Navigant Research Blog

What to Expect When Investing in Intelligent Building Technologies

— June 12, 2018

In many organizations there is a champion of sustainability and energy management. For many years these advocates worked in silos separate from decision-making executives who controlled the budget. That has changed, and today corporate sustainability and energy commitments are increasingly integrated with economic and strategic growth objectives. Furthermore, there is a growing acknowledgment that optimizing the portfolio of facilities in which organizations operate can be an effective mode of achieving the spectrum of business goals. The intelligent buildings market is capitalizing on the expanding understanding of the importance of connected, efficient, and sustainable facilities. Mass market adoption will have significant business and social impacts, but there remain challenges for many organizations. Let’s look at two steps that can help drive greater market penetration of intelligent building technologies.

Executive Engagement: The value propositions for investment in intelligent building technologies have changed from energy savings to a more comprehensive set of business benefits because of the importance of buy-in from budget holders and executives. The focus should be on speaking to the highest possible executive of each specific business. As explained by Cohen van Oostom in a recent Fast Company article, many executives need to understand the impact on the bottom line: “There are so many owners in the US that don’t have anything against sustainability but are not moving because they are afraid it will cost them money…We are at the start of a revolution where a lot of buildings are going to be made—with the help of technology—a lot more sustainable.”

Focus on the Intelligent Building as a Business Asset: Facilities operation has been characterized as a cost center for many organizations, but intelligent building technologies optimize cost savings and even create revenue-generation opportunities. Macroeconomic pressures are driving executives to rethink their facilities, and intelligent building technologies can help, as explained in a recent Commercial Property Executive article: “Many health systems own and lease large amounts of real estate and we’re seeing their financial leaders making changes to manage it more as an investment,” said Garth Hogan, executive managing director at Newmark Knight Frank Global Healthcare Services. “We’re seeing more hospitals consider monetization of some of their noncore assets to create capital and focus on portfolio optimization and strategy.”

Learn More at IBcon

The details of deploying intelligent building technology can be complicated. Will it be cyber secure? How do you address data privacy? What operations are you comfortable handing over to remote, even outsourced, control? Will you be at IBcon in Las Vegas? Be sure to check out a great panel discussion I will be participating in on Wednesday, “Understanding the Options for a Building Operating System.” This will be your chance to join a lively discussion on the next steps in intelligent building strategy.

 

How an Intelligent Building Technology Strategy Can Counter Real Estate Risk

— June 7, 2018

Today, technology is the badge of vision and financial commitment that showcases the value of real estate. The impact of Internet of Things (IoT) and evolution of advisory services are directing a tipping point across the market. Building owners and managers who step aside from this wave of technology risk increased volatility in the valuation of their buildings and even their businesses. Dynamics in the commercial office sector showcase just how important a clear strategy around technology is to future-proofing well-established businesses.

Occupants Have Power, but Their Demands Are Fragmented

According to a Brookfield Property Partners chairman, “Tenants have seemed to shift from focusing on cutting costs and being cost efficient to attracting, retaining and motivating their employees. Tenants are partnering with landlords so they can solve their people goals.” For the last several years, it has been near impossible to have a discussion on technology investment and the commercial office sector without hearing about the impact of the millennial workforce. Millennials demand flexibility and collaboration, and the result is a dramatic shift to open offices, non-traditional schedules, and customization.

These expectations have upended the asset planning strategies for many building owners. Multiyear plans for capital assets and space planning are no longer sufficient to maintain best-in-class distinction. The challenge persists because although building owners have invested in the demands of millennials, new expectations are arising for the next generation. Generation Z, born after 1995, totals almost 2 billion people worldwide. Often referred to as digitally native, this future workforce is expected to shatter expectations for employers and workspaces. Real estate owners have scrambled to support the collaboration and flexibility demands of millennials, and early research suggests Generation Z may flip things once again. According to Cushman & Wakefield’s The Occupier Edge, Sixth Edition, 53% prefer in-person communications over email or instant messaging and 91% report “technological sophistication” affects employment decision-making.

Three Steps to Hedging the Risk of Rapid Workforce Evolution

  1. Cost-effective equipment to digitize the office: Sensors, gateways, and controllers are becoming affordable commodity purchases to refine the data profile of large buildings or even create a new infrastructure in smaller buildings. These digital components are the foundation to the digital transformation of a facility into an intelligent building and a critical investment to support the flexible space planning and real estate management strategies that will hedge the risk of uncertain and shifting worker expectations.
  2. Analytics to translate data into insight: Software investment is table stakes for managing the modern office space. Occupants expect tailored conditions that meet their lighting, heating, and cooling preferences and even advanced applications to support productivity. While these metrics are much harder to quantify than traditional ROI metrics around energy efficiency, the benefits are clear. These analytical tools are also critical behind the scenes for operational strategies to meet the high demands of today’s and tomorrow’s workers.
  3. Services to act on insight: A cohesive interplay between operational and informational technologies is required for successful intelligent building solution deployment. There is a human capital gap in many organizations, as their IT departments are excluded from facilities decisions or their facilities teams lack IT understanding to drive the best investment. Both these functional departments are often short-staffed and operating with tight budgets, so expanding their responsibility set can also be challenging. Furthermore, the real benefits of deploying an intelligent building solution roll up to the C-suite with insights that speak to both the top and bottom line. These dynamics open the door to greater advisory and even partnership opportunities that can support the transition and ensure the owners and management realize the full benefits of the investment.

Check out Navigant Research’s Intelligent Buildings Market Overview report for more on how technology can transform facilities into business assets that meet ever shifting occupant expectations.

 

Reimagining Energy Efficiency as a Pillar in the Climate Action Strategy

— December 5, 2017

A recent Wall Street Journal blog post by Sam Ori from the University of Chicago, “Why Government Energy-Efficiency Programs Sound Great–But Often Don’t Work” starkly criticizes energy efficiency programs and ideas on how to revisit residential program design. The author’s conclusion is sound, but there is more to be said on how energy efficiency can become a sturdier pillar in the strategy to combat climate change. Ori points out, “there is an opportunity for policymakers to rethink the ways they choose, design, implement, and evaluate energy-efficiency programs.” Based on ongoing Navigant Research analysis, policymakers play a role, but the challenge requires a balanced two-pronged approach.

Utilities Are Only Part of the Equation

The reality is that a transformation of the energy industry is underway. A more dynamic, digital infrastructure of renewable, distributed, and non-traditional resources is being applied in the commercial buildings context. Navigant Research characterizes this new energy ecosystem as the Energy Cloud. In the buildings sector, rapid adoption of behind-the-meter energy management technologies, alongside onsite power generation and storage and ongoing investments in information technologies on the utility side of the meter, are redefining the relationship between electricity supply and demand.

This means federal and state policy and electric utilities will no longer be the gatekeepers of energy supply or the rule makers for how to orchestrate shifts in energy demand. Energy efficiency improvements are crucial for building optimization, which is made possible by intelligent technologies—notably the uptake of Internet of Things infrastructure and analytics. Navigant Research’s recent Building-to-Grid Integration report outlines how the intelligent building represents a conceptual paradigm shift for businesses through the integration of facilities management and IT. The intelligent building unifies strategy, investment, and decision-making. The door is open to market influencers, utilities, and many others that can introduce creative ways to utilize existing technology infrastructure, deploy new solutions, and analyze increasing data streams to optimize facility operations that meet broad business demands with energy efficiency savings as a byproduct.

Do Not Undervalue Energy Efficiency for Commercial and Industrial Customers

The Wall Street Journal blog outlined some significant challenges to realizing greater carbon emissions savings from energy efficiency in the residential sector, but missed one important part of the climate change big picture: tackling commercial and industrial (C&I) building energy use. C&I facilities are important because they not only consume more energy, but are also more energy-intensive per SF of floor space compared to residential customers.

Furthermore, C&I customers can be effective partners in tackling energy efficiency improvements because the scale of their effectiveness (and business perspectives) can help accelerate change. First, the energy savings potential of a single large building, single customer with multiple buildings, or a campus simply delivers a greater volume reduction in energy use and therefore carbon savings. In order to meet the magnitude of savings to combat climate change in a significant way (as outlined in the Wall Street Journal blog), business customers need to participate. Second, business customers understand the risks that climate change presents to their bottom lines and the mounting environmental, social, and economic challenges tied to unfettered energy consumption. This sector deserves credit for showing leadership through sustainability initiatives. Read more about how C&I customers invest in sustainability and combat climate change in Navigant Research’s report Intelligent Building Technologies for Sustainability.

As Ori summed up, “Energy efficiency offers significant potential as part of a portfolio of climate policies. But that potential will only be realized if we crack the code to get programs structured to deliver results. If we don’t, dealing with climate change will be much more expensive than we realize.” Want to hear more about Navigant Research’s perspective on the importance of energy efficiency? Register for our upcoming webinar, Monetizing Energy Efficiency, with Tom Machinchick.

 

Can Technology Solve the Dysfunction of Sustainability?

— November 30, 2017

Sustainability is a term that, by itself, can be meaningless. The downfall of “green” into “greenwashing” is a cautionary tale for sustainability champions. In a recent Triple Pundit article, “The 8 Dysfunctions of Sustainability,” a Penn State University professor articulated the problem: “[My critique] is meant to both reclaim the original fullness of ‘sustainable development’ but even more to point to the baggage we must leave behind. In a word, sustainability has to grow up.” Professor Erik Foley’s criticism is sound and defensible. The question then becomes: How can we course correct and make sustainability a relevant and impactful metric?

It is important to define a scope of action to make the concept of sustainability concrete. Let’s look at the commercial buildings sector as an ecosystem of business, economics, and people that can provide structure to the analysis of sustainability. Technology can be deployed to alter how we operate and assess the value of buildings against the environmental, social, and governance lenses of sustainability. To be specific, data, analytics, and automation can represent three pillars of a mature solution for the buildings sector that ensure continuous and ongoing improvements in the buildings sector from a sustainability perspective. Let’s examine two dysfunctions from Professor Foley’s article to highlight how technology can be the pathway forward.

#2: We measure what we can manage even if it doesn’t matter.

The bottom line here is action. We have tracked the evolution of the intelligent buildings market for years at Navigant, and it is evident the technology can make significant impacts on sustainability metrics. We have tracked the transformation from traditional building automation solutions that improved scheduling and reduced hot and cold calls in the biggest buildings to software as a service (SaaS) applications that provide enterprisewide insight on building operations—the key shift is action. Effective intelligent building solutions provide an end-to-end solution for gathering, communicating, and analyzing data that is translated into meaningful information with integrated automation and controls that enable continuous improvement in operations. What that means that customers can utilize technology to reduce costs, improve experience, and lower environmental impact through a systems-based strategy.

#4: Efficiency ≠ sustainability.

Foley’s fourth dysfunction sets up a further explanation of the sustainability improvement opportunities tied to the systems-based approach to building operations made possible by intelligent building solutions as described above. The smarts of the data-driven approach to intelligent buildings are rooted in the idea of holistic insight and operational improvement. This approach is a perfect counter to dysfunction #4. Take, for example, our historic approach to energy efficiency and demand management—these two objectives were seen as isolated strategies for energy management that delivered different and possibly competing benefits. The real-time insight and continuous operational changes made possible by integrated automation and controls with analytics enable reduced costs, lower environmental impacts, and increased comfort. One side does not have to take precedent over another but can be prioritized at different times to meet a larger goal. From a sustainability perspective, an intelligent building solution can support overall energy use reduction, but also optimize equipment operations so energy is used at peak time if there is onsite solar, for example, or reduce energy during peak if reliant only on grid power.

Today, there is a real opportunity to re-envision sustainability to deliver operational changes that provide sustained social, environmental, and governance improvements. Interested in more of Navigant Research’s point of view on sustainability? Check out our recent report, Intelligent Building Technologies for Sustainability.

 

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