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Unlocking new gains through smart buildings

Long-established real estate business models are at an early stage of being disrupted by digital technologies. We have barely scratched the surface in realising the economic and environmental gains that will be possible in the smart era, but, in time, digital advances will redefine the routes to securing profitable growth from commercial buildings, and to generating value from building usage. All these changes need to be understood by contractors working in commercial real estate as much as by developers themselves.

Trends in digital technology – such as the mainstream adoption of cloud, the advancement of the internet of things (IoT), and an explosion in real-time data – are transforming the way that companies use office and retail space, and the value they can generate from the built environment. As new ways of working become more and more mainstream, investors and developers need to rethink traditional ways of delivering and managing space, and look to new revenue streams such as delivering technology requirements and hospitality services, to sit alongside conventional rental income streams.

For example, as the built environment becomes embedded with sensors – and more connected devices are used inside buildings – it creates opportunities for new data-driven revenue models. In large retail centres, for instance, it is increasingly possible to capture and integrate data about where, when and how consumers shop, enabling retailers to tailor advertising, opening hours and store location, among other things.

While in office buildings, gaining access to data from different smart systems such as heating, lighting and fire safety, along with data captured by other connected devices could be of huge value to an insurer seeking to more accurately calculate and price risk.

New revenue models are not the only source of value. By better understanding how and when they are using their workspace, companies can reduce energy costs and cut down on surplus floor space. In addition, mapping productivity data against environmental conditions – such as temperature, light intensity and air quality – can drive a more productive, healthier workforce.

The race to achieve these competitive advantages has profound implications for all industries involved in this sector – including the contractors designing and building the smart buildings of the future. Five key trends for UK contractors to look out for would include:

  1. Smart buildings are driving gains stretching far beyond sustainability. While many firms are still striving to cut energy costs and optimise asset performance through smart building management, the most forward-thinking players are already imagining wholly new gains from the smart environment. As commercial buildings become omnipresent sensors of activity, sophisticated analytics will deliver new insights to improve the productivity and wellbeing of the workforce, It will also be possible to optimise occupiers’ use of space across their property portfolio – for both office and retail environments – based on data insights about use patterns.
  2. Future-proofing means in-built flexibility. Too much bespoke customisation in construction may leave buildings unattractive to future tenants who want to integrate their own technologies with ease. The key to “future-proofing” will be the design of flexible, loose-fit shells, and easy access to rewire and retrofit as new technologies come along. Developers, owners and consultants will need to give more thought to how future tenants’ needs may evolve.
  3. Winning the battle against obsolescence will be pivotal in securing returns. Replacing vast amounts of existing building stock will be impractical because of the cost and high carbon footprint involved — as well as listed status in some cases. As occupiers demand digitally-enabled buildings with high energy efficiency, owners must upgrade properties to remain attractive. As of 2018, it will actually become unlawful to let commercial properties with an Energy Performance Certificate (EPC) rating of F or G. Investors and owners need to be savvy to “future-proof” their investments against obsolescence risk, to ensure returns in future. They will increasingly demand conversations with asset managers relating to the Global Real Estate Sustainability Benchmark (GRESB) and other insights around obsolescence. In time, newer measures such as the WELL Building Standard, that assess how the built environment impacts human health, may be increasingly factored into investors’ decision-making too.
  4. Innovations in construction will deliver more than just hyper-efficiency — they’ll be crucial in driving future adaptability. Advances in construction, such as off-site fabrication, will be increasingly important in enhancing efficiency and lowering the cost to build. A more modular approach will also make buildings easier to repurpose further down the line, allowing owners to adapt them to occupiers’ evolving needs. Meanwhile, building information modelling (BIM) and 3D printing will enable more innovative designs.
  5. Smart gains will need to be realised through new partnerships and new networks. No single organisation can tap into the full potential of a truly smart built environment. Contractors may need to work with workplace strategists and innovative technology experts; firms providing smart building infrastructure may need to tap into the data analytics knowledge of consultants — such as in Siemens’ partnership with Capgemini.

Are you ready for Google the contractor?

This article was written by David Savage

For further information, please contact David Savage on +44 (0)1483 252615 to david.savage@crsblaw.com