Investment in Smart Buildings Moving Up the Agenda

by James de la Salle

Our new research among landlords, property managers, agents and suppliers reveals that investment in smart building technologies is finally moving up the agenda. There is increasing recognition of their ability to create efficiencies in commercial real estate, bringing costs down, increasing tenant satisfaction, improving space management and ensuring strong energy performance.

The research shows that more than half (58%) of respondents see smart controls and sensors as important in building management, with the majority (92%) saying spend in this area is increasing.

As a result, this is creating exciting opportunities for suppliers who develop systems and technologies such as controls, occupancy monitoring and data-led services for the sector, with CIL forecasting a 10-percent growth rate over the next five years, and profit margins of more than 20 percent.

In the short term, CIL believes that in a market heavily driven by ROI, the strongest case for smart controls is within prime real estate. Properties in larger cities with higher rents can justify refurbishments and upgrades, so it is these buildings which are seeing the early investment. Older buildings and commercial real estate out of larger cities are likely to take longer to adopt this technology.

However, as property managers build a stronger economic case for smart technologies, we predict a sector of high growth and strong margins, with clear benefits for commercial real estate.

Energy Efficiency Has Become a Top Priority for Commercial Landlords.
The research also confirms that energy efficiency improvements have been a key driver of investment across commercial real estate to date, thanks to an increased focus on combatting climate change, new regulation and the desire for cost-cutting.

Current industry focus is on LED lighting, which can substantially reduce the cost of building maintenance. This focus is broadening to include advanced heating, ventilation and air conditioning systems (HVAC), with 84 percent of respondents predicting a rise in future spend.

As a result, CIL is forecasting growth of 5 to 10 percent in this area over the next five years, driven in part by the uptake of more advanced systems. This is particularly true of the HVAC market as it shifts towards local heating and cooling of rooms, alongside the development in smart thermostats and room monitoring.

James de La Salle is director of CIL, a leading management consultancy serving growth clients in international markets.

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