Smart buildings: How IoT technology aims to add value for real estate companies

May 25, 2017

Yesterday, the value of commercial real estate was all in location. Tomorrow, much of it will be in information—and how commercial real estate (CRE)  companies can use that information to build relationships with customers and strengthen tenant engagement.

Enhancing performance and reimagining tenant experience

Technology is changing the most fundamental truth about commercial real estate (CRE)—that value is based solely on location, location, location. While it still matters, of course, that a space be close to customers, employees, and/or suppliers, information-based applications have the potential to add new ways for the CRE sector to create value for customers, differentiate from competitors, and even find new sources of revenue.

Specifically, the Internet of Things (IoT) is already having a significant impact on the CRE industry, helping companies move beyond a focus on cost reduction. IoT applications aim to grow margins and enable features such as dramatically more efficient building operations, enhanced tenant relationships, and new revenue generation opportunities. Consider the increasingly popular smart thermostats that intuitively adjust the temperature, humidity, and light based on residents’ preferences and climatic conditions.

While consumer IoT devices have drawn most press attention, it is enterprise-level adoption of the technology that will likely have the bigger impact on industry. Indeed, the CRE industry is perhaps uniquely positioned to implement the technology, using IoT-enabled building management systems (BMS) to make building performance more efficient and also use sensor-generated data to enhance building user experience. IoT technology provides owners an opportunity to have direct conversations and relationships with building users rather than only with their tenants. For instance, sensors in shopping malls can help owners connect directly and offer services to end customers. This would lead to building relationships with customers as well as strengthening tenant engagement.

The uses of the IoT: Far beyond motion-sensor lighting

CRE companies have been installing sensors and automating activities for some time, primarily aiming to realize the benefits of low-hanging fruit such as cost savings and operational efficiency through improved energy management and reduced personnel costs.

Individual BMS: Typically, CRE owners install BMS on a piecemeal basis to automate individual tasks such as elevator or lighting control; not surprisingly, owners then must collect and aggregate data from various places.

Partially integrated BMS: Realizing the limitations of individual BMS, more mature CRE companies have begun using partially integrated BMS, combining automation of a few activities with a common focus, such as energy management systems. Compared with individual BMS, these systems are more integrated, require less manual intervention, and enable faster decision making. More importantly, CRE owners use these systems to enhance tenant and end-client experience through sustainability initiatives (including to support LEED and other green building certification standards), open Wi-Fi access, and so forth.

Fully integrated, IoT-enabled BMS: In sharp contrast, a CRE company’s IoT-enabled systems can be fully integrated BMS, allowing higher-order cost, productivity, and revenue benefits with a deep customer and data focus. It can leverage one infrastructure to operate all building management solutions and require minimal to no manual involvement. Internet protocol or IP-enabled devices can facilitate intelligent decision making by automating point decisions and enhancing strategic insights; this allows data to automatically flow all the way around the Information Value Loop without manual interaction, enabling quick action on the data and creating new value for CRE companies.

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