Intelligent Buildings or Smart Buildings are set to provide real tangible benefits to everyone involved in commercial property. The benefits will be seen in – higher occupancy, lower operating costs, accelerated decision making, higher rents for landlords and productivity increases for tenants.
A Smart Building is a commercial property that uses digital-based systems to have a positive impact on:
- The Tenants’ Experience; and
- Back Office operations of the building.
CBRE’s Director of Customer Experience, Shelley McDowell wants to go beyond intelligence and thinks of a building in terms of its emotional intelligence, “Even with the best technology platform or enablers, the experience in a commercial building can’t reach its potential without a sense of community.”
Shelley sees the importance of a building’s non-technical attributes, “Tapping into the humanity, the heart beat and connecting people with authenticity is what creates an environment where people do more than just check email and tick boxes.”
The Commercial Real Estate establishment, (including global giants Colliers, CBRE and Cushman Wakefield) has started to invest in Smart Buildings. Wework’s, smart building component, Space as a Service, has seen its valuation doubled to $40B US since our Wework article a couple of months’ ago.
Smart Buildings have evolved from simple energy efficiency to a much broader Asset Management objective.
There have been several developments leading to the Smart Building Evolution:
- Internet of Things (IoT) leads to more and more of a building’s objects having the ability to communicate and share information;
- Space as a Service (like Wework) that will build on the theme of smaller and smarter workspaces; and
- Artificial Intelligence (AI) will provide a technology layer that enables smarter predictive data, insights and automation.
There have been false starts for intelligent buildings in the past. These efforts failed because they were single point tactical solutions that did not address strategic big picture of deploying modern technology.
The label “Smart Building” won’t be around for long. Soon all modern buildings will be smart. Remember when our mobiles were called “Smartphones”. Smart Buildings will just become the norm.
Smart Building Challenges and Opportunities
The Commercial Real Estate industry is highly concentrated. The industry leaders in real estate have been successful in a pre-digital world. So why fix it if it ain’t broke? The real estate industry has been reluctant to take up technology for a number of reasons. Commercial property owners and technology companies operate in two completely different worlds. In contrast to the concentration of commercial real estate, the smart building technology industry is fragmented. Building operators think in terms of systems that last 30 years. Whereas Smart Building technologies are often obsolete by the time the building is built. Instead of “plug and play”, most Smart Building systems currently require an expensive installation and integration process. Energy cost reduction have set the scene for Smart Buildings. However, the business case remains a mismatch between those who benefit and those who bear the costs.
Issues with current systems in commercial properties that are being addressed and overcome by Smart Buildings:
- Outdated systems - Most access control systems are using old technology;
- Security risks - Current security systems carry large risks. For example, keycards can be passed on or copied
- Temporary Building Access – The building visitor process remains inefficient, especially for handling large volumes of people.
- Expensive installation, integration, and operation of legacy systems lock in a building to a particular vendor based on compatibility.
The JLL 3-30-300 Rule
The first generation of “Smart Building” solutions were based on energy that represented a cost of about $20 per square metre. The next stage of evolution unlocked value at the building level, impacting on rents that translated to about $200 per square metre. This evolution is now focused on unlocking the largest building expense – people. They can be priced at $2000 per square metre.
Real estate giant, JLL calls this their 3-30-300 rule (using US square feet), in which the cost of people translates to ten times the cost of rent which in turn is usually allocated ten times the budget spent on energy and utility bills. Thus the ultimate aim for Smart Buildings is using big data and analytics to extract information that will bring value to the end user, the tenant in the building.
A number of factors have come together to make the timing right for Smart Buildings.
- Increasing awareness of security - Upgrading the physical security improves cybersecurity.
- Regulation requirements - have led to allocated budgets for upgrading security.
- Changing workplace dynamics - The rise of co-working and increasing employee flexibility have resulted in large volumes of transient populations.
- Technological Innovations - A number of innovations have unlocked cost-effective solutions allowing more advanced access control offerings.
- Commercial Real Estate Leadership Paying Attention - With access controls in particular, real estate technology adoption is being driven by senior executives, rather than facilities managers.
The technology building blocks have matured and are ready to be deployed in commercial real estate.
- Sensors and Controls - The largest technology enabler has been the infrastructure rollout of sensors and controls
- Mobile Phones - can unlock your door, pay your bills, pre-validate your VIP identity before you walk into a building and tell you where to walk and who to meet;
- Real-time reporting – will be the outcome of the rise of sensor infrastructure to capture data, the ability to process large amounts of data, mobile-centric applications and complementary workflow solutions.
- Artificial Intelligence – is the capability to amass large volumes of historic data in a structured way to provide predictions for future decision-making. This is the key for monitoring the operational efficiency of Smart Buildings.
By building a sensor network that delivers real time information to building operators, Smart Buildings will only need to add a mobile app to engage commercial property occupants, directly with the building’s environmental control system. This will increase the tenant’s comfort and productivity, while decreasing the workload of the facilities manager. Feedback from tenants will create a building automation network that will learn and adapt to the preferences of its occupants.