Smart Buildings

#Podcast 26: Commercial Buildings Silent Majority!

In our Podcast series “Sh*t You Wish Your Building Did!”, Memoori explores the intersection between technology and commercial buildings through interesting conversations.

For Episode 26, we were joined by Stefan Schmidt from Meterz to Discuss Building Retrofitting and why it’s THE Smarter, more Sustainable Choice over New Construction!

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#26 Commercial Buildings Silent Majority!

Transcript of ‘Commercial Buildings Silent Majority!’

James: Hey Stefan from Meterz welcome to the Podcast!

Stefan: Hey James good to see you again!

James: Nice to see you too and of course thanks for coming along and having a discussion today and we wanted to talk about commercial buildings silent majority all those buildings that don’t get enough attention the ones that need retrofitting and I guess I wanted to start today by asking you you know about really defining well to start with to Define retrofit because I think it’s something that you know people think they fully understand it’s one of those words that gets used a lot but actually it’s can be different things to different people I mean you can talk retrofit refurbishment replacement renovation like I mean what does it mean to you.

Stefan: Yeah it’s a really good question I think there’s a lot of words that you say that get used interchangeably right um you know for me a a large refurbishment or retrofit is is something where you’re you know significantly altering the fabric of the building you’re exchanging services and doing quite quite a lot of capital works but equally you could have very light retrofit right you know you could be putting some paint on the walls and putting new carpet in and you know just kind of freshening up the space it’s probably one of the challenges in in defining that arena in its own right as as you say you know I do think people like to like to just push things around and say one to the other for the purpose of today can we um we use that as a kind of a large project you know where you’re taking an old building and you you know pulling out quite a lot of systems replacing a lot of the the building Fabric and therefore it is a sort of a significant refurb or or a significant retrofit of that asset.

James: Based on that then how should people think about the technology for retrofit I mean how is it different what kind of use cases like are preeminent um and what are the different approaches in your opinion?

Stefan: Yeah it’s It’s Tricky I mean the the reason that we’ve all moved into this retrofit arena is because it’s become too expensive to build new right and and that in its own right is is is off the back of kind of financial pressures as obvious as that is you know the interest rates going up sort of there being less less demand for certain types of buildings in particular offices it just means that there’s more scrutiny on the technology itself and fundamentally smart buildings technology has been very expensive you know up until now it’s been a new innovation I think there’s a lot of quite Hefty subscription contracts that different you know real estate companies or even outside of that you know Enterprise companies that own real estate of some subscription are are currently subscribed to and fundamentally they they require a lot of a lot of work and a lot of setup you know and we used to do um or in the previous life we used to do a lot of you know integration work and supervisor side of things look at it and it does you know genuinely become very apparent that it’s just labor that that is required to to connect the dots between systems and for many buildings it’s not it’s not really required right you know if I haven’t got a BMS system or I’ve got a very light touch controls technology I don’t necessarily need to pull all the data points out of that I might just want something which is a little bit a little bit simpler um and and now kind of with the um the additional scrutinies as I said on on the financials I think people are taking a step back and looking at where the ROI really is on some of those Technologies and and whether or not especially in some of these these retrofit projects which are perhaps more financially squeezed they need to be investing in the crema creme or or should be instead focused on some of the the core use cases that exist within the Building Technology space okay and what would some of those core use cases be well I mean I think the the standard stuff that’s always been in buildings remains relevant right I mean it’s a building is about as people so there needs to be a decent experience as you move through the space it needs to be comfortable you know it can’t be freezing or be filled with dust so I think those those components will will remain sustainability is also core right I mean Energy prices are still really high it’s a lot of investor and Regulatory pressure and a lot of building owners and operators to do something to to kind of decarbonize and I think that’s why those will remain the the sort of the core use cases and perhaps some of the the fancier ones you know the um the difficult ones to put a business case against will will fall by the wayside a little bit you I mean it’s interesting while I was um at wired score before one of the things that I thought would be really popular with the some of the occupiers that we’re working with was the occupancy data side yeah right and actually many of them were were parking that because while they collected a lot of occupancy data they didn’t necessarily have the best tools in their Arsenal to do much about it right I mean if you know your building’s half empty but you have a lease for the next 10 years the only thing you can do is cancel your lease right and and there there’s you know probably not that much technology can do to to support that or or deliver that end outcome so yeah I think there’s um there’s going to be a bit of a a whittling out and perhaps we’re already seeing that right I think there’s a lot of companies that are changing their their approach and and their marketing to focus back on those.

James: You mentioned this greater scrutiny on technology um do you think that applies to I mean to an extent as well to new construction I mean I mean yeah okay it’s a sort of bigger Capital project and budgets allocated for it but you know I you talk to assistance integrators as well and they they do talk about how you know a lot of um costs get engineered out right as you get towards completion

Stefan: yeah no absolutely I mean I think the um the large buildings that that do exist that have these these budget will go ahead still with quite pervasive technology deployments you know I mean you look around the um the core cities going back to wired score the smart score was deployed in all those major you know trophy asset projects because they had the money to go behind it and you know actually if you are developing new and buying all your you know building Control Systems off the shelf and and getting packages perhaps for certain providers to bring down the cost it’s a lot cheaper to implement that technology than it is if if you’re retrofitting and you have to do a lot more physical work work you know to pull new cables or or replace existing systems or whatever it is so yes the scrutiny applies across the board I think and and there will always be questions asked about you know I think any technology or any feature in any building as to whether or not it’s going to drive the valuation of that property or or the leases that can be pulled in but that’s probably probably greater in my mind in retrofits because I think a lot of those those projects are perhaps assets that are at risk of stranding or you know in in regions where there’s less demand for this the certain asset that they are and really just what people are trying to do is keep those those buildings afloat right they’re trying to kind of invest the Mount of capital to keep them relevant and they know that technology is important perhaps they’re responding to some regulatory requirements on say you know getting the appropriate energy data or or something like that but they’re definitely not going to dive into things which are you know the cherry on top of cake it’s just not not within their aren to do that or or within their kind of financial capacity or capability no that makes sense of course yeah um and again on this point of scrutiny with retrofits

James: I mean obviously we talked about cost that’s uh that’s a massive barrier but you know there any other things that you think are that causing people to hesitate when they’re adopting technology?

Stefan: I think I think a lot of people have been burned unfortunately as well is is is probably the reality I mean there’s there’s a lot of road map selling that’s that’s happened over the past few years um in kind of the building technology or property technology space whatever you want to call it it it has been a little bit wild Westy um we’ve seen companies come in disappear right I mean you look that the Wei work story is kind of this almost North Star to that right I mean it’s an absolute roller coaster ride and then people been following up and it’s quite interesting but it is very much property technology right where where you know the the kind of the the leading thesis is you’ve got the world’s B biggest asset class by value right and all the investors are looking at that licking their lips and thinking well there’s got to be a huge amount of of money that can be made here but the reality is is that you have an extremely you know old traditional therefore very fragmented industry that sits underneath that and fundamentally also just is bricks and mortar right you know if you’ve sold to every you know every building of your asset type that can use your solution from a technology perspective you’re not going to get hockey stick growth because there’s no more bricks and mor buildings that you can sell your solution to right so it’s it’s it’s a slightly a slightly weird space and I think the I think the um I think the VCS the founders probably have to take some responsibility for that is as well now because there’s there’s been perhaps a lack of understanding or a bit of vanity entrepreneurship where um you know they there there’s been this crazy focus on growth which has led to that that burning of some customers you know which which maybe haven’t received the best service and and therefore pushing back on technology yeah as a whole as well until they are more mature right people people use that phrase Leading Edge not bleeding Edge and I think a lot of people are trying to to fall back to that now in in a time of Greater Financial scrutiny.

James: Really interesting point I totally agree I mean do you think that it’s it was just from a lack of kind of understanding of the industry or like I guess for one of a better word like a bit of ignorance that they didn’t really want they like you said they saw the fact that it was like it’s a huge asset class it’s a massive Market there’s lots of potential for disruption but ignore the other part the other aspects.

Stefan: It’s really nuance and um not an easy Market to disrupt yeah I think so I mean it is so complex right you know I speak to some friends who work in in kind of other Tech related fields or or or you applying technology to other sectors and I do really think that the that chain right between kind of the the original building owner and then excuse me the the property management Facilities Management you know the the Consultants energy Brokers whoever whoever they all are that then advise that end building owner is is is just difficult right because you it’s it’s very very rare that you’re speaking at any point to the person who’s actually making the purchasing decision but the person who’s actually making the purposing decision is so removed from any of the topics that you’re trying to to provide value against that they can’t even really really react to it and when you you have that that classic sales Mentor right around kind of the the economic buyer and and the champion in a certain situation and I think in real estate there’s probably you know 10 Champions that are required for any single single sale to be made and and that is what makes it so complex because um if it was straightforward if the benefit was easily applicable you know I will provide you this service or this solution and you will receive return X it would be easy but the reality is is that we’re all going in and saying well we’ll provide you this and actually there’s 10 different organizations all with different contracts that will benefit a little bit from what we’re you know what we’re providing who should actually pay for it yeah it gets weird right so I mean to to answer your question more directly I think there’s a lot of confusion around the what actually the industry makeup was or or perhaps a little bit of um wishful thinking that that could be cracked more easily this is fun and then off the back of that the um yeah kind of the the challenge around sort of vanity entrepreneurship.

James: If I was going to be honest as well there is this tendency to oversell which is understandable right from the vendor perspective like you want to like maybe a disconnect between you know what is doable like and what is deliverable right because I think you know a lot of the technology of course it exists we can do some great things with AI but it’s then applying that and delivering it and making it work in uh in the property.

Stefan: Yeah so I think there’s some responsibility there uh to you know to sort of sell the benefits of it better and to to the right person but as you said like it’s because it’s complicated it’s not it’s not a sale to one particular stakeholder that that really that does complicate things or even sort of like because technology is so complex that you want to simplify it so everyone can understand it so using analogies like go well you know think of think of a car think of some other kind of product but like that’s not it’s not a good analogy it’s that it’s so true and it is I mean I was sort of saying there a moment ago it’s so bizarrely difficult to actually allocate any any sort of benefit you know I mean I me using your using your car analogy right I buy petrol to move my car forward right like that like there’s a real easy benefit there’s a return on investment to me buying my petrol or hopefully in the future charging my car electrically to move my car forward right or using hyd whatever it is um I buy gas for my building even the beneficiary of that gas is is distributed and it’s and it’s complex right I mean you know with with me Z one of the big questions that we’re dealing with at the moment is is how people are portion Heating and Cooling in buildings right and and how we get them get them that data to to do that and it’s it’s it’s really really difficult you know there there’s a lot of data required if you to do it accurately if you want to do it at at billing grade and then there’s nuances if you want to install metering you have to speak to different teams again to get the right permissions to go on site got to deal with you know insurances it’s it’s almost comical in in some ways how complex the real estate environment makes it but I really just think that’s a function of the way it’s organically grown right I mean people say it’s you one of the oldest professions in the world um and and a lot of these a lot of these you know organizations that you work with as well have been around for a really long time and then kind of the structures in which they oper been around for for a really long time and that that makes them naturally more difficult to to disrupt because they’re just ingrained by nature of of their own age.

James: I entirely agree and you you mentioned your company there Meterz I actually pronounced it wrong earlier sorry we’ll edit that out I think but I mean yeah you sort of alluded to that tell us more like what are you what are you guys planning and how are you where are you fitting into this Market?

Stefan: Yeah so we’re um well we’re doing is we’re removing barriers to to analyzing and collecting energy data so we’re we’re effectively going out and we’ve recognized that there’s a demand for you know high quality data people need that to report they need that to develop their you know creme road maps and and strategies deliver the decarbonization work in many you know situations or many places now to actually comply with appropriate regulation as well the problem is is that getting that data has been historically challenging for some of the reasons that we spoke about right you know difficulties around the fragmentation of of kind of who owns the building who benefits from the data there’s challenges around you know just just getting on site and doing that in a cost-effective way and um probably some challenges also around sort of the the established you know energy metering companies or energy data companies not being pushed very hard they’ve kind of existed in a status quo and been able to deliver what I would describe as maybe a bit of a subpar service um at least a lot of the software companies that you speak to will will see it that way um so we’re going in we’re we’re providing that providing a piece of of data pipe you know energy data pipe which can be fed into existing tools and platforms that that are already in use by those organizations right so if you’re using a reporting tool like deep key or or aora or you’re working with an optimization company like demand logic facilio will’ll just push the data there right so we’re not trying to know give you another dashboard or another tool we’re really almost just like an API company for for energy data that’s based on a on a shadow metering solution to okay to get you that data need it nice okay and obviously ties into retrofit then the point of the conversation today because it’s a more cost effective solution than than might what otherwise be available yeah absolutely and I think that’s just it I mean we can um what I’ve seen in the market so far is that we’re kind of we’re undercutting quotes by by 50 plus percent and we’re doing that by by working with new iot solutions that other people aren’t working with right and and kind of being very very upfront around sort of what the the level of granularity in you need is versus the level of cost because if you’re just doing sustainability reporting on your building you might be happy with plus or minus 1% or 2% on the accuracy if you’re doing billing you need it to be you know on the mark right there’s you know there’s legal requirements and and all sorts there so we’re being really actively you know we’ve been actively talking to our to our first customers now and and making sure that they have an understanding of that kind of cost to to benefit balance you know if you’re a great example I was just up in crew actually which was a nightmare with the trains um earlier in the week you know they’re they they don’t need Super accurate data on some of the circuits that they want to monitor because they just want to see whether or not they’re operating out of hours right so they’ve been you know they’ve been saw these crazy metering packages in the past where people have tried to put in lab tested scientific great instruments but actually you’re probably happy with something that’s you know low cost out of the box and can tell you whether or not someone’s left the lights on right and I think I think that’s just it there’s just there’s not been enough effort made by the existing players in this space to really work and understand um you know what companies need or what the data requirements are and then to be able to be flexible enough and and react to that as well that’s that’s I think that’s the real challenge.

James: great and we’ll put a link in the show notes to the website but your what’s the plan for next year?

Stefan: so I mean we’re cracking on we’ve got um like I said we’ve got our first couple customers and and sort of pilot all signed up which is awesome um we’re wanting to launch in April this the plan as thing stand so we’re going to push out towards that date and um yeah then then kind of crack on there’s a few um a few Integrations to some of the software companies underway um that I mentioned also which will be cool then yeah hopefully I’m just starting to deliver more of these solutions to to more customers so that they can decarbonize effectively.

James: Good stuff excellent well I wish you good luck with it um just to go back you know obviously to where we were before with um retrofit I mean, do you also have advice I mean imagine there’s also a lot of customers out there who you know perhaps can’t draw that line between new construction and retrofit they have a large portfolio of different types of buildings with different building management systems different technology um what advice would you give them you know about retrofit projects and is it different or is it the same advice?

Stefan: You mentioned value engineering earlier on when you um when you started talking about development right and I do think value engineering has a really bad reputation right it’s if people people look at Value engineering they’re kind of you know I used to work in an MEP consultancy and that was always you know the big frustration at the end of the project the client value engineer what you’ve been working on for ages and I get it right I mean if you’ve you know you’ve been working on doing a detailed engineering design for a building and then someone turns around five six months later or two years later and says I don’t want to right that’s annoying I think that’s just the nature of Consulting unfortunately is that you’re never never the person that makes the final decision in any case but it is um it’s it’s it’s also important right because you well a lot of what the industry has been talking about for a while now is is not doing technology for technology sake and I think value engineering is is the methodology for avoiding that right you know if you have a bunch of a bunch of organizations now that are going to buy a huge amount of tech I mean I think the classic example or the tenant apps Sorry tenant apps um but you know buying tenant apps and off the back of that they are realizing that maybe they’re not seeing the the value or that the customer or like the tenant has brought their own app into the space they’re not using it you know no one none of those landlords will buy a tenant app again because they they now think it’s not right for them in that situation and it’s always going to get get value engineered out that’s not necessarily accurate right there there are still great use cases for tenant apps there still there still things that they can do but perhaps because we were too Keen you know coming back to that hockey stick growth to push this what might have not been the right solution or the good solution for the customer into the market there’s now an adversity to that and and and they’re saying W do we really need it is it that important and as we’ve been talking about retrofits that’s obviously even more pronounced in in that kind of environment right I mean the like basic use cases in in in an office building for example like like desk booking that’s that’s not for the building owner to provide right it’s it’s for the customer to bring in yeah you know I was working on projects nearly 10 years ago where everyone was providing desk booking apps to their you know to to their tenants so it’s just it’s it’s just been a little bit of thinning out I think and that will continue and and value Engineering in my mind is actually a useful mechanic to to make that happen to to stop people from spending money on things that they don’t need and then off the back of that you know hopefully lead to a net better outcome for everyone’s involved in that in that product or that that kind of solution cycle.

James: Yeah it’s a good perspective I hadn’t you know I hadn’t considered it that way before so yeah no it makes sense I mean you um it’s just a bad word yeah it comes with its own baggage doesn’t it yeah no of course yeah and probably the people I’ve talked to are the ones that don’t particularly like it um some of what you you talk about as well like in there was I feel like you know some of this can be solved by ultimately knowledge right like if you if if I guess all the technology was a bit more mature and people understood it better then they would make better decisions um and I wonder if like some of that’s like around use cases right like if there were clearly defined use cases which everyone knew that they were going to get return on investment then that would make more sense but I mean how do you how do you think as a customer how do they how do they how do they go navigate that are they do they have to go and speak to somebody you know hire a consultant or something or is it just something that you think they can pick up for themselves now?

Stefan: I’ve already thrown shade at tenant apps so I don’t want to throw shade at consultants as well the I I think the real the reality from me years is that a lot of buildings are are quite similar right and and there’s and there’s a fine line there so I mean to be super clear actually Office Buildings are Office Buildings you know industrial sheds are industrial sheds the tenants that exist Within those buildings have largely different needs you would still expect right they are their own organization there’s different things that they’re trying to do but from a a building operator or or owner perspective what you can do to provide the appropriate infrastructure for them to realize those needs from a technology perspective is is kind of similar right like like there’s not too much variability there that being said I think one of the biggest you know failures of the building smart building space the proper technology space so far has been assuming that there is this Silver Bullet that you can just apply a solution to any building and run with it and that isn’t true either right I mean even at a fund level funds are operated differently they have different investment priorities and DCS they will buy Solutions on the back of that not because they have also have an office building and the last person that you sold something to also had an office building right so I think there’s inherent complexity there but whether or not you as a building owner need to be undertaking kind of deep use case sessions to to understand which technology is right for you I think that that phase is is starting to go I speak to very few people now who don’t have a basic idea of kind of which data points would be useful for them and and therefore which types of Technologies would be useful for them what’s probably still more difficult is is the procurement side um because there you know if you if you aren’t an expert in software or or or that kind of field you know you might be used to procuring Facilities Management contracts or or or something like that um you will probably struggle and end up with what I think a lot of people have now a lot of overlap in your technology stack you know where you have three or four different platforms that your teams are logging into to look at dashboards where probably you could consolidate that down to one yeah or two but you’re locked in for three years that’s just going to be the way that you operate now and then so yeah I would I would say the use case side is is more straightforward and you know as I mentioned before the kind of security sustainability basic user experience that those things will continue to to run in the background but yeah the procurement can be more challenging if you’re not not clued into what’s involved and kind of what the pit Falls might be yeah great point.

James: I’m Gonna Leave You with one question Stefan if there was just one thing that we’ve covered today that you want people to take away from the conversation what would it be?

Stefan: It’s a big question um I think to all the building owners keep thinking about technology and then and keep you know looking at how that’s going to support your business don’t be afraid of it you know even if you have had a bad experience in the past there’s there’s huge value to be had and the future of buildings that are our founder at my who used to always say this I used to think was really good the future of buildings is that they are smarter and better connected they they will continue to be smarter and better connected and that not going away it’s just a fact of life it’s it’s our Our Lives will be defined by that know overall from a Solutions perspective I think there’s a world now in which we we need to really look ourselves you know in the mirror and and think about what growth is realistic and what use cases are important um the the environment as is as such that I think a lot of the solutions as they were will will not survive um but that’s also okay I think I think we need to be okay with that as kind of a property technology industry and and and just say look these weren’t the right products or these weren’t the right services and we’re going to Pivot or we’re going to refocus and and you know do something slightly differently message something slightly differently so that we are still providing value to these building owners because that value is there it’s it’s to be found it just needs to be done in in the right way and uh yeah then as an industry you know both the ownership and the operator side and the technology side I think we can just drive change and and make things better hopefully to you know decarbonize and improve on climate you know make buildings better for users make sure that our city centers stay stay alive and and all those kind of you know knock on social POS big trends.

James: Great it’s been awesome talking to you thanks for thanks for your comments thanks for the time appreciate it no thank you it’s really nice to be on here and nice to catch up as well yeah and uh of course thanks for everyone for listening and um we’ll be back in the new year with more podcasts see everybody then thanks a lot bye for now!

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