Facing pressure to manage costs, risks and energy consumption, commercial real estate investors are exploring how smart building technologies can help a company’s triple bottom line (people, planet, profits). Five key trends are making smart buildings a “no-brainer” for commercial property owners and investors, according to Jones Lang LaSalle’s latest report, Five Trends: Why Smart Building Technology Makes Good Business Sense.
“Commercial and public property owners are looking to smart building technology to boost operational efficiency, achieve energy savings, improve capital planning and reduce their carbon footprints,” said Dan Probst, chairman of energy and sustainability services at Jones Lang LaSalle. “These advantages, combined with tenant preferences for smart building features, provide a competitive edge for owners and investors.”
Five reasons for smart building investment
The report, which details the landscape for smart building technology, identifies five major trends:
1). Rapid return on investment (ROI). Smart building technology investments typically pay for themselves within one or two years by delivering energy savings and other operational efficiencies. Also driving the fast payback is the low cost of automated building technology, which has fallen as adaptation has increased. For example, intelligent lighting components that cost $120 four years ago today sell for just $50. Procter & Gamble’s building management pilot program, for example, generated a positive return on investment in just three months.
2). Operating-expense (op-ex) advantage. Relative to other energy-related building upgrades, smart building technology requires little upfront capital expenditure (cap-ex), while delivering significantly reduced operational expenditures (op-ex). Using automated systems, smart buildings generally cost less to operate than buildings operating solely on legacy systems, therefore offering a long-term op-ex advantage. By combining smart building systems and data analytics with facilities management, a smart building management system can detect and resolve building issues before equipment failures and capital expenditures ensue. Additionally, operational and energy savings begin shortly after the smart building management system is implemented.
3). Marketing mileage. As reported in JLL’s October 2012 Global Sustainability Perspective, numerous studies and surveys have demonstrated that tenants and their advisors increasingly expect smart building features such as zoned HVAC, sophisticated equipment maintenance alert systems, advanced security systems and “green” buildings. Like a new lobby or elevator bank, an improvement in sustainability makes an office building more desirable to tenants. These benefits can justify collecting higher rent, and can increase competitive advantage and occupancy rates. And when the building is sold, sustainable investments can be recouped in an increased sales price. In fact, a 2011 study by Eichholtz, Kok and Quigley indicated the premium for LEED certified or ENERGY STAR labeled buildings is approximately 13 percent.
4). Energy savings. Smart building technology can generate energy savings of eight to 15 percent annually almost immediately after deployment, with the potential for incremental improvements over time. A 2012 report*, estimates that $289 billion in building efficiency investment would produce savings in excess of $1 trillion in the U.S. alone, with every dollar invested in energy efficiency producing three dollars of operational savings.
5). Improved Corporate Social Responsibility (CSR) profile. Redirecting energy spend to building efficiency has allowed some corporate decision-makers to gain the reputational advantages of doing the right thing by the environment while also gaining significant performance and productivity improvements. Another benefit is a smart building system’s ability to measure and report greenhouse gas emissions. Some owners feed building emissions data to multiple benchmarking organizations, such as Greenprint and GRESB, as well as to Ceres and similar third-party reporting organizations, and smart systems can roll up the information from across a portfolio.
* By the Rockefeller Foundation and Deutsche Bank Group’s DB Climate Change Advisors: ‘ United States Building Energy Efficiency Retrofits: Marketing and Financing Models ‘