Smart buildings are all the rage, and most people now understand that there are benefits to be had. But confusion can arise when you try to determine exactly how the typical talking points actually translate to tangible value.
How do you differentiate the hype from reality?
If you’ve looked into the topic, there are a few areas that are most often championed: Energy efficiency, security, productivity and occupant experience.
Can smart buildings really deliver these areas?
To shine some light on this topic, we recently sat down to talk about just a few of these aspects with smart buildings expert Joe Aamidor of Aamidor Consulting. He has more than 15 years of experience as a product leader with building industry firms and has watched the landscape increasingly embrace trends like the Internet of Things and Leadership in Energy and Environmental Design (LEED) certification.
When it comes to energy, the value proposition is clear. There is widespread agreement that a company will reap savings by changing energy use. The question is how much?
The estimates in terms of savings can be anywhere from a couple percentage points up to 20% or even 25%.
“There are a variety of different measures, technologies, and operational changes you can make to a building to save energy,” says Aamidor. “And the estimates in terms of savings can be anywhere from a couple percentage points up to 20% or even 25%.”
The high-end of this range would certainly seem compelling. But Aamidor notes that these lofty figures are likely only possible on a small scale (a single building) and usually unachievable across a whole real estate portfolio. The local cost of energy will also play a large role. Somewhere like California, with high utility rates and demand charges, will likely offer more potential for savings than somewhere like the Pacific Northwest, where hydro rules and power is relatively cheap.
In the end, most companies are probably looking at more like 8%-10% savings. What companies need to do is assess what these savings mean for them. Combined with a desire to be a good environmental steward and help save the planet, even these returns would ostensibly seem like enough to move the needle.
While lowering your costs and carbon footprint at the same time is great, adoption will really start to take off if companies can leverage smart buildings to increase revenue.
If we can move productivity points 2%–3%, that’s worth more than our entire real estate spend
Many people do believe that this outcome is very real. By optimizing the workplace environment and conditions, employees will be happier, healthier, and more productive.
At least that’s the theory.
Some remain quite skeptical, but proponents say that, even through seemingly simple means — optimal temperature control, better airflow, and adaptable lighting conditions — the occupants of smart buildings will work better. “As productivity becomes more of a certain return, that will be sort of a game-changer,” says Aamidor. "That is a pretty big revenue opportunity. There is a stronger value proposition there."
The link between productivity and place has historically been difficult to measure, but this is changing. According to the Harvard COGx Study, certain office environments are linked to higher cognitive function scores. “If we can move productivity points 2%–3%, that’s worth more than our entire real estate spend,” Mark Golan, Google’s Vice President of Real Estate and Workplace Services, explained at an industry event. Even if the higher employee satisfaction numbers seem tenuous, the business value of increasing productivity by just a few points is clearly valuable.
In short, there is some productivity-boosting evidence out there. But it is not always clear cut and advocates still face an uphill battle to prove the case. “It’s very early,” says Aamidor. "There are not a lot of companies that have solidified a value proposition there. But I think more and more are trying — and more will be successful."
Somewhere in the middle of these certain energy cost savings and early signs of productivity gains are the benefits that come from safety and security improvements. As with productivity, and unlike cutting 5% off your light bill, this is an area that everyone agrees is fundamental for every workspace.
If you think of Maslow’s Hierarchy of Needs and you apply it to buildings, having a safe and secure workplace is the most important factor
So if smart technology in a building can help improve security, incorporating it will be a no-brainer for many firms — even if it doesn’t have an attractive ROI timeline and, in fact, is an additional cost at the outset. “It’s required and, if you think of Maslow’s Hierarchy of Needs and you apply it to buildings, having a safe and secure workplace is the most important factor,” says Aamidor. “Plus, the dollars spent on security in commercial buildings are already a really big number.”
Beyond security, the same logic largely applies to HVAC, fire safety, and lighting systems. You have to have them, right? So as long as the investment isn’t too significant and you can reap savings on the total cost of ownership, the smarter, the better.
“You can’t think about a modern office building not having air conditioning at this point,” says Aamidor. “So there’s just a lot of opportunity to innovate and improve how those systems work.”
Overall, there is definitely some level of return on investment to be had by making improvements to your workspace. And it’s quite clear that smart technologies have a role to play. Energy, security, and other critical systems have so far shown the most interest when it comes to adoption.
There is also another issue at play. By and large, companies are not thinking about all these areas comprehensively. These technologies may be all grouped together in academic literature, but they remain disparate systems in the real world. And each usually has a different “owner” within the company. The person who is in charge of HVAC systems has little to do with security access control and neither of these people regularly talk to HR or a would-be Chief Productivity Advocate (to the degree anyone in the organization even fulfills that ambitious role).
This is something of a practical brick wall in many cases that only further impairs the ability of an organization to make across-the-board moves on the smart building front. If, however, a company can start to think of an overall Smart Building Concept, that could help marry all of these ideas together.
Nevertheless, even coming from separate starting points, there is some clear movement forward. Smart buildings as a concept — and all the many innovations powering them — are just getting going.
“Different smart building technologies are in different places, but we’re absolutely at the early stages of deploying smart building technology and understanding what additional benefits it has,” says Aamidor. “On the one hand, that’s exciting to see — but it also opens up questions that will have to be answered."