(Feb. 12): Real estate services stocks fell on Wednesday as investors assessed the company’s vulnerability to emerging artificial intelligence applications and tools that could disrupt several industries.
CBRE Group and Jones Lang LaSalle shares fell 12%, and Cushman & Wakefield shares fell 14%. For CBRE and Cushman & Wakefield, the move marks the biggest decline since 2020 amid the coronavirus-induced market decline.
“We believe investors are exiting high-fee, labor-intensive business models that are seen as potentially vulnerable to disruption by AI,” Keefe, Bruyette & Woods analyst Jade Rahmani said in a note to clients on Wednesday.
Still, the analyst said the decline “may overstate the immediate risks to complex dealmaking, even though the long-term impact of AI is still ‘wait and see.'”
The decline is a further shock to the commercial real estate industry, which has struggled to regain its footing since the pandemic upended office demand and rising interest rates reduced transaction volume. While the boom in AI is increasing its power, particularly in the data center and high-end office leasing industries, investors are considering whether advances in AI could eventually put pressure on parts of the business by automating tasks and streamlining transaction processes.
Companies like CBRE and Jones Lang LaSalle are trying to cushion the economic downturn by expanding into property management, valuation and investment sales, from hotels and warehouses to apartments and life sciences labs.
On Wednesday, the group was the latest to be caught up in what Rahmani called the “AI fear trade” after investors dumped shares in software companies, private credit companies, asset management companies and insurance brokers en masse in just over a week.
Barclays’ Brendan Lynch said the drop in share prices was “excessive given today’s limited news flow”. The analyst said some of the weaknesses stem from concerns that AI will disrupt the job market and demand for commercial real estate. “These are appropriate risks, but that hasn’t changed since yesterday.”
Concerns surfaced last week when AI startup Anthropic released tools aimed at automating tasks in fields ranging from legal services to financial investigations. At the same time, analysts and investors have warned that some of this sharp selloff may reflect an opportunistic reaction and overestimate some risks.
“The threat of AI to leasing and capital markets businesses is limited,” said Joe Dickstein, an analyst at Jefferies. “CBRE and its peers benefit from meaningful scale from both data and industry relationships, and their position as intermediaries for large leases and large transactions is unlikely to change.”
Uploaded by Isabel Francis
