Intelligent Homes

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Smart Buildings Pose Steep Learning Curve

Much of the technology to make buildings smarter and more energy efficient has been around for years, if not decades in some cases. But most owners have turned a cold shoulder to these innovations. In the long-gone days of cheap energy, such extravagance was ignored. But in a period of rising oil prices and tougher global competition, more owners are taking steps to cut operating costs.

Architects now speak of developing intelligent buildings, properties that use technology to operate a range of functions more efficiently. What's more, their efforts are being aided by a new generation of web-based technology. .

Now a single system can control air temperature, lighting, and building security. A manager sitting at home can use his personal computer to tell whether the temperature is too cold on the fifth floor of an office building. Using the same system, a security guard stationed 1,000 miles away can detect an intruder who has broken into an office building.

While the new technology is stirring conversations among developers, few buildings have adopted the latest systems. "Only a small number of intelligent buildings are going up in the U.S.," says Jim Young, CEO of Realcomm, a San Diego-based operator of trade shows that focus on technology for the real estate industry.

But simple economics should increasingly drive the development of smart buildings. Young believes that rising oil prices and economic pressures will force more developers and tenants to focus on intelligent design. "We are still in the early stages of introducing new technology," says Young. "But ideas are starting to percolate. In the next two years, we will see more progress than has occurred in the past 20 years."

High cost of intelligence

A big barrier to the introduction of technology is price, says Paul Quinn, chief information officer of Duke Realty, an Indianapolis-based REIT."Many tenants are not willing to spend extra for something new," says Quinn. Many office leases are structured so that landlords can pass utilities expenses on to the tenants. In other instances, tenants are given a fixed amount of money to help defray the costs of renovating a space, commonly referred to as tenant improvements.

While the tenants can use the cash to make the space smarter, many prefer using the money to install walls or other conventional features. Finally, the greater initial costs could result in higher rents, something that no tenant welcomes.

Tax relief is a motivator

In some instances, developers can qualify for government subsidies, which can help to reduce costs sharply. In 2004, Macerich Co., a mall REIT based in Santa Monica, Calif., conducted a major renovation of its Queens Center Mall. The 1.2 million sq. ft. shopping center is located on Queens Boulevard in New York. The company poured $600,000 into refurbishing the central plant that provides heating and air conditioning.

"We got most of the money back because of tax rebates from New York state," says Jeffrey Bedell, vice president of operations for Macerich, which owns 77 malls. "Aside from the tax incentives, we achieved energy savings of about $300,000 annually."

Fewer managers

Wireless technology can simplify a variety of tasks and cut personnel costs. Sensors can activate lawn sprinklers when the soil is too dry. In bathrooms, paper towel holders and soap dispensers can be connected wirelessly to the building's network. When soap runs out, an e-mail can automatically alert the maintenance department.

Smart features can also cut the costs of monitoring fire safety equipment. Suppose an office building has 100 fire extinguishers. In the traditional approach, a guard would check each extinguisher once a month, verifying that the equipment was functioning. But with a computerized system, the extinguishers can be monitored remotely. When a valve indicates the pressure level has fallen, maintenance will be notified.

"With the right technology, you can have one operations center monitor 80 buildings," says Young of Realcomm. "That can allow you to lay off 200 facility managers."

For the time being, only a few building owners are seeking to save energy by installing such automatic systems. But eventually the market will demand intelligent buildings, says Bowles of CoreNet Global. "It may not make sense to own an old-fashioned building five or ten years down the road," he says. "Increasingly, buildings will need intelligent features in order to be marketable."

Nov 1, 2007 12:00 PM, By Stan Luxenberg

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