Artificial intelligence is changing real estate finance, but relationships are still what close the deal - by Anthony Pili
Commercial real estate financing has been forever changed by artificial intelligence (AI). Banks of all sizes are exploring how to implement AI to streamline processes, analyze data, identify patterns and help employees access information faster to best serve their clients.
For the borrowers, this can mean a more efficient financing experience. But there is a big difference between making the lending process easier and using technology to make the actual lending decisions.
Commercial real estate deals are rarely straightforward. Every property, borrower and market is unique. The numbers on a spreadsheet can only tell you so much. Understanding the nuances of each deal needs experience, judgement and a strong relationship between the borrower and a banker who knows – and can anticipate – their specific business needs.
AI will never replace relationship banking but, if used properly and responsibly, it can help relationship bankers be even better at what they do.
More Time to Bank
One of the biggest perks of AI in banking is giving people back their time.
Bankers are constantly gathering information, reviewing and filling out documents, preparing materials and doing administrative tasks. AI can make some of these processes faster, which gives bankers more time to work directly with their clients, learning the intricacies of their businesses and helping solve problems.
The better a banker understands their client’s portfolio, short- and long-term strategies and goals, the better the banker will be at helping them when a new opportunity presents itself or circumstances change.
Understanding the Whole Story
While AI can be effective at processing information and finding patterns, commercial real estate lending requires context. Experienced relationship bankers know that you won’t find the answers to all the questions in a spreadsheet.
If a banker has worked with a client for an extended period of time, they understand not only the client’s financial position but also how they do business.
Institutional knowledge is incredibly valuable, and this is where community banks can really differentiate themselves.
AI can gather information, but people still need to analyze it to understand what it means.
Keeping Real Estate Local
Commercial real estate is a local business. Two properties that look nearly identical on paper will be very different deals based on factors such as location, tenant demand, nearby development, infrastructure, regulations, etc.
This is where community and regional banks have an advantage.
Our team lives and works in the communities that we serve, and they know the players: the developers, business owners and professionals who are investing in the area. They see what businesses are doing well and can identify potential problems before they happen.
It is impossible to fully understand a project from behind a computer screen. A local banker getting in the car, walking a property and talking with the people involved in the project can provide invaluable insights.
While AI can help prepare a banker for the meeting, it will never replace that in-person connection.
Relationships Matter When Things Get Complicated
The true value of relationship banking becomes most clear during challenging market conditions.
This year, our clients have been dealing with higher borrowing costs, increased construction costs, and uncertainty about interest rates, tariffs and the economy as a whole. They don’t just need capital; they need a banking partner they can call who understands the industry and can work with them to navigate changing circumstances.
Real estate projects rarely go as expected, whether that’s construction taking longer, costs increasing or leasing assumptions changing.
It is incredibly valuable for a client to be able to call a trusted advisor who knows them, their business and the deal.
That trust is created over years of relationship building, successful projects and working through difficult times together. It cannot be replicated by technology.
High-Tech + High-Touch
AI’s not going anywhere, and we’ll continue to see the impact of it on banking and commercial real estate financing for years to come. As lenders, we have to look at how AI and other technology can help create a better client experience.
We cannot, however, try to automate the relationship out of banking.
AI can help community bankers prepare for conversations with clients, identify opportunities and spend less time on admin work – creating more time for building relationships and helping the people and businesses they serve.
As banking becomes more automated, relationships will become an even greater differentiator.
To understand a complex deal, navigate an unexpected challenge or find creative strategies, banking must remain high-touch.
At the end of the day, tech can help move a deal forward, but relationships will be what helps it get across the finish line.
Anthony Pili is the chief innovation officer at Orange Bank Trust Company, Middletown, N.Y.