As important as it is to continuously improve how buildings are operated within a portfolio, it is equally important to avoid missteps that negatively impact performance. By working with some of the best operated real estate portfolios in the world, we've noticed a set of common strategies and mindsets.
The best operated portfolios don’t necessarily do more of any one thing. Instead, driven by a deep understanding of what is important, these industry leaders apply technologies, invest in equipment, and update operational strategies intelligently. Over time, doing all the small things correctly unlocks asset value that would otherwise have been lost to wasted operating expenses.
Here are some of the things that the best operated portfolios don’t do.
1. Implementing “point solutions”
The rush to adopt technology in real estate portfolios has led to a range of “point solutions” that solve very specific problems. For example, many buildings have an Energy Management System, a tenant submetering provider, a Computerized Maintenance Management System, a Building Management System, and property management software, all of which do not "talk" to each other.
With data siloed in an ecosystem of point solutions, data are being gathered to meet just the requirements of a specific building system or business function. Disparate groups with unrelated responsibilities then analyze specific information and lack unification or collaboration. Fragmentation can also lead to duplicative analyses and non-standardized data
The best operated portfolios evaluate technology more holistically, so that more aspects of operations can be housed within one system and more systems can be tied together. This white paper outlines how to implement a comprehensive building operations technology.
2. Evaluating retrofit proposals based on intuition and experience
There is never any guarantee that the outcome of an equipment retrofit will match what was originally proposed. However, the best operated portfolios have systems in place to ensure that discrepancies will be minimized. This is accomplished primarily with granular data into the building system that is being retrofitted.
Even if a vendor has a very good idea of the percent savings that their equipment will accrue over what is installed, what does that absolute number equate to? This is impossible to answer without equipment-level data. Industry-leading portfolios understand the power in these data. Not only can proposals be grounded in truth, but it can help operators work with vendors to avoid costly over-sizing of equipment, a common issue with retrofits.
This article outlines how the best operated portfolios use equipment-level data to measure and verify a retrofit proposal before an installation.
3. Assuming building automation is inherently smart
There persists an assumption in many real estate portfolios that automation through the Building Management System (BMS) will necessarily lead to improved performance.
It is true that a building with a properly programmed BMS will run more efficiently and have a healthier indoor environment than a building without any controls. However, the programming and adjustment of these systems still depend on persistent diligence of a human operator.
The ability for equipment to be turned on, ramped up, or ramped down automatically based on specific set points allows for a response to conditions that no human could operate manually at scale. Obviously, there is tremendous value in a BMS and it can be an invaluable tool to reduce costs.
But the best operated portfolios understand that BMS need to be optimized using supplemental technologies. This article covers the ways to optimize a BMS and avoid a downward drift in performance over time.
4. Settling for high-level, closed, and expensive data collection
As we've covered, the best operated portfolios are using data to make more informed decisions. However, not all data are created equally. There are a few areas that are crucial for a robust, actionable data set. On one hand, granular data costs more to collect than very high-level data (for example, the difference between equipment-level submetering and building-level data). On the other hand, equipment-level submeters are generally an order of magnitude less expensive than using a Building Management System as the main data source.
Along the same lines, and for good reason, data in Building Management Systems are maintained on the building’s intranet. The safety risk of systems that control equipment is generally too high to host on the cloud. However, this makes analyses across a portfolio almost impossible. The best operated portfolios understand that by separating controls from data collection, a much more robust data set can be created and utilized.
This article explains how to get granular, cloud-connected, integrated, and affordable data out of commercial real estate.
5. Not leveraging machine learning
Machine learning is the process of teaching computers to make and improve predictions based on the data available, without being explicitly programmed. In most cases, the only data operators use to form judgments is pieced together from spreadsheets, preventative maintenance software, utility bills, and their own intuition.
Now that a sizable, diverse and granular dataset can be extracted from buildings, the tools available through machine learning can bring massive benefits to building operators. Costs can be accurately forecasted, schedules optimized, equipment malfunctions predicted, and weather-normalized reports generated.
The best operated portfolios understand that machine learning can solve existing problems faced by operators. This article dives into the ways in which machine learning is being applied to building operations.
6. Remaining reactive to building regulations
Recently, Bill de Blasio, mayor of New York City, outlined his plan to require thousands of buildings to comply with new energy-efficiency targets by 2030, or face stiff penalties. The legislation would set maximum levels of energy that a building could use. For instance, market rate apartment buildings would be permitted to use 50,000 B.T.U.s of fossil fuel per square foot per year. Today, an average apartment building uses from 65,000 to 70,000, according to Michael Shaikh, a spokesman for the mayor’s office. Such buildings would need to reduce their energy consumption by about 25 percent.
In the absence of broad, market-driven policy at the federal level, real estate organizations will continue to be forced to adhere to top-down regulation from state and local governments. Some may attempt to fight each piece of regulation, but the trend is clear. The best operated portfolios understand that it is better to get ahead of the curve, and implement energy-saving initiatives on their own terms.
This article covers 11 ways real estate portfolios can get ahead of energy efficiency regulations.
7. Relying on manual tenant submetering
When the decision is made to submeter tenants for their utility usage, the owner or property manager is making a choice that could impact their bottom line for decades.
Even with tenant relationships and potentially millions of dollars at stake, choosing a submetering vendor is often an afterthought. More often than not, the company in charge of submetering is selected by the design engineer because they provide cheap hardware and have been around since the 1980’s.
The best operated portfolios understand that marginal increases in meter costs will be quickly covered by the productivity gains from automatic meter readings, digitized processes, and fewer tenant disputes. In addition, experienced operators know that any system which does not allow a switch in service if the vendor does not live up to expectations is not optimal.
This white paper crunches the numbers around how much money can be saved by implementing an automated tenant submetering solution.
8. Depending solely on personal relationships
Surprisingly, real estate, the largest asset class in the world, still largely manages its buildings with more art than science. Largely dependent on personal relationships, building operations have only recently become more exacting. Most owners and operators would still prefer to stick with a vendor or partner they know than to follow the cold, hard data.
However, the best operated portfolios understand that in a world with an increasingly complex web of employees, vendors, and partners, depending on personal familiarity can be very bad for business. This is true across the value chain of real estate, but especially relevant for property management and the vendors necessary to operate buildings effectively.
This article outlines how and why personal relationships, while important, cannot be solely relied upon to achieve maximum operational performance.
9. Collecting non-actionable data
Just because new forms of data exist doesn’t mean that building operators are going to go from working hands-on with equipment and staff to sitting behind a desk to pour over analytics. Instead, the solutions that the real estate industry leaders are adopting are based around actions supported by analytics.
For example, conditions-based maintenance is beginning to substitute preventative maintenance. This maintenance strategy uses continuous tracking of equipment and notifies operators when maintenance is required, such as when performance is veering off normal parameters or has failed entirely. When this happens, operators are provided a series of data-driven recommendations, product specifications, clear diagrams of the relevant power infrastructure, and basically everything one could need to quickly troubleshoot an issue once detected.
This article dives into the difference between building data for data’s sake, and specific, actionable data-driven insights.
10. Not implementing the Internet of Things (IoT)
The IoT is a suite of technologies and applications that enable physical objects to generate data, and to connect that data to an analysis and reporting engine. Conceptually, the IoT lets equipment or spaces within a building communicate data about their condition, consumption, or other attributes. The IoT sensors particularly relevant for CRE companies are ones that track conditions such as moisture, indoor air quality, weather, space temperature, and occupancy. With this data continuously streaming to the Internet, the IoT can enable real-time analysis and visualization of operating performance.
The best operated portfolios understand that maintaining equipment is not entirely sufficient to ensure the comfort of tenants. This white paper explains the Internet of Things in commercial real estate, and the implementation steps to installing a comprehensive solution.
The bottom line: the best operated real estate portfolios use Enertiv. Schedule a demo today to see how!