The Business Case for Smart Building Technology

The Business Case for Smart Building Technology - Dan Probst of Jones Lang LaSalle clears up misperceptions about intelligent buildings.

To many property owners and investors, the value of smart building technology remains unclear.

The reality is that such technology, while requiring some capital investment, helps reduce facility operating costs over time. By combining building automation systems with a smart building management system, a commercial property owner can monitor hundreds of properties at once and fine-tune building performance to a degree not possible via human capabilities alone.

The technology to enable this competitive edge is already at hand. The internet and significant price reductions on IT components such as wireless sensors have made smart-building technologies much more affordable, creating a strong business case for owners and investors to invest in smart technologies and building performance.

Here are some common misperceptions -- and the facts -- about smart buildings.  

Costly -- or highly efficient? Smart building technology investments typically pay for themselves within one or two years by delivering energy savings and maintenance efficiencies. In large buildings with centralized building automation systems, relatively inexpensive devices can be connected to the building control panel to enable a smart building management system to extract and analyze real-time equipment and system performance data and use it to fine-tune building performance.

In smaller buildings that do not have centralized automation systems, the availability of affordable wireless sensors combined with this new smart building technology makes it possible to deploy a building automation system without the expense of hard-wiring. The cost of wireless sensors has dropped below the $10-per-unit threshold, making installation of a smart building management system much more affordable than in the past. These sensors collect data generated by building equipment, from fan blades to chillers.

Cloud computing is another advance that makes smart building management systems financially feasible to a degree not previously possible. A smart building management system can transmit data generated from hundreds of buildings to a single “command center,” where facilities professionals use complex automated algorithms to monitor equipment performance. With today’s affordable high-capacity computing, a company can use one smart building management service to monitor and control hundreds of facilities around the world.

In older buildings, smart building technology can help owners and operators determine where equipment replacements will generate the greatest return on investment. The resulting savings, according to two major corporate energy management studies produced last year by The Economist Intelligence Unit (EIU) and Deloitte, have become increasingly essential for a building to remain financially competitive in the marketplace.

Complicated -- or streamlined? Since smart buildings involve computer-controlled systems, owners and investors often assume that operation requires a small army of computer programmers. While controls professionals and system integrators typically perform the initial installation of smart building technologies, properly trained in-house staff can easily manage automated systems without being computer experts.

Combined with a smart building management system, a smart building is often easier to operate and maintain than a building that lacks automated systems. A smart building management system can integrate work-order management applications; pull equipment repair and maintenance data into performance analytics; and pinpoint equipment issues to a degree otherwise not humanly possible.  

Only for energy -- or for overall building performance? Smart building systems are more energy-efficient than legacy systems, but can also reduce operational risks, improve building performance and enable more accurate capital planning. In addition, smart systems can automatically calculate carbon and other greenhouse gas emissions to support corporate sustainability reporting.  

Using data generated by building automation systems, a smart-building management system can detect minute changes in fan speed, air temperatures or energy consumption, and trigger continuous adjustments to optimize equipment performance. This “continuous commissioning” provides a major advantage over manual equipment testing, which typically is performed every few years.

A smart-building management system often can detect when a piece of equipment is close to failure and alert facilities personnel to fix the problem. Finely tuned equipment maintenance extends machinery life and reduces facility staff, operations, and replacement costs. More dramatically, smart-building management systems can prevent full-scale building system failures -- potentially embarrassing to a Super Bowl stadium host, but life-threatening in a hospital or laboratory.

Are smart and green the same thing? Smart buildings inherently provide some green benefits, including better indoor air flow and energy efficiency. However, a complete “green” building sustainability program includes tenant recycling programs, sustainable construction materials and other strategies beyond building systems. So, while “smart” and “green” features may overlap, they are not identical concepts. The Continental Automated Buildings Association (CABA) explains the difference in Bright Green Buildings: Convergence of Green and Intelligent Buildings, a comprehensive report authored with Frost and Sullivan.

Only for office buildings -- or for all facility types? Regardless of the activity that takes place inside, every building needs heating, cooling, ventilation, plumbing, lighting and mechanical systems. Even very specialized technical facilities, hospitals or research laboratories can be smart.

Only for new construction -- or for buildings of any age? Some of the smartest buildings in the world are not new at all, but have demonstrated the return on investment in smart technologies. The Empire State Building, for example, exceeded projected energy savings for the second consecutive year following an extensive phased retrofit begun in 2009. Most U.S. buildings are not new, but most could potentially be retrofitted with smart technology.

Tower of Babel -- or interoperability? In the past, building equipment and controls were designed as proprietary systems, each with its own data “language.” Creating a unified building automation system required either a systems integrator or dependency upon a single manufacturer for all building systems. New providers are now offering interoperable building automation systems that can integrate proprietary controls, while smart-building management technologies can accommodate any system.

Tenants don’t care -- or do they? A company that owns its facilities can recoup building technology investments quickly in reduced facilities operating costs, and also gain advantages from sustainability programs that engage employees and satisfy shareholder demands. In contrast, commercial property investors are often less concerned with public image or employee engagement. Historically, they have resisted smart building upgrades because building tenants, not the landlords, pay utility costs in most leases.  

But these are short-term considerations. Anything that improves energy efficiency, reduces occupancy cost, and improves productivity is valuable to tenants, as numerous studies and surveys attest. In fact, a 2011 study by Eichholtz, Kok and Quigley indicated that the premium for LEED-certified or ENERGY STAR-labeled buildings is about 13 percent. Tenants and their advisors increasingly expect smart building features such as zoned HVAC and advanced security systems, and some municipalities now have new ordinances requiring public disclosure of facility energy efficiency.

Only the beginning

As affordable new technologies are adopted, tenants are beginning to expect smart building features -- and corporate owners and investors alike are beginning to realize the returns on investment in smart systems. Companies worldwide spent $5.5 billion on intelligent buildings in 2012, and the figure is expected to rise to $18.1 billion by 2017, a 27.1 percent compound annual growth rate, according to IDC Energy Insights.

Despite lingering misperceptions in the marketplace, the smart money is on smart building investments and the significant rewards for sustainability. 

***

Dan Probst is chairman of energy and sustainability Services at Jones Lang LaSalle.


Print