Connections for Success

 

06.23.16

Get Smart with “Smart Buildings”
Peggy Vyborny

With smart TVs, cars and appliances becoming more common, it is no surprise that smart buildings are also starting to take a foothold across the country. Some owners and investors continue to resist the trend; however, their resistance is often based on mistaken notions about the costs and complexities of smart building systems. The reality is that advances in technology mean the benefits often far outweigh the impediments.

What is a Smart Building?

Smart buildings feature systems that deliver critical building services — such as HVAC, lighting, sanitation and security — at a lower cost both financially and environmentally. The systems leverage information technology to connect various subsystems that traditionally have operated independently, enabling the subsystems to share data and maximize total building performance.

For example, a smart building can peg energy output to occupancy (as tracked by the building security system) or weather patterns to cut energy costs. A smart building can also monitor the electricity market and adjust usage according to pricing in order to secure the lowest possible costs. In addition, it can generate revenue by selling backload reductions on the market.

It is worth noting that smart building technologies are not just for office buildings. After all, every building has HVAC, plumbing and similar systems that could be optimized.

What are the Benefits?

Many people confuse the terms “green” and “smart.” While smart buildings typically provide some green benefits (that is, benefits related to energy and sustainability), they also go beyond energy efficiency to address operational issues — such as building and equipment performance and maintenance — that, in turn, allow better capital planning. Algorithms, for example, can detect performance problems and alert facility staff to address these issues, leading to improved performance, extended equipment life and the avoidance of expensive failures.

Smart building technology also allows owners to manage entire portfolios of buildings from a single operations center. Although outside experts will probably be required for the initial installation, in-house employees can easily operate the automated systems going forward. These trained personnel can analyze real-time data to optimize each building’s systems performance.

The incorporation of smart building technology can provide valuable reputational benefits and competitive advantage, as many of today’s tenants expect their buildings to be “smart.” The technology can boost occupancy rates and justify higher rents. Moreover, some municipalities now require public disclosure of buildings’ energy efficiency.

What About the Costs?

Concerns about the presumed high costs of smart building systems have been the driving force for some owners and investors resisting such systems — but those concerns are largely misplaced. Smart technologies generally come with low upfront capital costs, and buildings armed with smart systems usually cost less to operate than those dependent on legacy systems.

And because the operational and energy-related savings kick in shortly after smart building technologies are installed, investments in the technologies pay for themselves quickly. The return on investment probably begins earlier than ever before in light of dropping technology costs.

For example, the cost of wireless sensors that collect equipment data has fallen to less than $10 per sensor. That means smaller buildings without centralized automation systems can enjoy some of the benefits from smart technologies without incurring the costs of installing hard wiring. These buildings can adopt technologies using a prioritized system-by-system approach based on which upgrades will result in the greatest returns on investment.

Act Now

Smart buildings are bringing dramatic changes to the real estate industry. As owners and investors begin to explore how these technologies can help them and their bottom lines, they will likely jump on the proverbial bandwagon sooner rather than later.

For more information on smart buildings, contact Peggy Vyborny at pvyborny@orba.com, or call her at 312.670.7444. Visit ORBA.com to learn more about our Real Estate Group.

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