How to Triage Operational Waste in a CRE Portfolio

Commercial real estate have countless opportunities to invest in improving their building operations. But how can they triage the waste in their portfolio to understand where to get the best return on investment?

In this video, Comly Wilson explains how owners and asset managers can leverage data to triage their portfolio and rank order the best opportunities.

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Video Transcript

Hi everyone, my name is Comly Wilson and I’m the head of marketing here at Enertiv. Today, we’re going to talk about how to triage operational waste in commercial real estate portfolios.

Now, what do we mean by triage. Well, commercial real estate owners and operators are under increasing pressure from a more competitive marketplace, rising tenant expectations, disruptive forces like coworking companies to operate their buildings more effectively and efficiently.

But there’s only limited resources, and there’s only so many dollars to go around, so we want to understand all of the waste in the portfolio and triage it so that we can make the best investment and get the most bang for our buck.

How do we do that? Using a simple step-by-step process, the first step of which is to set our guiding principles.

The first principle that we want to take account for is direction over speed. Instead of launching into a new program right away, we want to capture data about your buildings so we can quantify this waste. This data comes from IoT sensors, digitized system documentation, and existing sources. And it’s more affordable than it ever has been in the past. So you want to build that map.

Second, you want to take decisive action. These disruptive forces are happening today, so you have to assume your competitors are doing something about it, and it’s important to get started as soon as possible.

Finally, you want dynamic prioritization. So, the point of triage is to make the best investment based off what the data tells you, but the data is constantly changing and you want to be able to adapt to changing conditions; the best investment today might not be the best investment a year from now, so you want to be constantly evaluating and triaging your assets.

Next, we want to take a look at the entire portfolio. This may seem obvious, but most landlords and portfolio managers don’t have one view where they can see the performance from an operational perspective of their entire portfolio and compare their regions and assets on an apples-by -apples comparison.

Once you do that, once you have the map and you can quantify metrics such as mean time to repair, the energy savings versus the potential, your CapEx reserves versus the projection, you can start making these apples to apples comparisons and drilling down into the assets that have the most waste.

Once we identify those, we want to understand exactly where that waste is coming from. In this example building, the energy savings are about on par with the portfolio average, but the maintenance metrics are well below. The mean time to repair is 31 days, almost double the portfolio average. The mean time between failure of equipment is at 62 days, well below the 91-day average for the portfolio. And the CapEx reserves are actually under what is projected in the data.

So obviously, there’s some waste in the maintenance processes in this building. Now, we want to lean on the operations manager to understand where that maintenance waste is occurring. He should be able to look at all of the pieces of equipment and understand exactly which pieces of equipment are driving that waste.

Say we identify that chiller #3 is the outlier here. We’ve evaluated all of the pieces of equipment and chiller #3 is having way more breakdowns, is causing third-party repairs way more often and so we want to drill down to that specific piece of equipment and look at its current performance, look at its history, and understand what’s going on. Perhaps there have been missed maintenance rounds, perhaps there’s a refrigerant leak.

It’s the ability to look at all the pieces of equipment in the building, identify the one that’s having trouble, and identify the root cause of that.

So, the basic idea here is that we’ve drilled down from the portfolio down to an individual piece of equipment, and we’ve triaged our waste to understand where we can spend money to get the most return for our investment.

That’s our simple step-by-step process on how to triage operational waste in commercial real estate portfolios. If you have any questions, feel free to reach out to us. I hope you learned something, thanks again and have a great day.