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November 2019
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Demonstrating Smart Building Business Value Further Up The Chain

"The business case for smart buildings must be clear, offering a more quantifiable return on investment (ROI) and more tangible benefits — not just a vision of a happy, healthy, productive workplace."
James McHale

James McHale,
Managing Director,
Memoori

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“The buildings industry is notoriously slow to embrace change and innovation, and established procurement practices are highly risk-averse and tend towards lowest-cost options,” highlights our latest report Future Proofing Smart Commercial Buildings. “While the market for smart building technologies continues to grow at a healthy rate, and customer expectations continue to rise, the technology is yet to become truly mainstream.”

We may have been talking about smart buildings for 25 years or so, but some technologies are still in the early adopter phase and have been for quite some time. For the industry to move on to the first follower phase, the era of growth that leads to mass adoption, we must develop stronger evidence to support bold value generation claims.

The business case for smart buildings must be clear, offering a more quantifiable return on investment (ROI) and more tangible benefits — not just a vision of a happy, healthy, productive workplace.

When benefits are more tangible, as with energy efficiency, it only represents one piece of the smart building offering. Only 15% of U.S. commercial buildings have building automation systems (BAS) that deploy controls, such as sensors that turn on lights or heating a room only when it’s occupied, according to a 2017 Pacific Northwest National Laboratory study. This figure is accentuated by small and medium commercial buildings that fall well behind the curve in terms of smart building technology adoption, and one of the key reasons for that is cost.

In 2016 the average cost to deploy a BAS ranged from $2.50 per square foot to $7.00 per square foot, meaning even for a 50,000 square foot building, costs could be between $125,000 and $350,000 for a complete install. This is beyond the resources of many small to medium-sized enterprises (SMEs), blocking access to the technology and slating the market towards larger buildings with bigger budgets. While reducing energy costs offers tangible benefits to all building sizes, the investment is too big and the payback too long to justify the small and medium commercial facilities that make up the majority of building stock.

Furthermore, smart building technologies offer so much more than just energy savings, and we in the industry, know that the value of occupant-centric applications far outweighs the energy cost saving. If these benefits were more tangible they would no doubt sway those on the fence and trigger a wave of adoption across the building spectrum. Utopian visions of futuristic smart buildings only entice a few, energy savings make sense for the biggest buildings, but if we are to truly seize the smart building technology market in commercial real estate, we must be able to persuade customers in the language of business.

“As with any significant business investment, much of the challenge in getting smart building initiatives off the ground revolves around establishing the business case and business value proposition,” explains our recent report. “Smart building initiatives should be aligned with corporate priorities, KPIs and business value. While market fragmentation, a lack of applicable skills and several other challenges can complicate the delivery of smart building solutions, market-ready technical solutions now exist for a multitude of different use cases and industry scenarios.”

This kind of development comes with the maturing of solutions, and in a previous report on Big Data for Smart Buildings, Memoori developed the following model to describe three potential levels of smart building data solution maturity which has some utility in describing the relative potential levels of “smartness” of a building and is illustrated below:

building smartness

PlantPROCORE Our latest report puts solution maturity into the context of Future-Proofing Smart Commercial Buildings, and our new assessment finds very few organizations reaching level 3. That is Smart Building solutions that use their building assets to differentiate themselves in the market or develop innovative new solutions. “Progress has been slowed by a variety of factors including the technical legacy of building management systems, historical under investment in modern technologies, and concerns around compliance, security and data privacy, as well as a lack of technical expertise,” the report says.

There are some positive signs; however, smart building solutions have been able to grow a body of use cases that prove their potential returns. This has demanded long-term, in-depth studies in real-world situations that provide clear and accurate results, which account for the wide range of variables and demonstrates robust short and long term paybacks.

We, as an industry need to move away from the focus on long-hanging fruit by demonstrating the value that exists for all kinds of buildings further up the chain.

“Moving up the chain is an iterative process, with new initiatives added to the overall range of smart solutions being used over time helping stakeholders build relevant skills and the company’s overall smart building related skills and capabilities, increasing efficiency and steadily reducing operational costs as they go,” our new in-depth report continues as it guides readers through the complex world of Future Proofing Smart Commercial Buildings.

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