A New Slate Of AI Tools Could Fundamentally Change Site Selection

A new suite of zoning intelligence software has begun to alter the speed and strategy real estate investors, developers and brokers use to evaluate and acquire property. 

Advanced artificial intelligence capabilities allow site selectors to more rapidly ingest, evaluate and understand local zoning changes using a broad, searchable database. Advocates say the technology is rapidly accelerating the potential pace of acquisition and helping buyers find more affordable targets when interest rates have cut into profitability. 

“The margins are so, so tight that everyone's looking for an edge, and that's the edge,” said Olivia Ramos, founder and CEO of Miami-based Deepblocks. “That’s the obvious edge: zoning data and zoning changes.”

Companies such as Cherre, Prophetic, ReZone and Deepblocks have built software and data platforms that claim to offer more detailed and updated parcel data to real estate buyers and investors, with clients including Christie’s International Real Estate, Bain Capital and CBRE. 

Avison Young has its own in-house tool for finding parcel data. It has been especially useful for finding industrial investments, according to Director of Industrial Market Intelligence Peter Kroner.

Other large brokerages, including JLL, are reportedly interested in the technology, Ramos said.

“If you're in real estate, private equity, and you're raising outside capital, you need to be using these tools,” said Brad Hargreaves, founder of Common and publisher of Thesis Driven, a tech- and real estate-focused publication. “You need to understand what's going on here. There’s valuable data here that wasn't there five years ago.”

Ramos would go one step further.

“If you're depending on having boots on the ground to find deals, you will be left behind, because sophisticated funds will be algorithmically driven,” she said.

The ability to better understand zoning changes at scale and market software to the commercial real estate industry has been enabled by slow, steady changes in technology and the digitization of government actions. 

Roughly 20 years ago, cities began slowly digitizing the actions of zoning commissions and other government bodies in reaction to the demands of their open-records laws. 

In the last five years, advances in AI and large language models have enabled new startups to capture those newly digitized records, often a mishmash of PDFs and different formats of meeting minutes and rules changes, and quickly convert and organize them.

Zoning remains complicated and arcane, with innumerable designations and overlays that differ between municipalities. ReZone claims it processes millions of words of zoning changes every week to keep current with changes in major markets. 

Cities and even states, seeking more development and increased density, have rapidly changed and updated their zoning and building codes. More than 90 U.S. jurisdictions eliminated parking minimums in recent years, and 18 states passed accessory dwelling unit laws since 2022. 

Austin, Minneapolis, Houston and Raleigh, North Carolina, have aggressively pursued density and missing-middle apartment development, and 80 state laws have been passed to increase housing production so far this year, according to Alex Horowitz, director of the housing policy initiative at The Pew Charitable Trusts.

The combination of changing zoning and more sophisticated tools to track those changes is allowing investors and developers to modify how they find development sites, acquire land and think about expanding retail brands. Daniel Heller, founder of ReZone, said he has a handful of clients using the tool for expanding car wash chains.

Heller also said his company notified student housing developers that Nashville changed its student housing regulations to allow more density with a 20% commitment to affordable units. That led two clients to start new developments. 

Now, developers can search across metro areas for sites that meet several criteria or rapidly discover what residential areas are set to acquire a new zoning status that allows midsized apartments, for example, making them great acquisition targets for multifamily developers. 

“People are recognizing that the site selection and feasibility analysis step is going to be automated,” Hargreaves said. “It’s not taking one site and analyzing it for a week. It’s how do we take 10,000 and put them through the funnel and pick 10 through some kind of automated analysis?”

Some hedge funds are tapping the tools to quickly assess and buy up land in neighborhoods that meet certain metrics, Hargreaves said. Land investors are creating lists of parcels they want and sending out mailers to property owners soliciting off-market deals. 

Some clients even ask these startups to track any zoning changes around prized assets like luxury hotels or cellphone towers so they can quickly push back against any proposed zoning changes or new projects that would put a disfavored neighbor or competitor within range. 

“We are deal-mining all the time,” said Kristina Chang, CEO of Westlake Realty Group, a family office that focuses on different asset classes, including industrial outdoor storage. “I was immediately sold on the usefulness.” 

Westlake uses Prophetic and custom in-house tools for site selection, Chang said, and she believes it gives it a significant advantage over the competition. Chang is also part of an investment group that eventually invested in Prophetic. 

In the case of IOS property, she can find out details about ownership, as well as concise information about what types of industrial uses, such as truck parking, storage and charging, might be allowed. 

This helped Westlake quickly expand the number of properties that it considers and make faster acquisitions when it starts looking at a new market. Chang described it as getting all possible properties in its acquisition funnel, as opposed to only considering what is quickest and easiest to vet.

Deepblocks runs what it calls “signals” for clients, seeking to find moments when zoning changes and buyers of affected parcels can gain a first-mover advantage, Ramos said.

Changes usually bring intense upward pressure to property values, she said. For instance, if the city issues a variance that a multifamily building can go from eight stories to 36 stories, it is a signal that the surrounding area will see a much higher population and increased development, which would be of interest to retail and commercial developers. 

The push to densify single-family neighborhoods is also offering apartment developers new opportunities, Chang said. For instance, picking up older homes in areas that have been rezoned for midsized apartments can present an opening.

It’s the promise of finding these kinds of opportunities faster and helping create an investment narrative that evangelists say makes this technology promising.

“It's not enough just to have a broad investment in Sector X or follow Strategy Y,” Avison Young’s Kroner said. “What’s your competitive edge? What’s the story? That’s where our differentiator has been. The industry has really been struggling to make sense of all the data that’s been aggregated.”