Why Patent Filings Matter To CRE

Patent filings are not the typical object of fascination in commercial real estate. But a periodic look can give some insight into what technology vendors might be offering to the industry and the competitive duels that could arise.

First, the stats, then the context and explanation. The first quarter of 2022 saw the highest global patent grants over the last five years, according to GlobalData, a provider of industrial analysis and data. Asian companies were the biggest filers. The historical boost was largely due to China, which saw a 29% year-over-year period increase. It included the highest percentage of university filings, which effectively means more patents in government hands. The US led in patents to startups.

The two top areas of patent grants were in artificial intelligence and fintech (technologies for financial services) and audiovisual. Leading patent category sectors were power and utilities, for clean technologies, and retail, in response to increased focus on e-commerce, delivery robots, and supply chain analytics. 

Real estate as an industry doesn’t register in the battle of the industrial sectors, but increasingly it depends on technology for more efficient operations and new capabilities. Start with artificial intelligence. The term appears in a high number of CRE software and services offerings. This has become the latest marketing buzzword that can be highly misleading.

AI refers to a wide set of different technologies that rarely if ever have to do with an independently “thinking” computer. Instead, it collectively refers to ways of automating tasks. For example, machine learning refers to techniques to let software analyze data and improve its performance of some task. If, for example, you have a package that helps pull together data for underwriting analysis, the machine learning part means that user choices and decisions become fodder for better future automated anticipations of what people would do.

It’s not magic and can go wildly awry if not used properly, which means if not fed the “right” decisions. Software can learn to do something badly just as easily as well and examples of poor choices can seem just as valid as smart ones. So, retain some grains of salt when vendors point to their machine learning algorithms.

And don’t underestimate audiovisual, which will include so-called computer vision in which software interprets images. Those are the technologies, combined with machine learning, that let applications count the number of people in an area or inspect objects (like building parts) for damage and a need for repair.

The retail CRE sector should pay attention to that area of patents. Delivery robots? Is your warehouse or logistics center ready for the future? And could supply chain analytic success help identify which retailers are better credit risks because they’d be more effective in getting the products they need to sell? (A good question for those in construction, as well.)

The competitive issue will be between vendors that use patents as offensive and defensive weapons. The presence of multinational protection of technical advances is important to startups and those that invest in them. It can also mean companies get caught when they develop an idea without the due diligence to see if someone else had a patent that covered the concept.