Smart Buildings

3 New Rules of Real Estate: Information, Information, Information

Traditionally, the most fundamental rule of commercial real estate (CRE) is location. However, while being close to customers, suppliers and employees remains an important factor, there is a newer and increasingly significant consideration for CRE in the modern age - Information. This shift within CRE has been underway for a decade or so with the growth of online shopping and web-based businesses pulling us away from the traditional consumer model. The Internet of Things (IoT) is now fostering new avenues of value creation for customers, greater differentiation from competitors, and fresh sources of revenue for CRE through the collection and use of information. IoT applications have the obvious ability to increase profits though greater efficiency in building operations, but also to enhance tenant relationships by adding services that improve the building’s user experience. Consider smart thermostats, which give the tenant the ability to perfectly adjust temperature, humidity, and light based on personal preferences, climatic conditions […]

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Traditionally, the most fundamental rule of commercial real estate (CRE) is location. However, while being close to customers, suppliers and employees remains an important factor, there is a newer and increasingly significant consideration for CRE in the modern age - Information.

This shift within CRE has been underway for a decade or so with the growth of online shopping and web-based businesses pulling us away from the traditional consumer model. The Internet of Things (IoT) is now fostering new avenues of value creation for customers, greater differentiation from competitors, and fresh sources of revenue for CRE through the collection and use of information.

Commercial Real Estate

IoT applications have the obvious ability to increase profits though greater efficiency in building operations, but also to enhance tenant relationships by adding services that improve the building’s user experience. Consider smart thermostats, which give the tenant the ability to perfectly adjust temperature, humidity, and light based on personal preferences, climatic conditions and optimum settings for productivity. Smart thermostats also, depending on settings of course, increase efficiency by making users aware of wasted energy and making it easier for them to reduce it.

CRE firms have long been installing sensors and automating actions, with a primary objective of realising the cost savings from operational efficiency and improved energy management through building automation systems (BAS). However, “with the introduction of IP Networked products across many of the services, improved solutions have been made possible”, stated a recent Memoori report. “With the advent of IoT we now have the capability to join “things” together more efficiently and cost effectively in a building. Creating the Building Internet of Things (BIoT)”, explained the report entitled ‘The Transformation of BAS into the Building Internet of Things’.

IoT-enabled BMS can be used to optimise energy use, and also to reduce repair and maintenance, as well as administrative costs. For example, building owners can use the data collected by motion and occupancy sensors at a building level to regulate air-conditioning and lighting in real time, thereby reducing energy costs and optimising the internal environment for its unique and intended purposes. CRE companies can also offer clear value to tenants, since the system could lead to lower energy bills.

“Especially in large sites, such as industrial zones, office parks, shopping malls, airports or seaports, IoT can help reduce the cost of energy, spatial management and building maintenance by up to 30%”, claims Bettina Tratz-Ryan, research vice president at Gartner Inc.

Through continuous monitoring, using the predictive capability of IoT-enabled buildings, owners can also pre-empt a repair or maintenance issue by enabling a building operator to pursue corrective action before a problem manifests. A survey by Johnson Controls for its Building Efficiency Panel, found that 70% of respondents believed the ability to predict and diagnose problems and provide or propose solutions would be a “game changer”.

With regard to energy, increased IoT adoption can enable more comprehensive, real-time monitoring of any device that consumes energy. In addition, IoT-enabled buildings promote better connectivity with the smart grid, allowing power utilities to enhance the efficiency of energy distribution and conservation. “Energy and buildings markets are beginning the tricky process of harmonisation as major global firms look to capitalise on opportunities surrounding smart grids and distributed energy”, suggested our report ‘Smart Buildings Meet the Smart Grid’ released earlier this month.

However, the IoT in buildings, or BIoT, goes far beyond energy and maintenance. In offices the modern workforce will demand, and function best within, such intelligent workspaces. It will therefore be the buildings who evolve first that will attract the best talent. If smarter offices attract smart employees, then smarter buildings should be able to command higher rental yields from their space than other buildings with similar locations.

IoT-enabled buildings can also improve security both in terms of preventing breaches and ease of access. The use of video surveillance and biometrics not only improves security but plays well into other building services, such as occupancy monitoring and fire safty. “BIoT should make building security’s convergence with the Business Enterprise and integration with other building automation services a practical proposition”, predicts our most recent ‘Physical Security Business’ report.

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Furthermore, the data itself could be a viable revenue stream. For example, data on the movement of people within a building can potentially be sold to advertisers or urban planners to aid decision-making. In retail real estate owners could collect and analyse end-customer demography, movement and even purchasing data and sell it directly to their tenants. We could even see CRE firms selling building performance information to institutional investors, allowing them to make informed investment decisions.

For the world of commercial real estate, the value created from the information generated by IoT-enabled buildings has the potential to broaden the opportunities for value creation far beyond location and on to a point of efficiency and effectiveness that could truly distinguish buildings within a marketplace from a pure desirability and profitability standpoint.

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