of these differences poses a substantial hurdle.

Takeaways for Tenants

The advancement of AI should compel tenants to closely examine their representatives and assess the benefits they receive from their existing partnerships.

Because since AI models can certainly provide a foundational understanding of a lease, their capabilities underscore the growing significance of having a tenant representative who offers more than just basic lease analysis.

In a landscape where even a rudimentary examination of a lease can be automated, the role of corporate service brokers, who currently dominate the commercial real estate (CRE) world, can sometimes seem limited. Because while euphemistically going by “corporate service brokers,” in reality these firms largely represent landlords. This means that the tenant is always at the disadvantage of conflicts of interest, and will likely experience less favorable deals compared to what an objective AI bot could offer.

However, it’s still crucial to acknowledge the limitations of AI, especially when dealing with expansive, multi-million-dollar leases. Relying solely on emerging technology leaves room for uncertainties and complexities that require the insight and expertise of a capable team. This necessity underscores the value of a seasoned team that not only comprehends your unique challenges but also aligns with the goals and objectives of your corporate real estate portfolio.

Beyond lease analysis, negotiating a favorable deal involves creating competition for your tenancy among landlords, thereby enhancing your negotiating leverage. This is precisely why tenants should consider turning their attention to True Tenant Representatives™. These experts bring a comprehensive set of skills and responsibilities to the table, ensuring that your interests are not only understood but also well-protected in the intricate world of corporate real estate. True Tenant Reps™ only represent tenants so you are ensured that they have your interests as their top and only priority. 

So, AI evolution should force tenants to take harder looks at their representatives and what they get from an existing relationship. Stay on top of the latest in the CRE world or risk getting left behind, subscribe to our blog.