Four Ways the Asset Digitization Trend Has Revolutionized CRE

Commercial Real Estate (CRE) has a notorious reputation for moving slowly. The longevity of commercial buildings as hard assets allows for such a mindset. Decades may come and go, but the buildings remain. Change has arrived, however. Asset digitization has disrupted the status quo and rendered it obsolete

Certainly, the building itself represents an asset, which has a value. To investors, the Net Present Value (NPV) can represent the current value of future streams of income. This investment abstraction helps provide a context to understand the role of asset digitization in CRE.

First, let’s provide a rough definition of asset digitization. Broadly, “digitization” can refer to the process of converting information into a digital format. Put aside for now any thought of the engineering required to perform the actual digitization. Consider instead the impact of digitization from the perspective of a consumer. If you have a mobile phone, then you qualify. As a prime consumer, you have developed a clear expectation of digitization. Hence, your growing intolerance of any non-digital products reflects your current attitude.

Without oversimplifying, “asset digitization” can then refer to the “digitization” of assets. Certainly, the asset can represent a building or any “thing” located therein. That “thing” can represent an HVAC system component, a utility submeter, a Building Automation System (BAS), the Indoor Air Quality (IAQ), a tenant space condition, a pipe temperature, or any other “thing” of interest to the consumer of “digitization.” No limit exists to the type of assets that qualify for digitization. Thus, if a consumer desires to see a virtual asset, then it should be digitized.

The how, of course, is simple. The Internet of Things (IoT) facilitates asset digitization. In various examples, IoT has digitized HVAC assets, has provided access to utility submetering, has supplemented a BAS, and has provided key insights to IAQ certifications. Certainly, limitless opportunities abound with IoT in increasing performance and sustainability in HVAC systems.

Let’s now examine four ways asset digitization has revolutionized CRE.

Real-Time Visibility to Individual Assets

Asset digitization brings visibility, period. Too often, organizations suffer for lack of visibility. They may receive a report at month’s end after the damage has been done. Thus, frustrations rise because problems could have been averted had they only been made aware at the critical time.

Imagine gaining access to real-time data that could alert you to a leak in a cooling tower system. Having visibility to the operation of a cooling tower asset would enable the building engineer to prevent catastrophic water loss before it occurred. Consequently, digitizing the cooling tower asset would have prevented a massive increase in the monthly water bill.

Any asset deemed critical to the operation of a commercial building would benefit from digitization. Consequently, real-time visibility is not a luxury. We expect real-time data because we inherently understand its value. To continue without real-time visibility seems absurd in today’s digital world. Real-time data rules and the CRE market has existed for too long without it. You don’t need intricate analytics to solve many operational problems. Just seeing the real-time operational status of your critical facility assets provides enough insight to cure most problems.

You Can’t Manage What You Can’t Measure

No one argues against cutting expenses in your building. Increasing your operational efficiency will impact your bottom line. Operational efficiency requires management . . . effective management. As the adage goes, “you can’t manage what you can’t measure.” Asset digitization provides an objective basis to evaluate operational efficiency at an individual asset level or at a whole-building level.

Take energy efficiency. HVAC and lighting represent the largest percentage of the electricity consumption in commercial buildings. Every building’s consumption profile varies, however, due to the differences in HVAC and lighting equipment, occupancy levels, climate zone, building envelope, etc.

Can you imagine an energy efficiency program that does not systematically acquire granular operational data (e.g., supply/return temperatures) from critical HVAC assets such as cooling towers, chillers and Roof Top Units (RTUs)? Most facility management programs today are deficient in this area. While a BAS can control equipment, it would not necessarily detail the operational efficiency of the critical HVAC assets. At the very least, granular operational data should be acquired to enable a continuous commissioning program.

Asset digitization via IoT provides the metrics for effective facility management at the individual asset level or at the whole-building level.

Transparency Required for Tenant Satisfaction

Everyday consumers have grown accustomed to real-time visibility. Without real-time products or services, a business runs the risk of obsolescence. While the CRE market has moved glacially through its history, their tenant consumers have not. As a result, tenants as consumers have changed expectations.

They consume differently, having patterned their lives around anytime, anywhere access. Don’t expect tenant consumers to settle for the way things have always been done. They have lived through the age-old problem of an office that is either too hot or too cold. They will not continue with such tolerance. Is their expectation of real-time IAQ visibility into their tenant space unwarranted? Is it too big of an ask, a bridge too far in this “modern” CRE world?

Tenants will compare and contrast commercial spaces via differentiators enabled via asset digitization. Clearly, location will still rule, but lack of asset digitization will diminish its reign.

Rise of Platforms

The longevity of commercial buildings qualifies them as hard assets of significance. That won’t change. Clearly, asset digitization via tech disruptors has changed the game. On those being left behind by the CRE revolution, a Wharton research article has noted that:

“The premise of the tech disruptors is simple: Let the CRE companies own the assets and we will own the platforms that enable residents and tenants to access what they need, when they need it, whenever they need it, using today’s real time, Big Data and cloud technologies.”

Platforms have given tenants new forms of access through asset digitization. The tech disruptors have interposed themselves between the tenants and the traditional landlords, marginalizing the underlying hard asset. Accordingly, from a pure technology perspective, the platforms have become the new Application Layer that facilitates the tenant’s primary interaction with the CRE space. This Application Layer provides visibility to building status and services, to trouble ticketing and resolution, to lease transactions and renewals, to whatever they can envision as a service.

You know the game has changed.