Don’t cut costs when it comes to smart building tech

Heading into what’s going to be an incredibly tough winter it’s hard not to be gloomy. Businesses around the country are being hit on multiple fronts: rising energy bills; inflation; the fall in sterling; the cost of borrowing is on the rise; and a recession is just around the corner. According to latest figures, construction prices have risen close to 25% this year – compounding supply chain pressures that had still to recover from the global pandemic.

At times like these, everyone is looking for cost savings, and real estate is no exception. Office projects around the country, whether new build or refurbishment, will be undergoing “value engineering” to ensure their continued viability. Many may well be shelved.

The concern of course is that cost cutting leads to a reduction in quality, as lines are drawn through aspects of a project that are deemed ‘nice to have’ rather than essential. Experience tells us that often this can mean design quality suffers, lower quality products are specified, green measures are binned, along with innovations such as ‘smart’ building technology.

That has been the case in previous downturns, but this time such cost-cutting would be a huge mistake. Why? Because the world of work has changed so dramatically in the past two-three years that the office sector is almost unrecognisable from what it was the last time real estate went through hard times. The space as a service mantra that has taken hold in recent years – and has been turbo-charged by the post-pandemic work-from-home revolution – now means any office project that fails to provide the features and services occupiers now expect, such as smart building tech, will struggle to compete.

Likewise with sustainability. Occupiers are increasingly demanding green buildings aligned with their own sustainability commitments, as are investors. A recession won’t change that – indeed, sustainable buildings become even more attractive as energy efficiency improvements mean lower energy bills. Moreover, as the climate crisis grows ever more acute, regulation that is already driving green refurbishment, such as the increase in minimums standards for EPCs, is likely to ramp up further.

All of this means that any ‘savings’ focused on cuts to green measures or smart tech – to focus on just two areas – are likely to be false economies, with medium to long-term value sacrificed at the altar of short term cost-cutting.

Affordable solutions

The good news is that when it comes to smart building technology, in particular, the perception that it is an expensive add-on to a workspace is wrong. Indeed, the digitisation of the core management services of an office, which provide the most impactful benefits to landlords and occupiers, are actually very affordable.

This misperception exists because too often the focus on the digitisation of the workplace is on the best buildings in the best locations, which of course command the highest rent and service charges, which in turn support investment in cutting edge tech. This means when people think of a ‘smart building’ they tend to think of ‘gadgets’ in shiny new offices: from digital lockers to smart lifts to sensors that track air quality, energy consumption and movement around the building, making adjustments in real time. The perception is that smart tech is expensive and therefore only for ‘elite’ buildings.

The reality is very different. At its core a ‘smart building’ is about using digital technology to manage the essential functions of an office. It’s less about sensors and digital lockers (as great as they are) and more about digitalising a building’s core management services. From key tracking and post room management to a smooth and seamless visitor experience; from managing deliveries and room bookings to building repairs and maintenance, digitisation offers landlords an integrated and connected management solution, which ultimately provides occupiers with a much-improved experience. And it is this customer-centric approach that lies at the heart of the all-important space as a service experience

Happily for the value engineers, the smart building tech that enables this experience is not simply the purview of elite buildings and needn’t cost the earth. Indeed, affordable tech that has an enormous impact on improving the occupier experience is readably available.

However, importantly, ensuring the affordability of smart building tech requires a move away from the London-centric or Class-A building practice of charging tech per square footage, which leads to higher costs. At Locale Group, we have never adopted that model, preferring more sustainable pricing structures that are more affordable for landlords, particularly those (the vast majority) with buildings in Class B locations or outside of London.

All of this means that when the value engineers run the rule over an office project, not only must the green features remain, but smart tech should too – they just need to ensure the focus is on the digitisation of the core services of a building, rather than ‘gadgetry’. Doing so will ensure that in tough times landlords and developers can still produce a product that will attract occupiers over the medium to longer term. And that is where the real value lies.