Beyond energy savings, unlocking the true potential of smart buildings
The term ‘smart building’ has been floating around for quite some time now. The primary driver for smart buildings’ adoption in recent years has been energy cost savings. In the United States, commercial buildings account for 40% of total energy consumption; 38% of CO2 emissions and 71% of electricity consumptions[1]. Smart buildings can help reduce total energy costs by more than $25 billion annually in the US.
The smart buildings of the past were enabled by costly building management systems (BMS) that cost $2-$3 per sq. foot[2] of the building to install, and the ROI can be a few years. Integrated security and safety systems as well as IoT-based automation are projected to grow the market for smart buildings from an estimated $7.42 billion in 2017 to $31.74 billion by 2022, at a Compound Annual Growth Rate (CAGR) of 33.7% during the period forecast period from 2017 to 2022[3]. Another piece of research, Building Management System Market Global Forecast to 2023 says the building management system (BMS) market was valued at $6.65 billion in 2016 and is expected to reach $19.25 billion by 2023, at a CAGR of 16.71% between 2017 and 2023[4].
However, I believe that the emphasis on energy savings and BMS is just scratching the surface of smart buildings’ capabilities. To be a truly smart building, the structure should be engineered to improve the productivity of people and systems by understanding its occupants and what resources do they expect to access while delivering actionable intelligence to help make better decisions and be more efficient and sustainable.
In my opinion, a truly smart building has the ability to change the value parameters in the commercial real estate (CRE) market from importance of location to the capabilities of a building. The property owners and managers will look to create value through differentiation and deliver premium experience for their tenants.
Property owners can act on intelligence obtained from knowledge of occupants of the building over time to predictively manage HVAC and lighting systems and reduce operating costs and optimize inside environment. According to Gartner, the cost of energy, spatial management and maintenance can be reduced by up to 30%[5]. Proactive maintenance by building managers can enhance the experience for the building tenants.
Through technology partnerships, system integrators will bolster their portfolio by offering a variety of smart solutions for the building. These solutions will include a seamless experience from parking garages, life and safety systems and HVAC systems to shared services that rely on sharing economy while increasing security posture of the building.
Building tenants will choose a building because it enables seamless experience for their employees, visitors and contractors. Tenants will look for buildings where they can understand the true utilization of the space by their employees and allow them to tweak the rented space without compromising the security. Also, spaces that allow sharing of resources such as printing, cafeteria access, audio/ video conferencing will be preferred by tenants as they look to optimize their operating expenses.
Finally, for employees the premium individualized experience delivered by the building and workspace will be important. Buildings designed to increase productivity and wellness will be an easy sell for the employees. Work will transform into consumer experience, and talent will choose the employer based on experience.
In conclusion, the buildings that are aware of their occupants and understand what resources will be used by the occupants and deliver actionable intelligence to building managers while delivering seamless premium experience for their tenants will certainly have an edge in CRE going forward.
[1] Source: Siemens “Sustainable Solutions for Commercial Real Estate”
[2] Source: Siemens/ Candi Controls/ Kilroy Realty
[3] Zion Market Research
[4] Occams Business Research & Consulting
[5] Gartner, “Gartner Says Smart Cities Will Use 1.6 Billion Connected Things In 2016,”