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Cities and Businesses Care about Smart Buildings: Part 2

Christina Sookyung Jung
Nov 14, 2017

With 238 proposals in hand from cities and regions across North America vying to host its second headquarters, Amazon plans to make a decision next year. Cities trying to lure Amazon should turn this occasion into an opportunity to strengthen their business environments to both complement and drive investment in smart buildings.

Regulatory Certainty and Standardization of Business

In order to attract investment in smart buildings, governments should work toward offering certainty and standardization for investors. Certainty refers to predictable outcomes or guaranteed returns. Governments can establish policies that set expectations for the building sector. Cities that adopt and enforce building energy codes, for example, can quickly increase local demand for energy efficiency technology. Stable demand means a stable market for finance.

In addition, having common standards for assessing risks will be helpful. For example, many stakeholders are already familiar with existing green building standards like Leadership in Energy and Environmental Design (LEED). If governments use policies such as financial incentives to encourage broader adoption of such standards, that will make it easier for investors to assess a project and ultimately increase the likelihood of investment.

Leading by Example

As a start, enforcing policies like building efficiency codes and fostering voluntary programs to pursue LEED certification can offer certainty and standardization. Cities can lead by example, ensuring that their own buildings adhere to the policy goals, unleashing the power of information and communication technology in public buildings. In its recent report, Smart Buildings and Smart Cities, Navigant Research expects the global smart public buildings market revenue to grow from $3.6 billion in 2017 to $10.2 billion by 2026 at a compound annual growth rate of 12.1%.

One of the leaders in this area is Washington, DC, which was named the first LEED for Cities Platinum city in the world in August 2017. Washington, DC requires all new public sector buildings to achieve a minimum of LEED Silver certification. And starting in 2012, all new private buildings over 50,000 square feet were required to achieve LEED certification. Once the regulations kicked in, the private sector responded by competing for LEED certifications—developers wanted to achieve higher levels of certification against their competitors.

Regulatory certainty and standardization of business together with government efforts to lead by example are key to encouraging investment in the smart buildings sector. As stated in my previous blog, cities wishing to remain competitive in the face of new emerging technologies and a new generation of top talent will want smart buildings as an action item.