Early Adopters of Smart Building Technology Will Have the Advantage
As CRE leaders begin to leverage technology to maximize profits, smooth operations and delight tenants, a less progressive perception still lingers. In a panel discussion offered at the Realcomm conference in San Diego last month, a comment from one of the presenters sent an uncomfortable wave of chuckles rippling through the room. Addressing the group of commercial and corporate real estate and technology professionals, the presenter declared, “We’re changing, and it’s not a decision. We don’t want to be Luddites 15 years from now, making horse carriages.”
The comment was made in reference to the force of innovation and change in commercial real estate, and how typically slow the industry is to adopt new ways of thinking. As you know, the Luddites were a 19th century labor group that protested the introduction of technology for fear their skills would be replaced by machines.
According to a Navigant research study commissioned by ENTOUCH, a provider of smart building solutions and managed services to multi-site companies across North America, smart building technology investments are beginning to gain momentum. Revenues generated from the sale of commercial IoT devices, a core technology used in smart buildings, are projected to rise at a compound annual growth rate (CAGR) of 8.2 percent over the next 10 years.
Still, CRE executives remain cautious. As one Navigant survey respondent and president of an international CRE services firm put it, "Change is so dramatic, and fear of the unknown is real."
Expert panelists at Realcomm corroborated the notion, citing a less than three percent adoption rate of smart building technology among CRE enterprises, despite CRE staking a 14 percent share of gross domestic product. One panelist went so far as to suggest that venture capital investments have been “more aggressive in cannabis” stocks than in CRE technology.
So what is the hold up? Could it be “success?” The suggestion of one Realcomm executive was, “Yes, we’re a skeptical bunch, because we’re successful.” CRE companies have made money consistently over many decades, so what’s there to change?
Study Shows Industry Prime for Change
The Navigant study suggests there is much to change, and it is benefiting the early movers in surprisingly short order. Historically, the CRE business has centered on conducting transactions, writing lease and sales contracts, and supporting tenants through siloed facilities management and business services. However, a powerful new consumer group known as millennials is now challenging this status quo. They bring a new set of expectations to the negotiating table, desiring a technology-enabled experience at work and at home, delivered in an eco-friendly and sustainable manner. And, they can be no longer be marginalized or ignored. A recent Brookings report predicted that Millennials will make up nearly 75% of the workforce by 2025. Long-term revenue growth and profitability will depend on satisfying this dominant and increasingly influential demographic.
To leverage this market dynamic – and more importantly, to avoid being perceived as irrelevant – CRE decision-makers must agree to adopt smart technology, and then acquire the technical resources to integrate it into existing systems. It’s not just about deploying technology for technology’s sake. It’s about improving the business and sustaining success well into the future.
As one survey participant put it, “A building is a building. They have changed very little. But, experience and use has changed significantly, and we need to understand that.”
For an industry that prides itself on long-standing success, the best place to start is by examining how technology can achieve fundamental business goals. Three key priorities are well worth examining:
- Maximize Profit: Making the most out of every lease and sale is what defines CRE success. The fact is, millennial executives will go the extra mile to set up shop in a building that supports a tech-enabled workspace and protects the environment. Because of this, smart buildings retain tenants longer and sell for higher profits. In light of this, the market for global building energy management systems (BEMS) is expected to grow to $5.2 billion by 2020, at a CAGR of 17 percent from 2017.
- Optimize Management: Reactive equipment repair and maintenance is expensive. Boots on the ground and truck rolls eat up CRE profits fast. Conversely, smart buildings promote proactive maintenance. Using real-time data, smart building managers cut cost by recognizing problems before they get out of hand. This reduces the number of truck rolls and improves long-term decisions relative to equipment investment and replacement.
- Increase Tenant Satisfaction: Strong landlord-tenant interaction breeds loyalty which breeds tenant retention. Smart buildings facilitate the interaction by responding to tenant needs, supporting both an integrated, technology-enabled workplace and conscientious energy management practices. With smart building solutions in place, landlords can achieve:
The “D” Word No Longer a Threat
- Dynamic lighting and HVAC control for improved tenant comfort.
- Proactive, responsive facilities management using real-time information delivered via IoT technology.
- Significant reductions in energy consumption for a more attractive brand and healthier bottom line.
- Dynamic lighting and HVAC control for improved tenant comfort.
So, if smart building technology can really support all that, why aren’t more CRE firms jumping into the smart building pool?
The answer may be that, historically, smart building technology has presented mostly point solutions on the way to a patchwork version of nirvana. One HVAC remote monitoring solution gets deployed here, followed by a lighting control system deployed there, leading to a separate security sensor system deployed somewhere else. In short order, more chaotic disruption is created than cohesion, amounting to what one Realcomm panelist labeled “the D word,” anathema to CRE executives everywhere.
The good news is smart building technology has evolved appreciably. Advances in technology and partnerships among technology companies have addressed much of the patchwork problem. And, with proven cloud-based Software as a Service (SaaS) now an accepted reality, the cost to incrementally implement a program has dropped dramatically, eliminating upfront capital costs and paving the way for adoption by subscription service.
To quote Navigant Research, “IoT smart building systems represent a coordination of technologies and advisory services that create a new infrastructure in commercial buildings to enable the changes in processes and the benefits described above.”
Namely, information technology, a core driver in the IoT movement, serves to facilitate system integration, networking, communications, and data management. It effectively collects and communicates actionable information from building systems, including legacy systems, to CRE stakeholders, for improved analytics and proactive facilities management.
As well, the pressure for CRE firms to technically staff up is no longer a table stake. Outsourced advisory services have bridged the gap, allowing CRE executives to focus on what they do best, while trained professionals provide 24/7 vigil over critical systems.
This combined IoT platform now offers CRE firms the technical expertise, integrated technology and single version of truth required to effectively manage equipment, reduce energy consumption, improve tenant service, differentiate in a crowded marketplace and supercharge the bottom line.
An Industry on the Brink of a Breakthrough
In all fairness, CRE executives today do not deserve the Luddite label. Luddites, after all, marched against and destroyed the technology they so feared. Conversely, the CRE world is actively seeking new input and embracing smart building technology with great interest.
As the record turnout for Realcomm’s technology panel recently demonstrated, today’s CRE industry is ready for a new injection of success. And smart building technology is providing it. Wherever there is a way to maximize profits, optimize management and increase tenant satisfaction, you can be sure CRE leaders will be leading the charge.
This Week’s Sponsor
ENTOUCH provides smart building solutions and managed services to multisite retailers, restaurants and commercial real estate firms across North America. With fully integrated, cloud-based software and sensors, and 24/7 advisory services and support, ENTOUCH renders a 360°, enterprise-wide view of the entire facility ecosystem. Leveraging ENTOUCH facilities professionals gain real-time decision support to lower energy consumption, improve business efficiency, extend asset life and create a more satisfying tenant and end user experience. To learn more, visit https://entouchcontrols.com/
UPCOMING REALCOMM WEBINARS
Commercial Real Estate Digital Transformation - Managing the Change - 1/18/2018
The Commercial Real Estate and the Technology industries operate at very different speeds. Real estate is long-term, slow moving, and relies on practices that have been refined over the last 50 years. Tech, on the other hand, moves at lightning speed with constant updates and innovation. This webinar will focus on the extraordinary change management required to digitally transform a commercial real estate organization. Executive sponsorship, accelerated collaboration, dual strategies and other programs that will best enable this transformation will be addressed. In addition to operational changes impacted by tech, the webinar will also cover tech’s influences on other industries’ business models and how that affects the way we use space.
Founder of Realcomm Conference Group, an education organization that produces Realcomm, IBcon and CoRE Tech, the world's leading conferences on technology, automated business solutions, intelligent buildings and energy efficiency for the commercial and corporate real estate industry. As CEO, Jim interacts with some of the largest companies globally pertaining to some of the most advanced and progressive next generation real estate projects under development.
Bob Rybak Is the CIO at Morguard, a leading Real Estate Investment and Property Management firm based in Toronto, Canada. Bob has been an IT professional, entrepreneur and frequent consultant for almost three decades, working in both the public and private sectors. A graduate of the University of Toronto with a degree in Mechanical Engineering, Bob's professional experience has spanned many different companies in a wide range of industries.
Sandy Jacolow joined Silverstein Properties in 2011 as Chief Information Officer, a role in which he oversees the technology initiatives that support the company's financial, operations and development, including the World Trade Center, and Silver Suites activities. Sandy has been active in the real estate industry for nearly 35 years with a focus on the institutional advisory, property management and brokerage markets.
Alex Stanton has over 20 years working with in the real estate application space. Currently as VP of Solution Consulting for Yardi Systems, he leads the solution presales team, who work with customers and prospects to explore how to address business needs. Alex’s recent areas of focus has been to work with clients on the real estate specific applications of cloud, mobile, 'big data' and energy.
Marc Petock is a pioneer in leading the Intelligent/Smart Buildings and M2M movements pushing the industry forward and has contributed to transforming and changing the Intelligent Buildings and M2M (now IoT) industries. As VP, Marketing for both Lynxspring and its sister company, Connexx Energy, heleads corporate and product marketing, strategy, brand management, PR and communications that support the company’s strategic and growth initiatives. Previously, Marc was VP, Global Marketing and Communications at Tridium. Marc is also a contributing author, noted speaker and recognized industry leader having earned several industry accolades. He serves on the board of directors of Connexx Energy and Project Haystack; is an advisor to the Realcomm and a contributing editor to automatedbuildings.com.
Dave Clute has been AEC/FM/IT Design Professional for over 35 years. He spent 10 years at Cisco Systems and 5 years at Zurich Insurance before he joined ESD in 2017. Dave is currently leading the Intelligent Building Practice for ESD Global.
Scott Sidman has 14 years of CRE technology experience leading sales and marketing efforts. He is responsible for supporting company growth goals and assuring company and product direction aligns with market needs as well as leads. Scott is CRE tech evangelist and host of a CRE Tech Talks podcast.