Every few years, in just about every industry, a groundswell movement occurs toward some new program, service or product—and professionals industry-wide fear that unless they grab hold of The Next Big Thing, theyll get left behind. The most obvious recent example for the commercial real estate industry came after September 11, when safety and security issues overshadowed all else. The end result was a renewed focus on a critical issue, with vastly improved security and evacuation plans the happy consequence. And while attention rightfully remains on issues of safety within our nations buildings, two new trends have taken front and center stage: technology in buildings and going green. Inextricably linked, wired and intelligent buildings are almost invariably more efficient ones—the issues have staying power, and its the wise commercial real estate professional who realizes that in order to remain competitive long-term, there are some technologies they simply cannot avoid.
Of course, sorting through a dizzying array of choices can be difficult, and convincing investors that the upfront costs will ultimately be worth it can feel next to impossible.
Both Doug Smith, principal, and Jim Sinopoli, principal, both of Smart Buildings, agree that one of the biggest challenges to the full acceptance—and eager pursuit of—intelligent building systems is the lack of a forceful financial argument and an overriding concern by owners that the return on investment (ROI) period will be far too lengthy.
Improved energy efficiency is a compelling reason for pursuing technology, said Smith, but theres a dearth of credible statistics in the market to show building owners how much sense it can make. We can easily identify some anticipated cost reductions, and were working on a comprehensive ROI tool that would look at the two biggest energy components—HVAC and lighting—and perform an energy analysis that would map out exactly what level of benefits can be derived from integrating building systems and fall to the bottom line in terms of improved NOI. But early adopters often have to act without the benefit of enormous banks of case studies and statistics.
The truth of the ROI factor is particularly noticeable when it comes to retrofitting older, existing buildings.
Kurt Padavano, chief operating officer of Advance Realty Group in Bedminster, N.J., puts it this way: Rental rates in most markets havent increased that much, construction costs for tenant improvements have jumped, some operating expenses have increased, and many older buildings need major capital improvement projects—new roofs, HVAC systems or parking garages—and theres only so much capital dollars to put in. It becomes a situation of, The HVAC is shot, and I have to replace it now.
Spencer Stewart, regional sales manager for Yardi Systems in Santa Barbara, Calif., also recognizes that one of the tapes running in the back of most property managers minds is, Tech is cool, but unless I can show ROI to my owner, why bother? Its discouraging to hear, and its disappointing that our industry is behind the curve. But at the end of the day, if a change doesnt bring in money, theyre not going to go for it. No one wants to admit it, but altruism alone—and going green or reducing a carbon footprint—wont cut it if the money isnt there.
Does all this mean, then, that commercial real estate is off the hook?
Far from it. Theres always more than one way to skin a cat, and if the ROI argument isnt working, its time to turn to other, often equally effective, arguments.
Some time ago, someone had to be the first one to put air conditioners in an office building, pointed out Tommy Russo, chief technology officer for Akridge Properties in Washington, D.C., a recognized technology leader in the industry. Now, you cant build without A/C. Its the same way with technology; some of these systems are relatively new, but if they improve client productivity and save us money in the long run, weve got to have them.
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When we start seeing some of these technologies really having an impact on energy usage, for example, it bolsters support for the notion that payback will come. |
We do need to be more aware of whats out there and figure out a way to make it work, agreed Padavano. When we start seeing some of these technologies really having an impact on energy usage, for example, it bolsters support for the notion that payback will come. Additionally, plenty of us have tenants with high-level, targeted social responsibility goals that we need to answer to.
So where, exactly, does one look for backup when faced with a wary investor? Sometimes, the best places are the easiest to find: case studies, anecdotal evidence and plain old common sense.
The old adage of the lights are on but no one is home has become more appropriate in a business sense with todays mobile workforce, said Smith, With greater connectivity, there are fewer reasons to be in the office, and if people arent in the building, why are we providing lighting and HVAC to their office? Thats where an intelligent building approach can be extremely beneficial. Research has shown, for example, that a majority of occupants will dim their lights an average of 40 to 60 percent when given the opportunity. And, gaining control over environment results in happier people, happier tenants, more productivity, more retention, less turnover, fewer tenant improvement expenses over the years, and no lost rent in between tenants. These seemingly small changes really can affect the entire operations.
Russo agreed, pointing out that in Akridges flagship building in D.C., the atriums lighting system depended on a guard, who adjusted the lights depending on the weather outside. Its now automated, ensuring that the lighting remains consistent and is never using more energy than necessary. Corporate office lights were also retrofit with sensors to brighten and dim according to available natural light, and motion detectors ensured that empty offices were never lit for long.
Lighting in stairwells can be another major cost saver, Russo added. After a trip to Japan, where I saw a skyscraper with stairwell lights on motion detectors, I started doing the math, and it didnt take long to realize that a 58-story building with four stairwells and two fixtures per set of stairs would consume a huge amount of electricity. U.S. building code dictates that the stairwells must be lit while the building is occupied, but weve thus far gained approval to use motion detectors on landings, and we hope to use dimmers on risers.
Parking garages can be another enormous electrical user; lighting makes up approximately 45 percent of the total electrical load, and 25 percent of that can be from parking garages, where lights are often on around the clock. Akridge has decided to go with dimmable fluorescents in its parking garages, whereby motion detectors in ramps, stairwells and elevators ensure that the lights are brightened by the time a person reaches the interior garage.
Replacing incandescent bulbs with compact fluorescents is another strategy, although there are concerns that their initial cost is too high.
We have a building with 480 lights in the canopy, contended Russo. Owners wanted to just replace the bulbs as they burned out with compact fluorescents, as replacing all 480 would cost $5,000. But when I ran the numberswed be using just 15 watts per bulb instead of 60and showed them that a wholesale replacement would pay for itself inside of six months, they agreed.
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From an occupants perspective, two of the most attractive technologies a building owner can adopt are in-building amplifiers for better cell phone coverage, and Wi-Fi technologies, which have become increasingly popular, particularly as the next generation of workers, who have grown up in the Internet age, come to expect it. |
From an occupants perspective, two of the most attractive technologies a building owner can adopt are in-building amplifiers for better cell phone coverage, and Wi-Fi technologies, which have become increasingly popular, particularly as the next generation of workers, who have grown up in the Internet age, come to expect it.
James Kleeman, general manager of the Time Warner Center in New York City, agrees that inner wireless and cellular amplifiers have profoundly changed the way occupants live and work in the 2.8 million square foot, mixed-use building.
Inner wireless technology is a great technology, particularly in terms of fire-life safety. One of the biggest problems from 9-11 was that fire and rescue personnel couldnt communicate back to their command post with their radios, and todays systems give the fire department the capability of using the buildings inner wireless system. For conveniences sake, having amplifiers from all of the major telecom companies also means that everythingBlackberries, Verizon, T-Mobile—you name it—works throughout the building, without ever losing a signal anywhere. A fiber optic network for our building management system also provides fast, easy access control, and our variable frequency drive controls for our HVAC systems provides that level of speed, as well.
Wireless systems can also enable owners to update features they may not have initially intended to, as Russo witnessed at a building in D.C. that featured a 20-year old directory board set in a marble floor. We couldnt install digital signage, because there was no way we could wire the sign without ripping up the marble. But when we went wireless, we could immediately bring it up to todays standards, with touch screens and interactive video. Wi-Fi also means wireless cameras—so surveillance becomes infinitely easier and less expensive.
Outside of wireless and improved cell coverage, several technologies gaining popularity also revolve around improved customer service, with one of the hottest topics today being paperless processing, which Stewart jokes should probably be called less paperful. Still, he notes, theres great attractiveness to a paperless workflow in operations and on the deal side, where electronic leases can be accessed and e-mailed far more easily and quickly than a paper version. Well never entirely ditch a paper lease, but if a question comes up and I can access a scan of the lease immediately, theres a lot of power in that, not to mention the customer service implications.
Electronic funds transfers are also improving flow between tenants and landlords, while self-service Web sites are allowing tenants to log on 24/7 to pay invoices, check on work orders or get updates on a variety of other projects.
Customer service is key, and although technology should never replace personal communications, it can be a big help in providing the kind of immediate and round the clock contact they need, added Stewart.
Were technically in the real estate business, said Russo, but we think of ourselves as being in the customer service business. We started doing online work orders in 1999, and it kicked off a big realization that technology is an enabler that allows us to do so much more for our clients. Our overall vacancy rate has been under two percent for 35 straight years, and were confident that its because of our focus on customer service and technology.
It is true, all would agree, that ROI gets an owners interest and attention. But the byproducts of technologyimproved customer service, satisfied customers, less turnover and higher retention ratescan have the same effect. So focus on the fact that tenants reimburse—empty space doesnt—and put yourself in the shoes of a building owner. Recognize, advises Smith, that yes, the bottom line is critical—but there are many more factors that affect the bottom line than just how short an investments payback is. Everyone needs to look beyond the installation of a system.
About the Author: Stephanie J. Oppenheimer, APR, formerly the assistant vice president of communications for BOMA International, is principal of Skylite Communications, a freelance writing and editing company based in Alexandria, Va.
