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Real estate reaps smart technology paybacks

Open, convergent systems deliver data to inform and validate management decisions
Thursday, December 10, 2015
By Barbara Carss

Smart buildings could be characterized as a venue for colliding cultures as real estate moves away from a tradition of proprietary systems and IT takes on a growing role in operations. A seminar at last week’s PM Expo in Toronto even presented that theme in an energy management vs. building automation context, albeit largely as a teaser for a discussion of the broader linkage of technologies to deliver high-performance buildings.

“I think we’re at a point where it is no longer a conversation about a building automation system or an energy management system or about water management. It’s a conversation about the environment,” observed Chris Piché, a principal with the engineering and green design firm, Integral Group, and one of the seminar presenters.

Elsewhere at PM Expo, real estate owners/managers and IT service providers likewise explored how smart technology and innovation are transforming buildings, as part of a panel discussion sponsored by the Building Owners and Managers Association (BOMA) of Greater Toronto. They pointed to the efficiencies and savings that can come with real-time monitoring and operational responses, which also support asset value and competitiveness in the marketplace through enhanced ability to attract and retain tenants.

“I suspect the evolution of technology in our buildings is going to come rather quickly,” mused the discussion moderator, Lachlan MacQuarrie, vice president, real estate management, with Oxford Properties Group. “My advice would be: you probably don’t have as much time as you think you have.”

Network infrastructure figures prominently in the first steps to get open systems converged on a platform for collection, integration and dispersal of data. From there, it becomes something of a discovery process for data applications — ranging from the obvious, such as energy-use monitoring and verification, to the perhaps more esoteric.

Andy Schonberger, a business development engineer with Cisco Systems Canada, recounted how HR staff at Deloitte’s new Internet-of-Things-enabled headquarters in Amsterdam scrutinize data from coffee makers to gauge how much time employees are spending at offsite coffee shops. Or, from a regional mall manager’s perspective, heightened connectivity can improve logistics for patrons with the ancillary environmental benefits of reducing circling space-hunters in the parking lot.

“If we can connect available parking spaces to where people want to go in the building, I think we are addressing one of the pain spots of the shopping experience,” said David Giddings, director of real estate management, national programs, with Oxford Properties.

“The smart approach is getting that data so people can have a better experience,” concurred Robert Murchison, principal and co-founder of the consulting firm, IntelligentBuildings LLC. “Getting things open, no matter what you want to do, is fundamental.”

Returns, operational savings & tenant retention

As with other kinds of capital investment in high performance, proponents maintain the paybacks are abundant and relatively quick. Scott Collins, project executive, construction, with Bedrock Real Estate Services, a major commercial landlord in Detroit, traced his company’s evolving view of smart technology from an amenity that would help differentiate a building in the marketplace to a key management tool.

“We can diagnose the building real-time instead of being reactive, as we tend to be in real estate development,” he said. “Our philosophy is: technology leads; money follows. We see predictable paybacks in a year to two years.”

For example, Michigan’s electricity rate structure — which features on-peak and off-peak time-of-use pricing and applies a separate demand charge based on business customers’ highest consumption during the billing period — helps make the business case for greater flexibility to manage and shift peak demand. “I now have an interruptible meter across a 10-million-square-foot portfolio. That puts us in negotiating space [with the utility],” Collins noted.

Using Oxford Properties’ big-picture lens on retrofits, MacQuarrie placed smart technology investment in the context of overall building returns, with yields currently in the 5 to 6 per cent range with a 20-year payback. “If we are able to drive a 10-year payback that’s, candidly, accretive from the get-go,” he said.

Smart technology can fulfill tenants’ explicit demands for control of the space they occupy — also reducing heretofore inescapable ‘too hot; too cold’ complaints to building management — and meet more implicit expectations that the workplace should be able to keep pace with ubiquitous smartphone use and advancements.

“Your expectations of how you interact with an environment have changed,” Murchison theorized. “There’s just a need for a better mousetrap, and that can’t be done without technology.”

Savvy leasing teams are also pitching it as building-based support for tenants to conduct business faster, better and more cost-effectively. “The key is, we’ve enabled tenants by putting systems in,” Giddings said.

System choices & stakeholder buy-in

Investors in smart technology should probably expect a learning curve. Service providers advise that many of the puzzle pieces are readily in place since most building systems have convergence capability. Open protocols — such as those the Open Standards Consortium for Real Estate (OSCRE) have been leading and championing — are indelible to the process, while system vendors may need a nudge to accommodate convergence.

“Your vendors are all too aware of it. Some don’t necessarily want to advance it, but many are because they see this is the way to go,” Giddings said.

“Challenge the norm,” Collins added. “I think our company does a pretty good job of saying: I don’t believe that is the only way to do it.”

Training, staff buy-in and collaboration are also central to successful adoption. “When you start the journey on smartness, you need to start bringing all the stakeholders with you on the journey,” advised Bill MacGowan, director of Smart and Connected Real Estate with Cisco Systems Canada.

Casey Witkowicz, founder, president and CEO of the telecom infrastructure consulting firm, RYCOM Corporation, recommends owners/managers first determine what they want to achieve and then find the appropriate smart technology, which could be a small-scale cloud-based option initially. While many of the panellists’ examples pertained to large buildings or portfolios, he emphasized that smaller buildings can also be smart and can realize the same kinds of return on investment.

“The building blocks of smart really are not size dependent. Smart is not necessarily a thing. It’s a destination,” he said. “To start, I would keep it simple.”

Schonberger and Piché reiterated the importance of collaboration and the opportunity to reap greater insight from system integration in their presentation on smart technology’s building performance outcomes. Piché sees both a means to learn more from ongoing building operations, and a need to provide more support for operations and maintenance staff.

“We play marriage counsellor sometimes between facilities management and IT,” Schonberger quipped. “These skill sets need to be in-house. That means the IT and core business need to work together.”

Barbara Carss is editor-in-chief of Canadian Property Management.

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