Lease abstraction is a critical function of the lease portfolio management process. It is the foundation upon which the entire lease portfolio management process rests. Accurate, succinct and informative lease abstracts help you make the right financial decisions regarding your real estate investments.
Over the years, the lease abstraction function has evolved to match the advancements in the commercial real estate portfolio management process. One huge leap in this regard has been the migration to the Cloud. The jump from creating and storing lease abstracts in spreadsheet format on local drives and servers to Cloud-based lease abstraction platforms that offer any-time access to important lease data along with meaningful reports that can be generated in a few minutes, has been so far, the biggest and most-widely adopted change in the lease abstraction industry.
Another trend in the last few years is the automation of lease abstraction. Artificial intelligence (AI) based lease abstraction is growing in popularity. Are you considering AI-based lease abstraction too? Then here are a few pros and cons that you should know of.
It may be faster
As AI based lease abstraction deploys technology to extract and summarize key data from the lease, the turnaround time for the lease abstracts may be lesser compared to those abstracted manually.
It may be more cost-effective
AI-based lease abstraction may be cheaper as it is automated and there is minimal involvement of human resource. Plus, as discussed above, AI reduces the turnaround time per abstract, allowing the vendor to enjoy the economies of scale that come with larger output capabilities, which may be passed on to you.
You can expect a greater degree of standardization
AI-based lease abstraction may offer a greater degree of standardization when it comes to clauses as it is machine based vis-a-vis having your leases abstracted by a team of lease abstractors, where each of them may have a different way of summarizing them.
But, what about accuracy?
When it comes to lease abstracts accuracy is key, leaving no margin for errors. One of the biggest challenges of automating lease abstraction is the inability of AI-based lease abstraction processes to guarantee 100% accuracy. AI based lease abstraction software programs cannot function like calculators, giving you the right output every time. This is because each lease is unique and there is great variation in the lease language. Plus, leases sometimes go back so many years that not all documents related to a single lease are of the same format and quality. There may be multiple addendums, amendments, handwritten correspondence (which even the best of AI tools may not be able to decipher), emails, notices, etc.
Overcoming accuracy issues by choosing a mixed lease abstraction model
You can overcome the accuracy challenges by opting for a mixed lease abstraction model, where your vendor may pass the leases through an AI-based lease abstraction software and then have a team of experienced lease analysts verify the abstract against the original lease documents. This sort of a ‘quality analysis’ will ensure
- No critical lease data is missed out
- Any OCR errors are identified and rectified
- The abstract stays true to the original lease language and interpretation
A mixed lease abstraction model brings you the best of both worlds. You benefit from the efficiency and cost-effectiveness of AI based lease abstraction and also from the expertise, experience and knowledge of a trained lease analyst.