3 Ways IoT Can Increase the Valuation of Your Commercial Property

Commercial property values are based on numerous factors, including obvious metrics such as location, age, type of building, etc. Each of these factors influence the revenue generation potential of the commercial property as proxy indicators for the desirability from the perspective of potential tenants.

Commercial buildings are increasingly evaluated based on technology features contained therein. So much so that Smart Buildings carry an implicit tag of superiority versus relatively unsophisticated buildings of generations prior. The Internet of Things (IoT) represents one of the new technology trends that have become entrenched within the new wave of Smart Buildings.

IoT should never be viewed as a novelty for technology sake. IoT is uniquely qualified to solve day-to-day Operational Technology (OT) problems in a retrofit capacity, obviating the need for large-scale technology overhauls. Below we examine a few ways that IoT can deliver to the bottom line, providing a tangible, economical path for increasing the value of a commercial property.

Increase Tenant Satisfaction

Tenants represent the revenue generation side of any commercial property. Their satisfaction in the entirety of the experience within the occupied space will color their view of the perceived value of their current lease. That perceived value, relative to competing commercial property space, will have a direct impact on lease renewal rates.

Tenant satisfaction matters. While tenant surveys can provide indications and trends of perceived satisfaction/dissatisfaction, the generalities extracted from those results may not point to clear plans of action for improvement.

One obvious way to measure tenant dissatisfaction is trouble tickets submitted. Trouble tickets can cover a wide range of issues in a building, and will typically focus on major system areas such as Mechanical, Electrical, Environmental, or Plumbing. From the classic hot/cold office problem, to the odors in the air, to the water leak detected in the ceiling, the numbers of incidents reported directly correlates to tenant dissatisfaction.

Building engineers know the frailties and problem spots in their buildings. They know because they happen repeatedly, and have a series of trouble tickets to prove it.

IoT retrofits can deliver targeted visibility to conditions in the building, which enables proactive vs. reactive actions by the building engineer. For example, (1) wireless temperature/humidity sensors can be installed in known problem spots within tenant spaces to monitor hot/cold issues, (2) temperature probes can be installed on pipes known to be at risk for freezing or installed on HVAC equipment to track supply/return temperatures, (3) leak detection sensors can be installed in remote areas of a building known to be at risk for overflows or condensation build up, etc..

IoT provides the real-time visibility that enables building engineers to get ahead of problems before they occur. Significantly, the real-time visibility should provide notice to building engineers before any trouble tickets are submitted by tenants. The perceived satisfaction by tenants will inevitably improve. IoT is uniquely positioned to deliver targeted metrics that will improve building operations using proactive facility management.

Technology Upgrades

Smart Building trends continue to advance in CRE. PropTech represents a wave of digital transformation that is fundamentally changing the CRE industry on both the owner/operator and tenant sides of the equation. The long lifespan of commercial buildings highlights the risk for obsolescence, both technological and functional.

Technological obsolescence is simple to understand because it refers to the aging of the technological infrastructure over time. If you think your iPhone is technologically outdated in two years, can you imagine how technologically outdated a Building Automation System (BAS) is after 10 years? Functional obsolescence is an even bigger problem. Whenever needed or desired functionality cannot be delivered, the current technological infrastructure is functionally obsolete . . . even on the first day of service after commissioning!

Every commercial building currently faces both technological and functional obsolescence. It is an inevitable fact. The extent to which owners/operators can define a technological upgrade path will impact the relative valuation of the commercial property. The larger the technological gap due to obsolescence, the greater the cost to perform the upgrades, and hence, the lower the value of the commercial property.

IoT is uniquely positioned to solve the obsolescence problem because it does not require a wholesale change of the technology infrastructure. Targeted wireless IoT retrofits can augment an existing infrastructure by replacing outdated technology, and can also add new technology features that the old infrastructure could not support.

For example, wireless IoT retrofits can address technological obsolescence in a BAS infrastructure by connecting directly to HVAC equipment to implement new control strategies based on schedules, zone-based sensors, or staggered start times. In another example, wireless IoT retrofits can address functional obsolescence in a BAS infrastructure by adding modern Indoor Air Quality (IAQ) sensors (e.g., Particulate Matter (PM), Volatile Organic Compounds (VOCs), Formaldehyde, Ozone, Carbon Monoxide, etc.) where none previously existed in the building.

Wireless IoT retrofits can upgrade the tech features in a commercial property in a myriad of ways. Taken in combination, the array of upgrades will enhance the overall technology quotient in the building, thereby enhancing its value.

Operational Efficiency

Utilities represent a major cost component of building operations. Investing in efficiencies will hit the bottom line and represent the core of any building sustainability initiative. Real-time utility data has obvious benefit when compared to monthly utility bills. Facility managers should know when the utility spend in a given month is projecting 20% higher as compared to historical budgets. This early warning sign could point to an operational failure in the building (e.g., faulty HVAC equipment, water leak, etc.).

In that regard, real-time utility submetering is still a vastly under-utilized tool in commercial properties. The technology isn’t new as utility submeters can be installed to track utility usage in remote parts of a building. Every facility manager should have access to granular insights to the utility consumption for different parts of a building, at the tenant level or at the critical facility equipment level. Real-time tracking using alerts and notifications should be the norm to highlight deviations and inefficiencies.

Submeters can be installed in any remote part of a building to gain those insights. Retrieving that data remotely has been the issue for many facility managers. Wireless IoT retrofits can be used to extract real-time consumption data from those submeters using common output interfaces such as pulse or Modbus. The payoff? Real-time access to all submetering data in a building from any Internet-connected device.

Flatly stated, it isn’t smart to have limited visibility to the operation of your building. IoT will bring real-time cloud visibility at a fraction of the cost of an infrastructure upgrade.

Conclusion

PropTech trends continue to proliferate throughout the industry. IoT represents a practical mechanism for delivering practical solutions to existing problems. The benefit beyond operational efficiency? A bump in valuation.