AI will not affect all real estate equally. Instead, it will create starker divides between different markets, property types, asset quality and investment strategies, says Cushman & Wakefield (C&W).

Flexibility, timing and asset-specific strategies will therefore become more important for occupiers and investors, as AI magnifies both upside and downside outcomes.

Certain retail properties and the living or multifamily residential sector are likely to benefit indirectly. This is because AI could improve household wealth, income growth, productivity, corporate profits, operational efficiency, and capital investment, C&W reckons.

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AI-driven employment shifts may support renter demand for multifamily and living assets, and affordability also improves with higher wages.

In addition, location will matter even more across all property sectors as AI concentrates growth in talent-rich, high-productivity markets. Performance gaps across geographies and assets could widen as a result.

These are part of the real estate consultancy’s global baseline scenario on how AI might reshape real estate fundamentals over the next decade.

Impact of AI on real estate fundamentals, by asset type

According to its research team's recent whitepaper, AI's impact in the Asia Pacific (Apac) will likely be slower because its economies are more diverse than those in other regions. Apac has a mix of advanced AI adopters alongside emerging markets where digital tools are only just taking root.

AI could also influence structural growth, urbanisation and infrastructure investments in Apac, instead of acting as a standalone demand driver, in C&W's view.

Near-term drag before long-term growth

The consultancy’s base case states that AI will be adopted incrementally and unevenly across industries and markets, while GDP growth increases modestly.

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In Apac, the economy is projected to grow at about 3–4% annually through 2030, supported by productivity gains and continued investment in infrastructure such as data centres and power.

Although some jobs will be displaced — as AI eliminates routine roles — there may be net employment growth because most roles will evolve rather than disappear.

Occupiers or tenants could pause and recalibrate in the near term. However, over time, more space will be absorbed across different property types as productivity improves and new businesses and industries are formed.

"There is a misconception that AI will reduce the need for physical space," says Dominic Brown, C&W’s head of international research for Apac, Europe, Middle East and Africa.

"Our analysis shows the opposite — AI expands economic activity and that ultimately drives greater demand for real estate across sectors," he adds.

The firm anticipates subdued demand for offices in the short run before an upswing later, though vacancy rates in other sectors remain relatively stable.

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For occupiers, AI's impact is felt most directly through how work is organised, where activity occurs, and how much space is needed per worker.

Office tenants in particular will likely take a more flexible approach to leasing, including shorter commitments in some cases and greater use of optionality, while the flight-to-quality trend continues.

As for investors, AI is making asset selection and timing even more important.

While the overall outlook is positive, potential downside risks include a slower-than-expected productivity boost from AI and disruption to the labour market, which could lead to higher vacancy rates and downward pressure on rents in general.

"The range of outcomes remains wide. Understanding the different scenarios is critical for both occupiers and investors as they plan for the next decade," says Brown.

Retail: Clear winners and losers

The retail sector may benefit from AI as stronger household income growth will support discretionary spending, but the consumer landscape could also become more polarised as a result.

The research team foresees the retail market splitting into clear winners and losers.

"High and low-end retail segments are likely to outperform, while mid-tier retail will face structural challenges," the report states.

Physical, experience-based retail will also remain resilient, with demand concentrating in high-income and talent-dense markets.

Although retail labour may be partly automated as a result of AI adoption, the increase in consumer spending is likely to support moderate demand for retail space, in C&W's view.

It suggests retail occupiers double down on space in prime nodes where consumer spend is flowing, refit their stores to focus on experiential formats, and exit the weakening mid-tier segment.

For investors in retail properties, C&W similarly suggests backing prime destinations and avoiding "generic boxes" or less differentiated assets.

"Retail investment outcomes are shaped more by supply constraints and consumer income than by AI-driven labour effects," the firm notes. It points out that differentiation by format and tenant mix is critical.

In Apac specifically, it predicts that the wide range of wealth effects within the region will boost retail property performance in affluent, tech-forward countries, while those with lower rates of AI adoption may lag behind.

Downside scenarios: AI bust or labour displacement

The study models four distinct scenarios reflecting different paths for AI adoption, productivity and labour market outcomes.

Besides the base case, which C&W says has the highest likelihood (50% probability) of occurring, it also explores the upside scenario — of productivity-led expansion with rapid AI adoption (15% probability) — and two possible downside scenarios.

AI impact: Vacancy rate by property sector, in each of the four scenarios

The "AI Bust" or "Moderate Recession" case (25% probability) takes place if AI adoption falls short of expectations and contributes to a cyclical downturn.

This downside scenario draws from the dot-com experience, when a transformative technology ultimately delivered economic gains in the long run, but only after a period of overinvestment, firm failures and disruption in the financial markets.

In this "AI Bust" scenario, stress in commercial real estate is driven by broader financial conditions and timing — not technology failure.

Real estate demand will weaken in the short run, with higher vacancies and rent pressure, before recovering.

For offices, such a delay in translating AI-driven productivity into occupier demand will be "particularly damaging", C&W says. A substantial growth slowdown will be accompanied by layoffs and prolonged office vacancy.

Vacancies are also expected to rise for retail properties as discretionary spending softens, and for logistics and industrial assets as capital spending pauses. With job and income growth slowing, more multifamily and living assets will be left vacant, too.

Finally, the other downside scenario, "Dystopic/Displacement", has the lowest likelihood (5% probability) of occurring.

In this case, AI adoption substitutes more labour than expected, leading to higher unemployment, and revenue growth lags productivity. Real estate demand remains weak for a more sustained period, with downside pressure on rents and values.

Office demand will likely be the hardest hit here, with muted spillovers in other sectors.

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