That the real estate market is a sector that suffers from the characteristic of being very volatile is no secret. It has gone from being a safe, easy and stable investment to being high risk. If we add this to the increase in energy demand, which has a huge impact not only on this sector but also on the rest of the sector, such as facility management, what are the challenges facing these sectors?
In this article we answer this question:
The challenges of the real estate market and facility management
The real estate market has changed greatly in the last quarter of a century. It has gone from being a safe, easy and stable investment to being a more volatile market. Speculation in real estate is a reality.
Real estate companies that work with office or industrial buildings have seen square metre prices fluctuate hugely in the last five years. Currently, and generally across all of Europe, we can observe an upward trend in large cities that seems to have no end. As a result of these upward trends, which help property companies to increase their profits, the commercial surface area increased by 14% in the United States in 2015:
The managers of these large portfolios of American buildings have opted for energy efficiency measures in new builds. Despite the aforementioned 14% increase in the surface area available for rental, these new buildings have “only” increased energy demand in the sector by 7%.
Moreover, the facility management sector represents 6.4% of Spanish GDP, with a turnover of more than €70 billion annually, according to IFMA data from 2016. This association has also calculated that a facility manager can achieve a saving of between 20% and 30% for the company. Within this saving, energy is included as just another item.
What challenges are being faced by the real estate and construction market? At a macroeconomic and operating level, the following stand out:
- A change in the needs of tenants: searching for buildings that are green, healthy, provide comfort and make their employees happy.
- Increasingly restrictive legislation (emissions, energy consumption, etc.).
- The need for process simplification to be able to better analyse business data. The amount of paperwork involved in property management and the number of tasks performed by a facility manager also mean less time available for analysis.
- Finding technology that is helpful and not difficult to use.
According to recent studies, we are increasingly sensitive to the building in which we work. Much of our satisfaction or dissatisfaction with our job (and our employer) depends on environmental conditions. Employee comfort is one of the key factors through which the performance of the facility management company is assessed.
Another transformation in the sector is driven by legislation. The European Union, for example, is speeding up procedures so that its Member States can force buildings to:
- Emit increasingly fewer greenhouse gases, progressing towards NZEB
- Publish accurate and verified data on the energy performance of their buildings
- Not only certify the energy performance of the building, but also have an energy management plan for it. This took place in the European Union with the mandatory implementation of the Energy Efficiency Directive from 2012.
In some countries, such as the United Kingdom, the legislator is proposing measures that go much further. For example, that companies with fleets migrate all their vehicles to electric vehicles by law.
This is a sector that needs to invest strongly in technology to simplify processes. According to Deloitte’s report, Commercial Real Estate Outlook 2018, the real estate sector has been slow to adopt technology compared to other business sectors. Many companies still manage their contracts, rentals, tenders, etc. on paper. Or they work with Excel spreadsheets to monitor expenses.
The problem with continuing with these practices is the difficulty in performing an advanced analysis of the data in that context. If we want to analyse operations from one year, we have to go to the filing cabinet, search for a specific sheet from each contact, scan it, extract the information, etc. We are wasting valuable time for the company.
However, technological progress and its incorporation into the real estate market is unstoppable. Utilities have forced the implementation of certain technologies that real estate and facility management companies can take advantage of to start offering energy management services.
This is the case with smart meters. For example, almost half of all American households have a smart meter installed, with this percentage being higher in commercial, industrial and business buildings. In Europe, 80% of meters will be smart by 2020.
The existence of these meters on the market is an example of how there is an interesting window of opportunity for real estate companies to enter new business areas with a relatively low investment. In many customers there will be no need to install meters that did not exist before: smart meters will cover their measurement needs.
We cannot forget that technology must always be a friend, not a foe. Employees of real estate and facility management companies want easy-to-use and intuitive technologies that help them with building control and energy analysis.
We are talking about a very fragmented sector, with different types of companies focussing on different things:
- Real estate companies. These may own complete office buildings, industrial buildings and even residential buildings.
- Facility management companies. These are dedicated to managing everything the building needs. From changing toilet paper to remodelling areas of the building and adapting them for a new business unit.
Despite their differences the key challenge is the same: the energy management of tens, hundreds or thousands of points and locations
Your business structure in real estate or facility management generates a series of specific energy challenges for your business and your sector:
- Having a plan that tackles the relentless increase in the prices of energy.
- Finding a truly specialised solution in energy management in building portfolios and/or for facility managers.
- Being able to integrate a new building (or all the ones you have) simultaneously and without losing data. That is: without problems of incompatibility with a BMS, BIM or new meters.
- Having an energy management platform that is scalable and helps to implement the project in the portfolio’s buildings in stages. It is smarter to first work on the buildings with the greatest potential savings and then migrate the rest without any problems.
- Having technology that allows control tools to be integrated into the energy management plan: control of the lighting system, communal areas, HVAC, etc.
- Ensuring that energy management becomes a way of attracting new tenants. In this way, you can generate more business thanks to being able to offer guaranteed energy savings, advanced control, a detailed analysis to make better decisions, etc.
- Finally, and especially for the facility manager: energy management must be carried out through an intuitive and easy-to-use technology. With the number of tasks you have, it is logical to think that an energy management technology should help you to save time, not waste it.
As a company that manages the energy of various buildings, the energy challenge is not to be underestimated. As we already mentioned in the introduction, energy prices continue to increase. You need to have an energy management plan and some energy management software that helps you to “protect” your energy cost.
So, no matter how much the kWh price goes up, you can be sure that it will not affect your rental margins or your facility management services.
However, this is difficult for the manager of building portfolios or the facility manager, because in reality there are few solutions on the market that are truly specialised in dealing with your needs and challenges.
For example, few platforms offer the possibility of being able to integrate a new building (or ten, a hundred, a thousand) automatically and without losing data. Or, without having to invest thousands of euros again in meters.
This occurs firstly because many technologies are “tied” to the meters of one manufacturer or another and, if you purchase a new building for your portfolio that does not have these meters, you cannot integrate it.
It is also because they are closed systems in company servers, difficult to connect to other systems. Ideally you should rely on an energy analysis tool that can communicate seamlessly with a BMS natively or through an open API. If you do not know what this is, you can read this article.
Scalability is essential for your building portfolio. You might grow tomorrow and want to add new users to the energy management plan (preferably a tool that does not charge per user, right?). Or add new buildings or new energy measurement variables. Can the platform you have bought support this? That is scalability. If the answer is no, you may have a problem with data loss, synchronisation, etc.
When you manage tens, hundreds or thousands of properties, energy management is an important investment. Scalability is key in order to be able to start with a number of buildings whose cost you can afford and then, as you recover the money from the investment through energy savings, you can add new properties to your energy management plan.
There is another key challenge in the energy management of building portfolios; the issue of control.
It is likely that your properties already have various BMS-type systems, or perhaps SCADA-type systems if it is an industrial building. It is important to read this article to understand the ideal relationship between an Energy Management System and these systems.
However, it is easy to simplify this issue as follows: your challenge is to be able to integrate your energy management system with those control tools. If possible, it should also provide advanced energy saving tools such as demand response, closely related to control.
We cannot ignore the fact that energy management is a strategic business investment for your company. Therefore, it should have an impact on your business. It should help you to achieve new facility management contracts or attract new tenants to your building.
Customers are becoming increasingly concerned about occupying buildings with lower energy consumption. This is logical as they pay the bills and it takes a big bite out of their business margins.
However, this is also because the legislation is increasingly strict in terms of emissions that are harmful to the atmosphere (emissions of CO2 and other greenhouse gases).
In addition to all this, your ultimate challenge is that your time is limited. As a real estate company, energy management is probably just one of your business variables. Not to mention what it means for the daily work of the facility manager.
As you can only spend part of your time and resources on energy management, you want intuitive and easy-to-use tools that encourage collaboration in your team.
Within the property sector, energy management on a “global” scale has not had a great impact on private housing until now. However, this is changing.
More and more legislation is forcing developers of private housing to provide details, dashboards and access for the user to their detailed energy consumption. And also to be proactive when promoting energy saving measures for these tenants. At DEXMA, we have already seen and worked with housing projects that provide the tenant of a rental property with sub-measurement and try to increase their awareness and help them save energy.
Not to mention the integration of solar energy into new buildings (required by law in many European countries). Therefore, the ability to monitor solar production may be vital for the property manager as it will allow them to:
- View any possible faults or breakdowns in real time
- Identify whether solar energy meets the demand needs of the building
- Activate demand response processes when the grid is overloaded, if it is possible to make do with solar energy, to return the unwanted energy to the grid and thus generate income.
Gamification will be vital for the real estate and facility management companies that want to implement energy management plans and encourage their tenants to follow them and save energy. Gamification is the application of game theory concepts and techniques to non-game activities, and the adoption of new habits.
Feedback Project is a pioneer in the application of gamification to energy saving. In particular, in housing and shared office projects.
The idea is simple. According DEXMA data in singular buildings, they can save between 8 – 15 % only by applying behaviour improvements, which also have practically zero cost. How can this change in behaviour be achieved? For example, triggering staff and making them compete each other for a common benefit. This is, gamifying the behaviour of energy use.