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Your Building Is Talking, Are You Listening?

As property professionals interested or invested in the future of tech-centric buildings, we ply our trades in an exciting time. Each year another nimble startup seems to announce their own new, creative approach to the challenges facing the industry. However, we don’t often seem to take a step back and ask the fundamental question: What exactly are smart buildings? What is their goal, and why are we so enthusiastic about them?

A Propmodo-hosted panel at New York Real Estate Tech Week sought to propose answers to these questions. Moderated by Pete Hallett, CTO for District Technologies, the panel consisted of Matt Ellis, CEO of Measurabl, Marian Kost, Disruptive Technologies Chief Sales Officer, Jeff Hendler, co-founder, president, and CEO of Logical Buildings, Brock Nigg, founder and CEO of iES, Robert Cooper, founder, president, and CEO of Embue, and Shannon Smith, CEO of PointGuard.

The opinions of the panelists were as varied as their backgrounds.

“In my prior life I was a commercial real estate broker,” Matt said. “What’s the real estate business? It’s an asset class that generates income. So a “dumb” building would be one that doesn’t do that. A smart building would be one that does. We can dress it up however we like it, make it sound far more intelligent and all, but my most basic assessment, is it a profitable asset? Is it in the long run profitable, that might be where it gets a bit more interesting.”

Others agreed, adding additional insight to that working definition.

“It’s being able to link that [property operating] information to people who run the building to create that value,” Jeff added.

Other panelists offered different angles less connected specifically to profit.

“A smart building is software that enables participation from people that operate these assets. So tools that enable and equip people to build, to innovate, to trial, to experiment, on a platform that is able to create data interchange with any sort of device or sensor…,” Brock said.

Comments such as these, though varied, indicate a general definition focusing on connectivity and efficiency, regardless of the specific metric used. In practice, different professionals offered varying opinions on practical goals for smart buildings.

“In…facility management, we really are looking just for a smarter building. And for us, that’s defined by precise action. Nothing good happens in a building unless you can turn a wrench or make it better,” Shannon said.

Shannon was not alone in this more conservative interpretation on the state of smart buildings. While bearish might be too strong a term, several panelists did express more reserved opinions on the state of the industry, citing concerns over market penetration among others.

“…The best tech…it’s never going to get to a mom-and-pop building,” Matt said. “So what are we doing to change that? It’s obviously not yet more tech. I believe in debt. I believe in equity. They’re by far the biggest component of the building’s stack. Let’s talk about business models and value drivers there, not necessarily optimizing for energy [consumption].”

That concern over the smart building energy efficiency craze was echoed by some of the other panelists, who seemed to emphasize that energy efficiency is not necessarily a goal in and of itself, but rather a correlate of lower operating costs and positive environmental externalities.

“We don’t believe buildings were ever built to save energy. We believe they were built to provide a great workplace experience and last as long as they can for the lowest possible operating and capital cost,” Shannon said.

Others agreed.

“Energy is nice and easy because it’s easy to put an ROI around it. It’s an existing expense that you can now with an investment show an ROI, a payback, and we thrive on that. But there’s also other types of values that IoT is uncovering and revealing,” Jeff said.

This discussion led to perhaps the most salient point of all: What exactly is value? Panelist opinions were varied.

“So value in my experience is in the idea of a shared vision. With each customer and person where they can build toward that vision iteratively and refine their models and their understanding…so meaning to us and value to us is participation where people can build and make sense of data,” Brock said.

It was that theme of bridging a data-human gap that seemed to rise to the surface over the course of the panel discussion. One way or another, most of the panelists seemed to allude to an inherent worthlessness of data without some sort of intelligence – human or artificial – to interpret that data and act appropriately.

“So in our case it’s all about ultimately increasing the net operating income and thereby increasing the asset value for owners,” Robert said. “…Now you go down another level and yes it’s energy, it’s…preserving the building fabric which comes into an insurance angle. But a lot of what’s really gratifying to me is to see customers that maybe they came to it through energy, but when they see the data we’re providing and the alerts we’re giving them, we are letting them know about problems in the building that are going to affect resident comfort, health, and satisfaction before the resident finds out about it. And that means that not only are they saving energy and making the environment more healthy but they’re actually providing a better service.”

By the end of the panel, a few conclusions seemed to rise to the surface. Smart buildings seem to be those with the connectivity and data-gathering capabilities necessary to increase property value when compared to an equivalent “dumb” building.

Value in turn can mean different things to different players, but fundamentally comes down to a dollar valuation, with a basket of other impacts – environmental, satisfaction, health – functioning in tandem. By understanding this definition of value, perhaps owners can focus their efforts on adding value where it is most needed, and tech players can tailor their solutions even more accurately to deliver their expected results.

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