In 2020, 75% of real estate executives anticipated that smart buildings would become the norm within five years. Now, almost three years after the announcement, many CRE professionals still struggle to incorporate these tools into their overall building strategy…and that is becoming a problem.
First things first…
What is a Smart Building?
Before we dive into why the slow adoption of smart building technology is a problem, let’s define what it is. A smart building is a facility connected by technology. These buildings have systems like regular buildings — access control, utility meters, HVAC, etc. — except they are connected by a network signal. Though the type of technology installed in a smart building depends on the needs of the property team, each piece of equipment has something in common (cue the royal music and pull back the curtains): they all belong to the Internet of Things (IoT).
The term IoT refers to a network of connected devices (access control, HVAC, utility meters, BMS, etc.) that communicates with each other. A robust IoT framework makes a smart building function seamlessly and the duties of the property team easier. Though these devices do not need to be connected through the public internet, they must be connected either wirelessly or hardwired.
Why Care About Smart Buildings?
With 48% percent of commercial real estate firms in North America planning to increase tech spending in 2023, failing to invest in technology could be short-sighted. “Real estate firms with the flexibility and risk appetite within the current environment can get ahead by exploring how technology can unlock potential in the long term,” stated a proptech study by Deloitte.
But is proptech really worth the investment? Are smart buildings just a fad or are they here to stay? Indications suggest the latter. According to Allied Market Research, in 2021, the smart building market was valued at $69.8 billion and is estimated to grow to $201.2 billion by 2031. Additionally, there is good reason to believe that the smart building is more than a trend…actually, there are three good reasons.
Why are Smart Buildings Becoming More Popular?
Multiple events ratcheted up the need for smart building technology, among these were COVID-19, tenant demand, energy regulations, and the improvement of technology.
Let’s start with COVID-19 and tenant demand. During the pandemic, tenants adopted hybrid and remote working as an alternative to expensive leases. As of June 2022, 58% of people were still working away from the office, which often signals office downsizing or lease nonrenewal. Consequently, enticing new customers has become a higher priority for property teams. Building updates with new amenities have worked for some, while others are taking serious steps to establish environmental, social and governance (ESG) initiatives.
Secondly, state governments have begun mandating more energy efficiency in CRE operations. For example, California’s Title 24, Washington’s C409 and NYC Local Law 88 all make submetering mandatory in buildings of a certain size. Considerable tenant demand for ESG initiatives, like becoming LEED certified, is also on the rise.
The final factor spurring this transformation is the rapid improvement of proptech technology. At its core, smart building technology helps property teams automate their processes. It removes unnecessary steps and makes everybody more efficient. Data can be collected, formatted and shared on the fly, on-site or remotely. Teams are finding that they can get more accomplished with less. Among these changes is the move from separate, isolated on-premises systems to a unified cloud-based solution.
But to understand just how useful property technology can be, it’s important to look at specific use cases. Here are some to help you get started.
Cloud-based Access Control
One of the newest and most widely discussed areas of CRE technology is access control. Access control is used to regulate who enters a building. Access privileges are granted to employees with the various credentials, like key cards, smartphones, key fobs and more.
Traditionally, physical access control was relegated to the building’s security team. However, as cyber technology began being integrated with physical security, much of access control duties now fall upon the IT professionals.
Currently, another change is happening—cloud-based access control systems are replacing on-premises systems. With cloud-based access control, property teams and tenants can provision credentials like smartphones or key cards quickly. Instead of collecting the key, a system administrator can add or remove a user. The magic of all this is that it can be done remotely. Various property managers demonstrated the success of this workflow during the pandemic. When a company made a new hire who required access to the building, the property manager could remotely access a software portal and add the new user, even if working from home.
To sweeten the deal, some cloud-based access control solutions provide tenant portals. These can sync credentials at the building level with those at the suite level. If Alex, an employee of a law firm, quits, then the law firm’s IT administrator can remove Alex from both the building and suite. With a traditional system, a work order would have been filled out and sent to the property team to remove Alex at the building level.
Integrations, Security and Features
Cloud-based access control saves time, money and adds security to the tenant and building experience. Unlike their on-premises predecessors, cloud-based API integrations can be instantly deployed by software manufacturers.
For example, if a tenant wants to connect their notification system (e.g., Microsoft Teams or Slack) with their door access control system in order to receive notifications every time a door opens, it can be done as simply as by entering an API key (i.e., a string of numbers) in the access control platform.
Likewise, when new cyber threats occur or new features are released, physical access control providers can quickly deploy them. whereas on-premises providers are less nimble, take a long time to fix and need to be done on-site.
Submeter Billing and Big Data
As discussed earlier, monitoring energy usage is becoming increasingly important in order to meet ESG and sustainability demands. In the Johnson Controls Energy Efficiency Indicator Survey, 62% of commercial organizations expect to increase investments in energy efficiency, renewable energy or smart building technology in 2023. This is an indicator that property teams are adjusting in order to meet tenant sustainability and ESG demands. Deloitte found that most CRE organizations plan to start incorporating ESG data over the next year or two. But how is this data being accurately measured?
It all comes down to the analytics tools used to gather building information. Advanced software can help teams set baseline measurements using key performance indicator (KPI) charts. Consumption graphs give precise measurements as much as once every fifteen minutes. With these tools, building teams and tenants can better keep track of and collaborate on plans to scale back their energy usage.
If going “all in” on an analytics plan sounds daunting, consider taking steps to automate your submetering practices. Instead of having building engineers record calculations manually on paper spreadsheets, they can use mobile phones to take meter reads, and upload them to the cloud-based software. Some software manufacturers make their solutions compatible with both networked and non-networked meters. A few offer submeter billing to take even more work off your plate.
Another area to consider automating is heating and cooling. The HVAC industry has experienced rapid changes over the past year that have pushed professionals and manufacturers to rethink how they approach sustainability.
The Johnson Controls study previously mentioned that more than a third of respondents plan to replace fossil fuel heating equipment with heat pump technology by the end of the year. This is a 7% increase from 2021. Hydronic heat pumps are an energy-efficient alternative that can replace boilers to help reduce carbon emissions.
Additionally, property teams and tenants can benefit from on-demand HVAC usage. Instead of heating and cooling an empty building, tenants can request air, via an app, for the times they will need it. This eliminates costly work orders, expedites the process of fulfilling heating and cooling requests and lowers energy consumption.
While smart building renovations take time and money, the CRE industry is clearly heading in that direction. Property owners and managers should prioritize the technology that will most serve them and their tenants. Make sure to thoroughly vet any technology provider, keeping in mind their customer support and implementation processes. These factors can be the difference between a smooth smart building and one that is more troublesome than it’s worth. With changes in tenant demand, technology, and energy regulations, now is the time to begin your smart building journey.