5 Trends Helping Drive Smart Building Adoption

The opportunity for smart buildings is clear. But for many firms, harnessing it requires a better understanding of real estate trends.

The opportunity for smart buildings is clear. From The Edge in Amsterdam to the RBC WaterPark Place in Toronto, smart buildings across the globe are delivering a better occupant and operating experience. Moreover, there is data that links green building certification to higher rents and property values.

McKinsey, which has analyzed the market opportunity for the internet of things (IOT) in many different industries, predicts there will be between $70 billion and $150 billion of value creation by 2025 within offices due to the IOT. Key areas of savings include a 25 percent reduction in maintenance costs and a 50 percent reduction in unplanned outages. Smart buildings will also increase revenue opportunities and enable the delivery of new business models.

Many startups understand and benefit from key technology trends. It is now easier to collect and analyze building data. We have nearly unlimited cloud data storage and analysis capabilities that are accessible to even the smallest startup. Additionally, inexpensive sensors have made their way into smart meters and can be deployed within LED lighting systems, among other form factors. There is an increasing volume of data about how buildings — and the underlying systems and equipment — are running.

But many firms in the smart building space haven’t adapted to the changing state of real estate, which has made it difficult for them to grow. A number of trends are changing the way we interact with our buildings, which require smart building vendors to rethink their business models and offerings.

GE Ventures, Shorenstein and Lawrence Berkeley National Lab will discuss how smart buildings and the latest developments in real estate are affecting building owners, operators and technology providers at the Grid Edge Innovation Summit, taking place June 20-21 in San Francisco. In the meantime, here are a few of the key real estate trends that will drive smart building adoption moving forward.

Rise of “as-a-service” in real estate

The “as-a-service” model was popularized by cloud-based software firms such as Salesforce, but is now being used throughout real estate. For example, co-working firms are popularizing workplace-as-a-service. Tenants no longer enter into long-term leases; they simply pay for the time they need an office and cancel when they no longer need the space. There also are energy-efficiency-as-a-service options, which have revised the energy performance contracting model to be shorter-term and more flexible.

The end result is similar: A building retrofit can be funded by the future reductions in energy cost. For some building types, there are also facility-management-as-a-service models that seek to standardize core offerings such as custodial service, repair/maintenance, trash pickup and snow removal, among others.

Technology plays a vital role in these models, because it enables sites and systems to be monitored remotely — reducing the on-site staff costs — and can increase utilization of the core inputs to deliver such services. A facility management technician may be able to service more sites if technology can provide data on real-world conditions. There is less time needed to visit sites and check systems manually.

The office as an innovation and collaboration enabler

Many companies are investing in their office space to improve employee collaboration and help support innovation. JLL’s 2017 Office Trends Report notes that 63 percent of companies using shared office space do so to increase team collaboration.

Technology is necessary to make shared spaces work — giving occupants knowledge of open spaces to work, helping these employees with wayfinding, and even using user-defined preferences to direct them to open work stations. If an employee likes natural light, a shared office space will be viewed more favorably if technology can direct the worker to an open desk near windows.

A renewed focus on space utilization and space analytics

CoreNet Global has cited a general decline in the average square footage per occupant in buildings. In 2010, each employee had an average of 225 feet. By 2013, this dropped to 150 feet. One way to effectively fit more people into a building is by collecting more information on which spaces are used (and which are not). There also are a number of technologies being deployed that provide real-time data on occupancy within buildings. This can include a count of people in a room or if a particular desk is occupied.

These data are valuable because many parts of an average office are underutilized, but it’s very difficult to know which rooms in particular are underused. CBRE has noted that globally, about 40 percent of offices are empty. Additionally, CBRE notes that there is a misalignment between the number of people attending most meetings and the size of conference rooms. In many cases, two- or three-person meetings are happening in six-, seven- or eight-person rooms. With better data or real utilization, some of these rooms could be subdivided.

Tenant demand for high-tech spaces

Similarly, there is increased demand for better occupant technology in offices. Tenants expect that their offices have modern, easy-to-use technology. In research published by Dell and Intel, 44 percent of office workers worldwide responded that their offices are not smart enough. Moreover, 57 percent of these survey respondents believe that within five years, they will be working in a smart office.

What’s more, younger employees would consider quitting a job due to lack of technology in the office. The concept of a smart office is nebulous, but many smart building technologies — which include better connectivity between systems, occupant-based control of some operational systems, and data analytics solutions to predict failures and other equipment issues — certainly fit into the occupant demands characterized by this survey.

Continued demand for green buildings

Green buildings, based on certifications like LEED, have become widespread. There is research that highlights the direct financial benefits of such certifications, including an increase in rental premiums and sale prices.

Additionally, the energy savings realized in green buildings also reduces operating costs. And healthy building certifications, such as Well and Fitwel, seek to standardize and ultimately provide data on the financial benefit of healthy buildings. Similarly, WiredScore, which certifies internet connectivity in offices, recently published research showing that buildings with better connectivity can capture higher rents. If a building has green, healthy and wired certifications, it is likely a few steps ahead of its peers in becoming a smart building.

Hear how smart buildings and these real estate trends are impacting leading building owners, operators and technology investors at the Grid Edge Innovation Summit. The panel, “The Past, Present and Future of Smart Buildings Vendors: Offerings, Positioning and Value Propositions,” features participants from GE Ventures, Shorenstein and Lawrence Berkeley National Lab. Join us as we discuss how these leading enterprises are investing in smart buildings and what you need to know about the rapidly growing space.