In today’s tough office market, it’s hard to find ways to boost NOI. Rents are highly competitive, and operating expenses are tight. Shifts in tenant expectations and use of office space have created new leasing challenges. There is, however, one underutilized avenue to increase revenue, decrease expenses, and attract tenants: building technology.
Office properties contain numerous computerized systems, from parking automation and elevators to security systems, tenant networks and more—it’s not uncommon for a building to have twenty or more separately networked systems. Many building owners and managers have little understanding of the technology systems in their properties and only address them when they fail. By shifting their approach to a proactive strategy for building technology, building owners and managers can not only avoid technology headaches but save money, find untapped income sources, and improve tenant experience. Below are just a few examples.
Rooftops are valuable space for telecom carriers. Unfortunately, telecom carriers tend to be much more aware of this value than landlords, who may not get full value for their rooftop space. Without direction from the lessor, telecom tenants may install rooftop towers in such a way that prevents leasing to additional (often competing) providers. A skillfully negotiated lease will ensure that rooftop telecom tenants pay market rates and that towers are installed to maximize use of space or provide premiums for exclusivity.
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Beyond telecom, solar arrays are another way monetize office rooftop space. Historically, building owners have installed solar arrays to provide energy for their own buildings, which is still a viable option for long term returns, though it can require significant upfront investment. The solar market has evolved considerably in recent years, however, affording building owners the opportunity to lease rooftop space to third party investors, usually solar developers, who own and operate the solar array. (To learn more about solar rooftop leasing, click here.)
As 5G networks expand, the opportunity for real estate owners is lucrative. Unlike other cellular networks, 5G cell sites must be installed below 150 feet, so an office building need not be a high-rise to attract carriers. Not all office properties are appropriate for 5G cell installations, but carriers require a vast number of cell sites for their growing networks, so an inquiry could prove worthwhile if your site is selected.
Quality internet access is a key amenity for office tenants, and internet-ready spaces can expedite delivery of space to new tenants, improving their move-in experience and the property’s cash flow. By installing a centralized, secure Wifi network that is accessible throughout the entire property, landlords may be able to collect a technology premium from tenants. By adding a cell signal booster capability, landlords can further monetize these amenities by collecting revenues from cell carriers. Many CRE owners miss this opportunity to provide turnkey, ease-of-use technology amenities to their tenants while leveraging their position as gatekeeper to internet service providers.
Consider the possibilities of a fiber-based infrastructure running through the entire property that can provide as much a 1,000 Mbps of speed to each tenant. How about including an HD TV streaming option to this super-fast internet, all for a much lower price than tenants could procure on their own? Like centralized WiFi networks, these types of connectivity packages can generate a substantial amount of revenue, improve tenant experience, make the building move-in ready, and help differentiate the property from its competition.
Thinking Outside the Box
Besides connectivity and communications, building technology offers many site-specific opportunities to save money and generate income for building owners who are willing to think strategically. Recently, owners of a Nashville office tower ordered a Building Technology Assessment (BTA) in support of repositioning. In addition to rooftop tenants, the BTA recommended three potential revenue sources that the building owners chose to implement:
- Automated parking to allow monetization of after-hours community parking
- Created tech-enabled community conference rooms in unused space, as both a tenant amenity and event rental space
- Upgraded energy efficiency, including submetering, that boosted NOI and helped tenants meet sustainability goals.
These three initiatives resulted in a gross annual income increase of $1.2 million.
The diverse and evolving field of building technology can be daunting for building owners and managers. A qualified building technology consultant stays abreast of technology trends and combines tech expertise with CRE savvy to help CRE owners and managers identify innovative opportunities and solutions. A proactive approach to harnessing building technology begins with a building technology assessment, which will provide an inventory of the existing systems within a building, along with recommendations to correct deficiencies and identify potential income opportunities. A BTA can be ordered during acquisition due diligence, in conjunction with a Property Condition Assessment, or any time a property owner is ready to take the reins on the technology within their assets.