The buzzword “Disruptive Technologies” was coinedby Clayton M.Christensen in 1995 (although he later he changed it to“Disruptive Innovation” because he argued that few technologies aredisruptive, rather it's the business model that the technologyenables that creates the disruptive impact.) In our world ofcommercial real estate, technology is having a profoundimpact. Market forces are increasingly forcing investments intechnology: tenants and investors are demanding upgrades inIT, MEP and energy efficiency and as a result, greener and smarterbuildings yield better tenant attraction/retention, lower operatingcosts and higher rental rates.

Smarter Buildings

Technology is making our buildings smarter. The Internet ofThings (IoT) makes it possible to collect huge amounts of data,which can be used to expedite or even automate managementdecisions; resulting in improved efficiencies and reduced downtime. Heating and ventilation systems, lighting, distributed power,security, elevators systems, CCTV, communications, parking, utilitygrid meters, vending machines, water management,landscaping/irrigation, digital signage and voice communicationscan all be operated and optimized through centralized managementsystems. This interoperability of building systems leads tobetter managed, more efficient assets. Tenants expect smarterbuildings – particularly in the space of energy optimization anddata/wifi connectivity- and investing in such technologies presentsa great opportunity to optimize ROI by lowering operating costs,improving marketability and value.

Smart Cities

On a city-wide scale too, networked physical systems will playan important role by enabling the real-time collection of datarelated to health, pollution, energy usage, traffic, water usage,and waste disposal. The city of Amsterdam in the Netherlands iswidely considered to be a smart city, with a wide array ofinterconnected systems, products and initiatives, many of which aregovernment-sponsored. Among these is Mobypark, an app whichallows owners of parking spaces to rent them out to people for afee (kind of like AirBnB for parking). The city then uses thedata generated from this app to determine parking demand andtraffic flows. Other city-run initiatives include flexiblestreet lighting which allows municipalities to control thebrightness of street lights and pedestrian traffic, and smarttraffic management systems, which monitor and broadcasttraffic in real time to advise motorists on the fastest routes totake.

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Recently the City of Los Angeles announced that it is installingthe first city-wide cloud and mobile based lighting control system.Using mobile chip technology embedded into each fixture, the LABureau of Street Lighting is able to remotely control lightingfixtures, and monitor the energy use and status of each light.According to LA representatives, “This smart plug and play approachnot only reduces the cost of programming each fixture, it alsoreduces the time of commissioning from days to minutes andeliminates on-site commissioning completely. Furthermore, theentire system can be securely controlled and managed remotelythrough any web browser.”

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Of course, these kinds of developments place enormous pressureon wireless networks, which must also continue to evolve to keep upwith ever-growing mobile data performance demands. For example, 5Gis the ultra high-speed and high-capacity successor to 4G networksthat are currently widely used, and will be a critical component toenable ongoing innovations and developments in the networkedsociety of the near future.

A New Investment Risk: Cyber Security

Critically, these intricate connections can create securityvulnerabilities. The growth of wireless equipment monitors andcloud-based data storage inevitably increases the risk ofunauthorized access. As properties utilize interconnectednetworks to gather massive amounts of incredibly valuable data,they will increasingly become inviting targets of cyberattacks. Forlenders and investors, “cyber security” should perhaps become a duediligence consideration to protect their interests.

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To address security concerns, the National Institute forStandards and Technology (NIST)has pushed for the development of a more secure, interconnectedenvironment for cities. Their research and analysis havefocused on ensuring that an attack on one system (such as streetlighting) cannot spread to others (like traffic lights or acity-wide CCTV system), preventing a security flaw in one devicefrom compromising other parts of the system, and optimizingsecurity settings to secure the means of transmission and storageof data collected.

Smarter, Safer Real Estate

The transition to smart cities and buildings could have a hugeimpact on our built environments. Efficiencies in municipalenergy and water management may reduce city costs, which couldfacilitate reinvestment in the infrastructure. Networked parkingmeters could be used to optimize urban parking, thereby minimizingthe parking requirement for urban real estate, to allow increasedbuilding densities. Some cities have even applied IoTprinciples to waste hauling with “smart” municipal trash cans thatsignal when they're full, saving a trip to a half emptycontainer.

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Smarter, better operated buildings will yield higherreturns. Investing in technologies to improve energyefficiency, IT and connected building systems has potential tosignificantly increase the marketability and value of yourassets. As smart-building technology continues to evolve, itis critical that lenders and investors stay ahead of marketdemands, applications and security risks relating to newtechnologies to ensure their investments deliverrather than disruptreturns.

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