Richard Morris 30 March 2020

Smarter buildings create smarter revenue

In an ever-evolving digital age, technology is changing all areas of life from home to the workplace. Industries across the board are reaping the benefits of these technological advances, with improved connectivity a major advantage. This is very much the case in the realm of commercial real estate (CRE), a sector where local authorities are increasingly making significant investment to drive new sources of income.

In CRE, buildings are getting smarter and there is significant opportunity for local authority investors to enhance the performance of these assets. Tenants no longer consider a building purely on the basis of its bricks and mortar offerings, looking now for the additional promises of strong connectivity and the potential of technology to support productivity and employee wellbeing across a business. For property owners and investors, the integration of technologies such as Internet of Things (IoT) in buildings can be the key to enhancing profitability and ensuring longevity through improved tenant retention. This, in turn, can support wider economic growth and community schemes within an area.

Smarter buildings create smarter revenue

The smarter the technology of a building, the more value added for both property owners and tenants. This is especially the case around connectivity, which is key to mitigating against void space and any possible resultant lapses in profit, while also providing a direct attraction for tenants. Indeed, according to property consultants Cluttons, 78% of landlords have actually been able to achieve rent increases as a result of improved connectivity and 72% have been able to reduce voids in occupancy rates.

Tech-enabled solutions not only increase the appeal of a building but are also now being recognised in efforts to define quality across the sector. For example, WiredScore provides an industry-recognised certification for the digital connectivity of a building, which brings a greater level of transparency and assurance to prospective occupants. The value of this is clear, with buildings certified by WiredScore able to command an average 5% ‘digital premium’ for office space in the capital.

However, the potential to establish truly smart buildings goes beyond just connectivity. Property owners are now able to collect and capitalise on their own data, tracking areas such as occupancy levels, energy usage, ventilation and temperature in order to improve efficiency and profitability across their building. Crucially, these enhancements are also a significant step towards ensuring the future profitability of any asset, given the expectation that 72% of digitally unconnected spaces could become obsolete in the not so distant future.

Benefiting businesses

Alongside improved connectivity, smart buildings can bring a wealth of additional benefits to tenants – benefits which improve tenant satisfaction and retention and therefore an asset’s overall performance. For example, greater technological capabilities within buildings have been found to improve productivity and, in turn, business performance, with benefits such as super-fast broadband able to better connect and enhance communication channels amongst employees and external parties. These capabilities therefore have significant benefits to tenants’ bottom lines, with 81% reporting that a well-connected office means a better performing business.

Secondly, enhancing the offering of a building can have a keen impact on a tenant’s wellbeing. Amongst senior business decision-makers in the UK, over two thirds believe poor connectivity is detrimentally linked to their work-life balance and mental health. Further, technology is crucial to achieving flexibility in one’s work life, facilitating remote working, enhancing communication and establishing new tools for greater efficiency – a benefit never more important to businesses than in the current climate around COVID-19.

Furthermore, environmental factors, which can have a pronounced effect on mental wellbeing, can be more readily controlled in smart buildings to ensure a more happy, healthy and productive environment. When the businesses are free to worry less about the quality and comfort of a workplace, they can focus more keenly on areas such as improving wellbeing, morale and productivity.

CRE assets contributing to wider community schemes

Ultimately, by enhancing the offering of their spaces, local authorities can see far greater returns from CRE assets, which can in turn be funnelled into providing vital services in the area. However, establishing smart buildings can in itself make a significant contribution to the local economy and community.

The struggles facing the high street, especially in smaller cities and towns, are well-known, but attracting more diverse economic activity to an area can in fact be a well-thought strategy that reinvigorates demand for high street retail and leisure facilities.

Similarly, attracting tenants such as flexible workspace operators (or even establishing an independent flexible workspace offering within the building) can help to provide tailored spaces that support the growth of local business. Councils have an abundance of knowledge about their own communities and are well placed to ensure that they create smart buildings best able to support the business needs of their area, which can bring economic benefits to the wider community.

What is clear is that when local authorities improve the intelligence and capabilities of their building, they can enhance both its potential profitability and their tenants’ experience. There is no doubt that the technological capabilities of buildings will continue to evolve, but what is crucial now is that councils seek to capitalise on the potential of their property assets, using this to support not only their own revenue schemes, but also their communities of tenants and the wider (and increasingly diverse) economic activity of their boroughs, towns and cities.

Richard Morris is director at technologywithin

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