How AI Projects Will Transform the Retail Sector

Posted in OTL Newsletter, News -

While we’re seeing applications of artificial intelligence (AI) throughout the commercial real estate industry, interactive technology is having an especially transformational influence on the retail real estate sector.

In fact, AI—and projects that feature it—could change the retail sector dramatically.

How, you might ask? Well, while many retail real estate professionals have approached AI as a force for increasing operational efficiencies or fine-tuning marketing efforts to create increasingly compelling purchasing incentives for consumers, this only scratches the surface of what AI can do for retail real estate.

AI is already being used by retail stakeholders as a way to engage consumers and visitors with unforgettable, one-of-a-kind experiences. OTL is incorporating this technology into water features like the Illuvia show fountain at EpicCentral in Grand Prairie, Texas, which delivers dramatic special effects such as lighting, fire, and jets that propel water dozens of feet in the air, all choreographed beautifully to music and other sounds.

The latest AI technology we’re implementing at projects like Illuvia allows people to control a fountain’s effects simply by moving their body, without wires, pressure pads or other devices. It can recognize and respond to the commands and movements of not only individuals but entire crowds, opening possibilities for one-of-a-kind, real-time performances. (More details on this in the coming months.)

Projects with these AI applications can also be coordinated with other elements such as holiday lights and decorations for even greater impact on audiences. As shoppers continue to signal their desire to get out of the house and participate in unique experiences at retail and mixed-use venues, these AI technologies are poised to become a potent competitive advantage for drawing large crowds, enticing them to stay longer and ultimately spend more money there.

AI is also helping these venues control costs by dynamically sensing patterns of foot traffic, tying into other systems at retail and entertainment properties to help reduce the use of heating and cooling systems and lowering utility bills. And it can trigger lights to turn on and programming to begin as needed when crowds of people have gathered.

Plus, AI is driving retail and entertainment property owners and operators, as well as their tenants and the vendors they use, to be more creative in attracting visitors, customers, and guests to their destinations. Through the process of machine learning, AI is becoming increasingly intuitive and constantly improving, prompting those who use it to do the same.

Even with all these benefits, projects that feature AI have the potential to do even more for the retail sector. We see this technology emerging as an in-demand and essential element of experiential retail. As they discover the possibilities at existing retail and mixed-use venues, consumers will continue to ask for and seek out ever-more-exciting retail and entertainment experiences that transport them from their everyday lives into magical and wondrous environments where virtually anything is possible.

As visitors are drawn to these environments and the places that offer them, the valuation of these places can only increase, attracting high-quality retail tenants and investors into the mix and raising the assets’ price tag. This effect will make destinations with projects that implement the latest AI among the most coveted in the retail sector, positioning them to thrive and bring in new visitors as the technology continues to evolve. Eventually, we believe these technologies will be as indispensable to the sector as omnichannel retail has become.

This very imaginable shift in retail real estate has far-reaching implications for the sector as a whole. With AI to lead the charge, experiential retail could be elevated to the upper echelons of retail real estate, bringing in institutional investors and foreign investors who consider these properties trophy assets.

The resultant trend has the potential to fuel an arms race of sorts between municipalities and commercial real estate developers to deploy the most dazzling AI-based functionality at these properties, seeing which are the most magnetizing and draw in the highest number of visitors. As these systems provide a source of steady and reliable returns for investors, they may cement retail’s position as one of the darlings of commercial real estate, standing shoulder to shoulder with perennially strong sectors like multifamily and industrial that minimize risk and maximize upside.

While the use of AI in CRE is still in its infancy, projects featuring this tool could help the retail sector grow exponentially over the next decade. By helping the burgeoning experiential retail segment soar to the top of the real estate food chain, AI could dramatically and permanently alter the retail and mixed-use sectors as we know them.