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Construction & Real Estate

Smart buildings: Moving beyond green for added value

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Commercial real estate developers can create new opportunities to attract tenants and improve margins by using new and emerging technologies that make buildings not only more efficient, but smarter and healthier.

In 2017, building construction and operations were responsible for nearly 40 percent of energy-related carbon dioxide emissions[1] —underscoring the numerous opportunities to improve the performance and sustainability of both new and existing buildings. In fact, as governments, businesses and consumers have raised the bar for environmental standards, there has been a growing shift towards green buildings—those that reduce or eliminate negative environmental impacts and offer improved energy efficiency.

Now, however, the real estate industry is left wondering where the next big opportunity to create value will come from. While developers have realized the advantages offered by green buildings, such as cost savings, increased asset values and reputational worth, their value can be extended beyond environmental output. The key is to take a more holistic view on how buildings can be better designed, built and operated. Smart buildings can satisfy client demand for greater sustainability while also amplifying the cost, operational, environmental and reputational benefits. By leveraging the Internet of Things (IoT) and analytics, smart buildings can even generate operational improvements, using data from building processes to provide value-adds such as condition-based and predictive maintenance, improved service delivery and enhanced user experience.

Demand for smart buildings and smart spaces is accelerating as technology continues to permeate everyday life—and the doors of opportunity are open for real estate developers to position themselves as leaders in the industry of the future. Real estate developers and owners need to carefully consider how smart building technology can be incorporated into their strategy to set themselves apart from the flood of green portfolios, particularly as interest in smart buildings accelerates in the Canadian marketplace.

Catching up: Canadian market in early stage of adoption

Perhaps owing to the strong real estate markets in urban centres such as Vancouver and Toronto, which reduced pressure on developers and owners to experiment with new technologies, the smart building market in Canada has been slow to develop. Canada’s Building Strategy, adopted in 2017, focuses on efficiency and reducing greenhouse gas emissions, with an emphasis on net-zero energy buildings. Yet smart technologies have begun proliferating in other jurisdictions that have been more supportive of their adoption. In Europe, for example, a Smart Readiness Indicator was adopted as part of the 2018 revision of the European Energy Performance of Buildings Directive to promote the adoption of smart building technologies, and the Clean Energy for All Europeans initiative includes a program with the European Investment Bank to provide financing for smart buildings.

Similar initiatives are starting to take root in Canada as the country looks to catch up in the smart technology race. The Smart Building Initiative, for instance, is implementing JLL’s IntelliCommand building performance platform in 82 federal buildings after a pilot in 13 buildings yielded energy savings of 17 percent, equivalent to about $1 million in savings annually. As new technologies emerge and consumer and tenant demands increase, the market needs to continue its shift toward smart technologies. This will require moving beyond the pilot and innovation stage, which is typically centred on energy improvements. The use of smart technologies provides opportunities for the delivery of growth through operational efficiency, improved productivity, enhanced user experience and even brand recognition—and more benefits will be realized as the technologies become increasingly sophisticated and impactful in everyday operations, business strategy and culture. These and other initiatives are driving organizations to pay more attention to—and increase investment in—smart building technology.

Moving forward: Learning from the past, accelerating the present

Moving forward, real estate developers and owners will need to accelerate and support the adoption of existing and emerging smart building technologies. IoT and smart building platforms—which provide building automation systems, energy management systems, tenant services metering and systems monitoring—are well established. Office buildings are making use of integrated IoT technology, and a wealth of opportunities exists for the technology to be used in other sectors.

However, beyond these platforms are other opportunities the industry should consider, including building information modelling (BIM). BIM can be leveraged to design and construct more efficient and intelligent building structures and can support smart building processes by integrating IoT sensors. With demand for BIM accelerating, developers of all sizes need to carefully consider how to integrate the technology. Other emerging technologies, such as virtual reality and artificial intelligence, powered by data from IoT devices, may also increase operational efficiency, improve occupant experience and enhance space and asset use if integrated effectively.

That said, effectively implementing these technologies requires taking a holistic view of building design and operations, moving beyond a granular focus on energy systems to consider the entire value proposition of a building and its externalities. The use of holistic building design standards, such as the WELL Building Standards, can help developers and owners gain a full-picture view of how to better design or operate a building to maximize positive impacts by considering critical concepts such as environmental and human health.

Developers can also learn from the successes and failures of others to establish themselves as leaders in the nascent Canadian market. Successful case studies lay the groundwork for the future development of smart buildings and can be used as a blueprint for developing strategies to integrate the technologies that will increasingly be expected by owners and tenants—particularly as the fastest growing cohorts of employees and residential tenants are more digitally savvy and dependent.

Looking to the future

Real estate developers and owners need to be proactive and tap into emerging opportunities, such as the transition toward smart cities, to position themselves for growth. The evolving market is presenting a critical window of opportunity for developers to secure their position as leaders in green, smart and intelligent building design and operation at a time when it’s becoming increasingly important to clients, the bottom line and the planet. Speak to your Grant Thornton advisor about how an effective smart building strategy can complement long-term growth strategies in the commercial real estate sector.

 

 

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[1] Global Alliance for Buildings and Construction, International Energy Agency. “Global Status Report 2017.” Accessed at https://www.worldgbc.org/sites/default/files/UNEP%20188_GABC_en%20%28web%29.pdf on March 27, 2019.