Vince Lombardi, legendary football coach for the Green Bay Packers, once said: “some people try to find things in this game that don’t exist. I don't care about formations or new offenses or tricks on defense. Football is only two things – blocking and tackling.”
The rapid ascent of real estate technology has had a similar effect, leading many try and find solutions to problems that don’t exist. However, like football, operating commercial real estate is only two things: maximizing revenues and minimizing expenses.
In last week’s video, Michael Beckerman, founder and CEO of CREtech, revealed the advice he gives to landlords looking to adopt technology to help improve their results in an increasingly competitive market. There was one point in the video that deserves to be expanded upon - finding product fit to solve an existing pain point.
For example, while countless companies touted how the blockchain and artificial intelligence will revolutionize leasing and asset management, VTS simply went about digitizing the manual and siloed processes that landlords and brokers deal with daily. This focus on basic blocking and tackling enabled them to solve an existing pain point and quickly help landlords maximize revenue and minimize costs.
It’s not hard to see the parallels in the “Smart Building” sector of technologies designed to improve how buildings are operated. Again, the promises of artificial intelligence and cloud-based automation systems are being sold well before most portfolios have perfected their basic and unavoidable daily processes.
The gap between what the future will look like and the current state of operations, even in the best run portfolios, is enormous. Here are some of the outdated processes that continue to this day, and how technology can alleviate these existing pain points.
Equipment-level performance analytics have reached a point where conditions-based maintenance and predictive fault detection are becoming a reality in commercial real estate as they have in manufacturing. Every day, Enertiv alone collects over 4 million hours of machine data to be analyzed by data scientists and machine learning algorithms. Over time, this steady accumulation of data leads to better predictions and more robust insights, helping operators prevent problems, save money, and improve the tenant experience.
However, adding predictive maintenance capabilities without addressing the basic blocking and tackling of preventative maintenance is backwards. Even with a predictive fault detection solution that identified every impending equipment failure before it occurred (the world is not there yet), running equipment to near failure is not as beneficial as consistent preventative maintenance.
Preventative maintenance has a 545% ROI over reactive/corrective maintenance when the extended useful life of equipment is factored in. Despite this, only 13% of commercial real estate portfolios have a functioning preventative maintenance program in place. Clearly, one of the two fundamentals of commercial real estate, minimizing operating expenses is not receiving the attention it deserves.
Perhaps one reason is that, like blocking and tackling, preventative maintenance is not a glamorous job, and the benefits are usually hidden to the one doing the work. Furthermore, there’s no equivalent to game tape in building operations, where operators and managers can review last weeks performance and find areas of improvement.
Digitally logging preventative maintenance tasks is not a game changing technology, this type of solution has been around for a long time. What has changed in recent years is the affordable equipment-level performance tracking mentioned earlier.
The combination of digital preventative maintenance notifications and real-time performance tracking enables operators to both streamline their activities and clearly see the quantified benefits of their work. Meanwhile, management gains have transparency into the work that is being done (or not done) without having to physically be on site.
One area where the gap between futuristic Smart Buildings and the status quo is abundantly clear is with building documentation. The electrical and mechanical drawing sets, meticulously organized when the building is first constructed, are usually no where to be found after a handful of years of operations. The same generally goes for the equipment-specific O&M manuals and information about the metering infrastructure.
This has numerous consequences downstream. Repairs must be left up to expensive third-party vendors, institutional knowledge is lost when operators retire, and time is wasted searching through paper archives to find the right documentation. Furthermore, this lack of documentation delays the conversion of an asset into a Smart Building because systems must be surveyed again, and redundant information collected.
Not only can new technologies offer a digital archive of building documentation, metadata collected about an asset can dynamically serve up relevant documentation to on-site operators and portfolio managers in the field.
Of all the activities required to operate a building, perhaps none is as archaic as manual tenant submeter readings. The fact that office landlords make tenants open their space every month to a stranger who writes down numbers from a meter on the wall is almost unbelievable. Equally as confusing, some portfolios leave the job up to their highly-paid and skilled engineers.
Not only is it a nuisance, there are many opportunities for an error to occur. From writing down the original meter reading, to transferring the data to a spreadsheet or tariff engine, to transcribing the output to the tenant’s bill, there are too many moving parts to trust the process. Multiply these activities by dozens or hundreds of tenants monthly and frustrating mistakes are bound to happen.
Even a minor typo can have major consequences. For example, during the “shadow billing” period with a new client, Enertiv’s system noticed that a simple typo from the existing vendor’s meter reader from a “2” to a “3” resulted in a tenant being billed $16,000 more than they were supposed to. Luckily, we were able to alert the property managers before the bill went out, but this type of situation is all too common.
The path to a digital metering infrastructure, where readings are read remotely and bills are generated automatically, depends on what meters are currently in place. This video, shot by Enertiv’s Chief Technology Officer, Pavel Khodorkovskiy, explains how to determine where you are today and the optimal path moving forward.
On average, the performance of newly commissioned buildings drift about 20% downwards in the first two years of operations. Because of that, it has become widely recognized best practice to periodically retro-commission assets to bring performance back up to the original specifications.
The problem, besides how infrequently the process is performed, is that commissioning requires an expensive, highly-skilled technician spend hours surveying the building systems and taking measurements.
Recently, thanks to the same equipment-level performance tracking used for maintenance optimizations, this process can be performed continuously. Instead of doing a major commissioning project once every five years, “continuous commissioning” through a building monitoring system notifies operators the moment performance begins to drift due to issues such as scheduling or set point changes.
During each budget season, asset managers go line by line through the capital expenditures that must be made depending on the age of equipment and the funds available. Not only is this a manual process, but it relies on the manufacturers estimates for useful life and does not account for the conditions of each piece of equipment, such as the frequency of breakdowns and repairs.
When making decisions about equipment that is expected to last for 20-25 years, every factor should be accounted for. Unfortunately, in many portfolios, the evaluation process is almost entirely based on the upfront cost of the replacement instead of also incorporating the lifecycle cost of operating the equipment.
In addition to benchmarking properties against similar assets, which has become common practice in commercial real estate, technology now enables landlords to benchmark their equipment against similar systems throughout their portfolio and against industry averages. This both helps streamline the decision-making process by clearly highlighting which equipment requires replacement, it informs asset managers as to which makes and models perform the best over the long run, not just which cost the least upfront.
As more portfolios have begun to focus on sustainability, the number of new energy-related processes and reporting requirements have ballooned. From measurement and verification, to energy budgeting and forecasting, to achieving and maintaining ENERGY STAR and other accreditations, to submitting benchmarking data to regulatory bodies, to applying for rebates, the number of necessary activities that do not directly reduce utility spend has increased tremendously in recent years.
Each of these processes are tedious, manual, and siloed from each other. The focus of sustainability departments should be on executing retrofit projects and operational improvements, not on paperwork.
Fortunately, the data that feeds these paperwork requirements is easy to capture, and there is now software that can streamline and centralize these processes.
The future of buildings is truly exciting. The reality of Smart Buildings that can adjust dynamically to outside conditions and individual preferences of tenants is not very far off. Management will have access to a “digital twin” which will be accessible from anywhere in the world to ensure flawless operations across massive portfolios.
But before we get there, the basic blocking and tackling of operating a commercial real estate must be perfected. Now that technology is available to streamline the unavoidable processes of preventative maintenance, documentation archiving, submetering, commissioning, capital investment decisions, and energy management, the status quo is no longer tenable.
From this strong foundation, the flashy solutions that will bring about the buildings of the future will be able to fulfill their full potential.
Need help streamlining your building operations? Enertiv can help, demo our platform today!