IoT investment beneficial to CRE owners of all sizes
The internet of Things (IoT) and digital devices are changing a fundamental truth about the commercial real estate (CRE) industry. Information, information, information is eclipsing the age-old mantra of location, location, location.
While finding a space close to customers, employees, and suppliers is a fundamental requirement for tenants, experts say the emergence of information-based IoT applications and big data are transforming the value proposition of the CRE industry.
“Owners with a little forward-thinking vision and willingness to adopt are coming out ahead. It’s been proven time and time again the cost savings benefits of having better controls. Digital wireless devices are becoming mandatory. Sometimes saving a penny a square-foot can make all the difference in the bottomline for CRE owners,” said Jonathan Jones, senior property manager at Holt Lunsford Commercial, which manages more than 70 million-square-feet of commercial space in Dallas, in an interview with In-Building Tech.
Barriers to entry are diminishing as industrial sensors become more affordable enabling commercial building owners to retrofit their buildings with wireless digital devices to better compete with new developments, Jones added.
According to data compiled by Statista, the cost of industrial sensors has declined by 70% in 16 years making them more affordable for all sectors, including CRE.
Buildings with IoT sensors and devices are not only reaping the rewards derived from reduced energy costs but also have a significant competitive advantage—they can provide clients with valuable consumer data.
Using sensors to create heat maps to determine which products consumers are approaching in retail settings or tracking customers inside a mall can help clients determine product placement are just a two examples of how digital technologies are translating data into dollars for building owners.
As the global market for the IoT in buildings approaches $75.5 billion by 2021, several new trends are emerging in the CRE sector.
One of the primary requirements from office building tenants is higher network capacity and bandwidth to transmit data effectively, said Jones.
“We are seeing clients asking for double fiber connectivity. Commercial owners who doubled down on fiber added between $20 to $30 per square foot based on location,” said Jones.
Customized apps to manage operations and maintenance remotely in real-time and building engineering staff with competency in IoT-related software technologies are also in demand, Jones added.
While these changes offer an opportunity to revitalize CRE, a change in the mindset of building owners is essential.
The CRE industry has traditionally been slow to adopt because most owners think of their buildings as fixed assets within a defined structure but owners who recognize them as dynamic landscapes which are used by customers to accomplish vital tasks can completely change their value proposition.
One of the misconceptions among building owners is that technology favors the titans like Walmart or Amazon, but some experts say digital technology and sensors are leveling the playing field for smaller developers as well.
Smaller developers can offer customized spaces for startups and mid-sized firms by deploying sensors without making substantial infrastructure investments.
“In the digital economy scale is not always required to win. If you are a smaller developer you can find the best way to solve a problem with technology without having to spend the kind of money that large companies have to spend,” said Chandra Dhandapani, chief digital and technology officer at CBRE.