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3 Reasons Why Smart Owners are Investing in Smart Buildings

In today’s connected world, everything from watches to refrigerators is smart and getting smarter. Real estate is no exception.

Talk of so-called “smart” buildings first emerged in commercial real estate more than a decade ago. These buildings are known for their state-of-the-art systems that are integrated into motion-controlled light sensors, security key card access, fire safety, and more. Today, it is clear that such smart buildings are becoming more prevalent, as more capital flows into the technology.

What is considered smart?

Smart buildings are somewhat loosely defined. Think of the differences that exist between an iPhone 4 and iPhone 6s. Both are technically smart phones, but each version gets a little better, faster, smarter. The same is true with smart buildings. There is a wide range of capabilities supported by innovative technologies that are constantly evolving.

Real estate is continuing to shake its image as an “old school” industry and is embracing network connectivity or the Internet of Things (IoT) to do a variety of tasks automatically. IoT typically refers to the connectivity of physical objects — such as light switches and thermostats — that are embedded with electronics, software, or sensors that collect and exchange data. Smart buildings can leverage that IoT to perform a variety of functions, such as:

  • Monitoring equipment performance
  • Detecting inefficiencies
  • Managing routine maintenance
  • Conducting diagnostic checks
  • Making automatic adjustments
  • Issuing alerts to problems or changes
  • Capturing data for building analytics and benchmarking

Studies have shown that more property owners are installing “smart solutions” into all parts of their portfolio. A forecast by IDC Energy Insights predicts that global investment in intelligent building systems will triple from the $5.5 billion spent in 2012 to an anticipated $18.1 billion by 2017, according to a report on Smart Buildings: High Performance Real Estate.

Why go smart?

There are a number of incentives compelling owners to adopt smart technologies. Smart solutions help to deliver greater efficiencies, reduce costs, improve operational performance, enhance the value of a property, and reduce risks from equipment failure.

Better Data: Most of these advantages are driven by data — data that can be used to enhance building usage and performance, and forecast for future developments. Owners access powerful analytics for individual assets or entire portfolios to collect and analyze key performance metrics and conduct benchmarking on property performance. This data can also be combined with other information — like leasing or tenant data — to make smarter leasing decisions.

Energy Efficiency: Another key driver behind the rise of smart buildings has been the keen focus on energy efficiency. The growing momentum behind sustainability and LEED building standards has helped to further the cause for smart buildings as a number of the smart tools developed focus on monitoring and reducing a building’s use of natural resources. Certainly, owners are motivated by a desire to “do the right thing” by helping to lower energy consumption and reduce emissions that can be harmful to the plant. In addition, there is more documentation that investment in these energy efficient controls also delivers tangible ROI. According to JLL, owners can expect energy efficiency to improve 15 to 20 percent in the first year – even in buildings that already have strong energy management programs in place.

Tenant Requests: Advanced technology is also a big selling point to today’s tenants. Many tenants are drawn to buildings that allow them to control temperature or lights automatically or remotely. It also affords them opportunity to be more creative about how they respond to system failures or staff maintenance teams.

The path ahead

There is no question that the future for smart buildings is continuing to move forward at a rapid pace. It also is a future that is expanding beyond individual buildings as corporate owners and investors look to smart technology to manage larger real estate portfolios. Such connectivity is poised to take an even bigger step forward as major metros around the world develop their own master plans for creating “smart cities.”

These urban environments promote connectivity among city-wide systems such as telecommunications, transportation and utilities to better manage core functions and drive their own efficiencies in today’s competitive global market. Ultimately, smart buildings could help drive transformative change across the real estate industry and play an integral role in achieving that broader vision.

Billy Fink
Billy Fink
Billy Fink is a former member of the VTS team.
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