How to leverage AI for lease comparison in commercial real estate

Lease comparison should be a critical process in commercial real estate (CRE), ensuring stakeholders—from brokers to asset managers—can make informed decisions.

However, manually it is time-consuming given that most commercial leases run into hundreds of pages. And given the bespoke legal and real estate language it's prone to human error. As a result, unless it's required for critical workflows real estate professionals skip it and end up with costly mistakes.

GenAI has been a complete gamechanger. Leveraging it correctly not only does the process become faster, it's more accurate and scalable.

Let’s explore how different CRE professionals should utilize lease comparison and how AI is revolutionizing the process.

How Different CRE Professionals Use Lease Comparison

1. Brokers (Leasing & Capital Markets)

• Negotiation & Deal Structuring: Brokers compare LOIs ( Letter or Intents)  with final lease agreements to ensure key business terms remain favorable.

• Market Benchmarking: Comparing lease terms across portfolios to provide clients with competitive market insights. For instance the leases across  buildings of a landlord in a market can be compared to identify typical tenant improvement allowances, rent abatements and options granted by the landlord.

  
  

• Closing Deals Faster: Rapid lease abstraction helps brokers identify discrepancies and add value as an advisor to negotiate amendments.

2. Acquisitions & Investment Teams

• Due Diligence: Reviewing executed leases against offering memorandums (OMs) to validate financial assumptions. Oftentimes risks like missing lease renewals and therefore vacancy loss can only be established by scrutinizing each of the leases closely as they may not be disclosed in the offering memorandums.
  
  

• Underwriting Accuracy: Ensuring rent escalations, renewal options, and concessions align with pro forma expectations. Lending professionals have to spend days reviewing leases for these details for a single loan application

  
  

• Portfolio Comparison: Evaluating lease structures across properties to assess investment risk and return potential. Whether you are refinancing or evaluating capital improvements to refurbish the building, to accurately project net operating income, a portfolio wide lease assessment becomes crucial.

3. Asset Managers

• Performance Optimization: Comparing lease agreements to market standards to maximize NOI. At any given time, an average of 20% of the portfolio is being negotiated for new leases. With dynamic market conditions it is imperative that asset managers balance vacancy loss and NOI with the best lease terms.
  
  

• Risk Management: Identifying inconsistencies between executed leases and tenant obligations. No two leases are alike. In one there may be a cap on pass through operating expenses and in another none. Staying on top of all the clauses that have an impact on the financial risks is vital.
  
  

• Lease Renewal & Restructuring: Evaluating existing leases against new market conditions to renegotiate renewals on better terms or structuring them to be favorable over the course of the lease term

4. Commercial Tenants

• Negotiation Power: Comparing their leases against current industry standards to avoid unfavorable clauses. For instance, the office market  pre-pandemic looks very different from post-pandemic.
  
  

• Expense Auditing: Ensuring CAM charges, escalation clauses, and pass-through expenses are accurate. An average tenant overpays 6-10% due to human errors in lease abstraction. For an enterprise tenant, this could amount to millions of dollars across their entire portfolio over the lease term! Reviewing leases when the operating expenses statement arrives, prevents that.
  
  

• Expansion Planning: Analyzing lease terms to optimize multi-location leasing strategies. In retail that could mean evaluation of percentage rent and co-tenancies across the breadth and width of all locations in a market which is not a small task.

Common Lease Comparisons & What to Keep in Mind

1. Lease vs. Amendment
   

   • Ensure amendments align with the original lease intent.
     
     

   • Identify changes in rent, term length, and responsibilities. The continuity of dates and consistency of escalations and options is key.
     
     

2. LOI vs. Lease
   

   • Verify negotiated terms match final lease terms.
     
     

   • Spot any additions or unfavorable modifications due to change in language as a lease is much longer than the LOI.
     
     

3. Lease Draft vs. Standard Lease
   

   • Ensure compliance with internal leasing policies and standards.
     
     

   • Flag deviations that could impact liabilities, cash flow and debt convenance.
     
     

4. Executed Lease vs. Offering Memorandum (OM)
   

   • Validate income assumptions in investment analysis.
     
     

   • Cross-check lease expirations, renewal options, concessions and sublease/assignment rights and escape clauses of cancel/break options.
     
     

5. Translating & Comparing Leases Across Regions
   

   • Consider jurisdictional differences in lease structures. European leases rely heavily on health index for escalation clauses and dilapidation costs are common unlike the US
     
     

   • Standardize financial metrics of that nature for accurate comparisons in terms of opex and capex costs or income from a lease.

How AI is Revolutionizing Lease Comparison

AI-powered lease analysis tools are transforming the lease comparison process by automating extraction, normalization, and analysis of lease data. Here’s how AI makes a difference:

1. Automated Data Extraction

AI can instantly extract key lease terms, including base rent, escalations, tenant obligations, and renewal options, eliminating manual review errors.

2. Intelligent Lease Normalization

Different leases use varied terminology. AI-driven tools standardize lease clauses across documents, making comparisons seamless.

3. Rapid Discrepancy Detection

AI highlights inconsistencies between documents, such as changes in rent schedules or missing clauses, ensuring transparency in negotiations.

4. AI Lease Translation & Comparison

Global investors and tenants benefit from AI lease translation with contextual translation of real estate language not literal, allowing easy cross-border lease comparisons.

5. AI-Powered Benchmarking

Machine learning models can compare leases to market standards, flagging potential risks and opportunities.

How to Implement AI in Lease Comparison

1. Define Key Comparison Metrics: Identify critical terms and clauses to track based on your role (e.g., rent escalations for asset managers, lease expirations for acquisition teams).
   
   

2. Choose AI-Powered Lease Analysis Tools: Platforms leveraging NLP (Natural Language Processing) and machine learning can extract and compare lease data from standard contracts. However if you are looking for in depth intelligence from unstructured lease documents GenAI choices like Bryckel AI can be more effective.
   
   

3. Integrate AI with Existing Workflows: Connect AI tools to lease management systems, financial models, and document repositories for seamless lease comparison.
   
   

4. Validate AI Insights with Human Oversight: While AI enhances speed and accuracy, it may miss complex nuances. Always have experienced professionals in the loop to ensure contextual nuances are accounted for.

Conclusion

Lease comparison is no longer a tedious, manual process. AI is making it faster, smarter, and more reliable—giving CRE professionals the power to make data-driven decisions with confidence.

Whether you're a broker closing deals, an investor underwriting assets, or an asset manager optimizing portfolios, AI-powered lease analysis is the future.