“Commercial and public property owners are looking to smart building technology to boost operational efficiency, achieve energy savings, improve capital planning, and reduce their carbon footprints,” said Dan Probst, chairman of energy and sustainability services at Jones Lang LaSalle. “These advantages, combined with tenant preferences for smart building features, provide a competitive edge for owners and investors.”

The report identifies the following five major trends:

1) Rapid return on investment (ROI). Smart building technology investments typically pay for themselves within one or two years by delivering energy savings and other operational efficiencies. Also driving the fast payback is the low cost of automated building technology, which has fallen as adaptation has increased. For example, Procter & Gamble’s building management pilot program generated a positive return on investment in just three months.

2) Operating-expense (op-ex) advantage. Relative to other energy-related building upgrades, smart building technology requires little upfront capital expenditure (cap-ex), while delivering significantly reduced operational expenditures (op-ex). Using automated systems, smart buildings generally cost less to operate than buildings operating solely on legacy systems, therefore offering a long-term op-ex advantage. By combining smart building systems and data analytics with facilities management, a smart building management system can detect and resolve building issues before equipment failures and capital expenditures ensue. In addition, operational and energy savings begin shortly after the smart building management system is implemented.

3) Marketing mileage. As reported in Jones Lang LaSalle’s October 2012 Global Sustainability Perspective, a number of studies and surveys indicate that tenants increasingly expect smart building features such as zoned HVAC, sophisticated equipment maintenance alert systems, and advanced security systems. Like a new lobby or elevator bank, an improvement in sustainability makes an office building more desirable to tenants. These benefits can justify collecting higher rent, and can increase competitive advantage and occupancy rates. And when the building is sold, sustainable investments can be recouped in an increased sales price. In fact, a 2011 study by Eichholtz, Kok and Quigley indicated the premium for Leadership in Energy and Environmental Design (LEED)-certified or Energy Star-labeled buildings is approximately 13 percent.

4) Energy savings. Smart building technology can generate energy savings of eight to 15 percent annually almost immediately after deployment, with the potential for incremental improvements over time. A 2012 report by the Rockefeller Foundation and Deutsche Bank Group, estimates that $289 billion in building efficiency investment would produce savings in excess of $1 trillion in the U.S. alone, with every dollar invested in energy efficiency producing three dollars of operational savings.

5) Improved Corporate Social Responsibility (CSR) profile. Redirecting energy spend to building efficiency has allowed some corporate decision-makers to gain the reputational advantages of doing the right thing by the environment while also gaining significant performance and productivity improvements. Another benefit is a smart building system’s ability to measure and report greenhouse gas emissions. Some owners feed building emissions data to multiple benchmarking organizations, such as Greenprint and GRESB, as well as to Ceres and similar third-party reporting organizations, and smart systems can roll up the information from across a building portfolio.

The full report can be downloaded here.

Publication date: 11/18/2013