How to Reap the Benefits of Today's Investment by 2021

Jon Meisel has been a commercial real estate broker for over 30 years. In this time, he's seen few cost-saving opportunities as straightforward as that of IoT solutions. Between the fast payback period and documented savings which allow costs to be passed onto tenants, he sees this investment as a no brainer.

Click to enlarge image

Video Transcript

Hi, my name is Jon Meisel. I’m with CBRE and I’ve been a commercial real estate broker for the last 30 years. First of all, I want to thank Enertiv for having me. As a geek, I Iove talking about real estate technology, especially the IoT – the Internet of Things – solutions.

Today, I want to outline the benefits of investing in commercial real estate technology and what it means to the valuations and what it means to all the stakeholders involved.

It’s been my experience when I represent landlords, that when we sit down with the property management team and there’s some great solutions to save money in the building, the landlord’s first question is: “what’s the payback?”

What he means by that is, at what point am I going to get my money back for this investment. Typically, if it’s beyond five or seven years, then he’ll lose attention immediately. But if you can prove out that it’s a one to three-year payback, you’ve got his attention. And frankly, you’ve got something that really matters and will affect the building positively.

Once you have something in there, once you make this investment, and once it proves to lower operating expenses (OpEx), then you’re really talking about adding value to the building. When you talk about valuations, you’re talking about the rental streams coming in from the tenants versus the expenses going out. One of those large expenses of course is OpEx.

If you can widen the gap of the income stream coming in by lowering the operating expenses, that adds value to the building, and that has a multiple on it, so that’s how you get valuations. And in terms of marketability, I know from being a broker that having a more sophisticated building, proving to tenants with empirical evidence that they’re not going to spend as much as next the building next door, that adds to the marketability.

It also adds to the salability of the building. We’ve seen that these types of lowering of operating expenses, the buildings that perform better, that are smart buildings, have a much higher occupancy rate, lower cost to run, and higher valuations, and that’s the name of the game.

Finally, it’s a pass through. What does that mean? That means if you can prove and document savings, you can pass the costs onto the tenants. In fact, that’s exactly what data-driven IoT solutions do.

Most leases have this pass through, and I don’t know if all landlords take advantage of that. When evaluating technology, it’s important to pay close attention to what’s in the lease, and if this clause is not in there, adding it in for future leases would be very beneficial.

Investing in technology as a pass through is a no brainer. It’s a win-win for every stakeholder. You have a higher valuation for the landlord, a tenant that has lower operating expenses and year over year increases, you have a maintenance staff that has less documentation burden, and then you have Enertiv that makes the sale ;)