The commercial leasing sector is rapidly becoming one of the most complex industries to navigate and manage. Even a single lease can contain hundreds of pages filled with niche complexities that have to be fully understood, maintained and accounted for.
This coupled with new accounting rules and regulations such as IFRS/AASB-16 (If you are unfamiliar with these terms see our previous posts), COVID-19 regulations, business plan upheavals and ‘work from home’ disruptions have left many businesses, both small and large, scrambling for effective solutions.
Welcome to LeaseInfo’s weekly blog! This week we will be diving into the world of Artificial Intelligence and how it is being used to revolutionize the commercial leasing sector.
Most businesses have their leases stored as PDF’s or even worse, in hardcopy gathering dust in the basement or filing cabinet. These leases contain valuable data which heavily impacts the business and yet, until very recently, we have not been able to extract, organize or use this information effectively, as computer system cannot “read” these documents.
Employing computers to solve this problem is an incredibly difficult task and would involve creating an algorithm that could read and understand natural human languages (not machine code!) and then extract that data faster than a human. This feat was achieved with the use of advanced machine learning, which involves feeding an adaptive algorithm millions of documents and allowing it to learn from them. This phenomenon is a subsect of AI known as Natural Language Processing.
Natural Language Processing Algorithms can read hundreds of lease agreements in a matter of seconds and perform several highly complex tasks including:
- Key datapoint extraction and backlinking
- Organization of critical data
- Calculations of rent and forecasting
- Calculating expiry dates and sending automatic reminders
- Calculating NPV of lease liabilities and assets under AASB – 16
- Categorizing key clauses such as demolition, make good and break clauses
- Calculating tenancy schedules and weighted average lease expiries
- Reading invoices and comparing the to the contractual lease values to check for variances
- Managing complex data hierarchies such as sub leases, vacancies and agreements for lease
By comparison these actions could take a leasing team weeks to achieve and even then the data would be subject to human error which is highly probably, considering the manual effort in wading through thousands of PDF’s searching for relevant clauses.
At the bare minimum, AI allows your leasing team to get a full understanding of the strengths, weaknesses and upcoming obligations presented by your leased portfolio and frees up valuable time that was previously wasted searching for information or organizing documents.
The future of AI will bring further changes to the commercial leasing sector but we are confident that it will continue to:
- Create Business efficiencies
- Eliminate unnecessary costs
- Maximize portfolio data usage
- Prevent errors and fraud
- Create powerful, intelligent and rapidly improving computer algorithms
This post was authored by Simon Fonteyn. Simon is one of Australia’s leading experts in retail, childcare and medical leasing and rental valuations. He holds a Degree in Accounting & Finance, a Diploma of Valuation, a Masters of Management and is an Associate of the Australian Property Institute. With over 25 years experience in the commercial property industry, Simon founded LeaseInfo® as a way to provide more transparency to the industry.