Commercial property values are based on numerous factors, including obvious metrics such as location, age, type of building, etc. Each of these factors influence the revenue generation potential of the commercial property as proxy indicators for the desirability from the perspective of potential tenants.
Commercial buildings are increasingly evaluated based on technology features contained therein. So much so that Smart Buildings carry an implicit tag of superiority versus relatively unsophisticated buildings of generations prior. The Internet of Things (IoT) represents one of the new technology trends that have become entrenched within the new wave of Smart Buildings.
IoT should never be viewed as a novelty for technology sake. IoT is uniquely qualified to solve day-to-day Operational Technology (OT) problems in a retrofit capacity, obviating the need for large-scale technology overhauls. Below we examine a few ways that IoT can deliver to the bottom line, providing a tangible, economical path for increasing the value of a commercial property.
Tenants represent the revenue generation side of any commercial property. Their satisfaction in the entirety of the experience within the occupied space will color their view of the perceived value of their current lease. That perceived value, relative to competing commercial property space, will have a direct impact on lease renewal rates.
Tenant satisfaction matters. While tenant surveys can provide indications and trends of perceived satisfaction/dissatisfaction, the generalities extracted from those results may not point to clear plans of action for improvement.
Building engineers know the frailties and problem spots in their buildings. They know because they happen repeatedly, and have a series of trouble tickets to prove it.
IoT retrofits can deliver targeted visibility to conditions in the building, which enables proactive vs. reactive actions by the building engineer. For example, (1) wireless temperature/humidity sensors can be installed in known problem spots within tenant spaces to monitor hot/cold issues, (2) temperature probes can be installed on pipes known to be at risk for freezing or installed on HVAC equipment to track supply/return temperatures, (3) leak detection sensors can be installed in remote areas of a building known to be at risk for overflows or condensation build up, etc..
IoT provides the real-time visibility that enables building engineers to get ahead of problems before they occur. Significantly, the real-time visibility should provide notice to building engineers before any trouble tickets are submitted by tenants. The perceived satisfaction by tenants will inevitably improve. IoT is uniquely positioned to deliver targeted metrics that will improve building operations using proactive facility management.
Smart Building trends continue to advance in CRE. PropTech represents a wave of digital transformation that is fundamentally changing the CRE industry on both the owner/operator and tenant sides of the equation. The long lifespan of commercial buildings highlights the risk for obsolescence, both technological and functional.
Every commercial building currently faces both technological and functional obsolescence. It is an inevitable fact. The extent to which owners/operators can define a technological upgrade path will impact the relative valuation of the commercial property. The larger the technological gap due to obsolescence, the greater the cost to perform the upgrades, and hence, the lower the value of the commercial property.
IoT is uniquely positioned to solve the obsolescence problem because it does not require a wholesale change of the technology infrastructure. Targeted wireless IoT retrofits can augment an existing infrastructure by replacing outdated technology, and can also add new technology features that the old infrastructure could not support.
For example, wireless IoT retrofits can address technological obsolescence in a BAS infrastructure by connecting directly to HVAC equipment to implement new control strategies based on schedules, zone-based sensors, or staggered start times. In another example, wireless IoT retrofits can address functional obsolescence in a BAS infrastructure by adding modern Indoor Air Quality (IAQ) sensors (e.g., Particulate Matter (PM), Volatile Organic Compounds (VOCs), Formaldehyde, Ozone, Carbon Monoxide, etc.) where none previously existed in the building.
Wireless IoT retrofits can upgrade the tech features in a commercial property in a myriad of ways. Taken in combination, the array of upgrades will enhance the overall technology quotient in the building, thereby enhancing its value.
In that regard, real-time utility submetering is still a vastly under-utilized tool in commercial properties. The technology isn’t new as utility submeters can be installed to track utility usage in remote parts of a building. Every facility manager should have access to granular insights to the utility consumption for different parts of a building, at the tenant level or at the critical facility equipment level. Real-time tracking using alerts and notifications should be the norm to highlight deviations and inefficiencies.
Flatly stated, it isn’t smart to have limited visibility to the operation of your building. IoT will bring real-time cloud visibility at a fraction of the cost of an infrastructure upgrade.
PropTech trends continue to proliferate throughout the industry. IoT represents a practical mechanism for delivering practical solutions to existing problems. The benefit beyond operational efficiency? A bump in valuation.