The economy is as predictable—and unpredictable—as the weather. Generally, forecasts are accurate, but the reality can change within minutes. Market studies try to tether that reality to trends help the profession prepare. For its sixth annual corporate smart building survey, U.K.–based research and advisory firm Verdantix surveyed 350 real estate and facilities managers across multiple sectors on their smart building technology budgets, priorities, and preferences. Verdantix smart buildings analyst Ben Readman presented the survey’s findings during a Sept. 28 webinar.
Hailing from around the world, excepting Latin America, the respondents took the survey between May and July 2022, a few months into Russia’s war on Ukraine, increasing supply chain uncertainty, and rising energy prices and inflation.
Overall, the respondents’ top objective is “reducing real estate costs,” which Readman noted tracks global concerns about the economy and waste-spending on space. North American respondents ranked “improving the health and well-being of building occupants” essentially as high, with 27% of respondents prioritizing either of the objectives first. Though only 12% of respondents identified “decarbonizing our building portfolio” as their highest priority, 37% of respondents ranked it second. “Attracting and retaining talent for the wider organization” was most commonly selected as the third priority with 30% of respondents. Though occupant health and well-being did tie for the chief objective, 31% of participants also ranked it as their fourth priority. “Improving the resiliency of buildings” was chosen by 41% of respondents as their last priority among the five options.
Readman noted that attention to health and well-being and employee mental health has existed in the “sphere of real estate management” for some time, nabbing the top spot among priorities in Verdantix’s 2019 survey. The COVID-19 pandemic has only underscored its importance.
Readman said that the economy and tenuous hybrid workplace policies have led to uncertainty among firms about the direction of their portfolio management strategies. In the U.S., workplace occupancy is at about 43%, he said. Excepting the health care, pharmaceutical, and biotech market, all industry groups are seeking to downsize, with technology, media, and telecommunication firms leading the exodus. As a result, buyers and leasers have the upper hand when searching for real estate, Readman noted: They can demand “high-quality spaces” and are willing to leave a space if necessary.
Influences from energy costs and environment, social, and governance
In the near term, businesses do not intend to invest heavily on decarbonization strategies, Readman said, likely due to the economy and budget constrictions. Among all survey participants, 81%, 75%, and 64% plan to increase or maintain their investment in, respectively, energy efficiency controls across HVAC and lighting, building insulation, and on-site energy storage. Electric vehicle charging infrastructure is least likely to be on the table. The education and public sectors are most likely to increase their investment in efficiency controls, while approximately one-third of respondents in the consumer and retail and healthcare, pharmaceutical, and biotech industries show interest in on-site energy storage technologies.
The enforcement of ESG (environment, social, and governance) regulations is starting to have an impact on the investment in digital data collection tools and ESG reporting software, Readman said. Among respondents, 39% are “looking to level up their reporting standards” by buying new software or extending deployment across their portfolio. The financial and real estate industries are most interested in upgrading their nonfinancial reporting software. Still, 19% of all participants are not aware of a reporting solution or interested in investing in one.
"The enforcement of ESG (environment, social, and governance) regulations is starting to have an impact on the investment in digital data collection tools and ESG reporting software."
In terms of portfolio initiatives, Readman said, the prevalence of underutilized spaces and rising energy costs have “pushed the energy management agenda back to the top of the real estate mind frame.” Second on respondents’ list was space optimization, followed by building security enhancements, cybersecurity risk management efforts, proactive maintenance, and getting more value out of facilities contractors.
Less salvation in software solutions
As corporations seek to understand, from an overall portfolio perspective, how employees are using their space, Readman said, “the pandemic has been an accelerator for space-monitoring software.” In 2022, 35% of survey participants plan to expand deployment of space-utilization monitoring software, as compared to 20% in 2021 and 13% in 2020. The financial and real estate industries are most likely to invest in software, with 18% of respondents expecting to deploy solutions over the next two years for the first time.
Though companies have been investing in technology and software to enhance the workplace experience, adoption plans have dipped from 61% to 54% since 2021. Readman said employees are looking for “IRL benefits for their workplace,” such as gyms and events; technology is more “an enabler for workplace experience,” but not the source of enjoyment. While 38% of respondents plan to extend or upgrade their software, as compared to 32% in 2021, 47% have no plans to invest in the short or long term, as compared to 40% last year.
In 2022, 35% of survey participants plan to expand deployment of space-utilization monitoring software, as compared to 20% in 2021 and 13% in 2020.
Economic uncertainty has also tamped down investment plans in integrated workplace management software, IoT platforms, and building management systems from 2021. However, investment plans in workplace and maintenance management solutions remain steady as owners seek to “deliver a solid, enjoyable occupant experience,” Readman said. Respondents are most enthusiastic about digital twin technology, with more than 30% planning to increase their spending in the next 12 months—double from the 2021 survey. Readman cited potential reasons as a “lower barrier to entry” and greater understanding of the business value of digital twins and their use in fault diagnostics and building efficiency.
In the next five years, approximately 30% of respondents plan to purchase best of breed real estate and facilities solutions from multiple vendors and integrating those into a supervisory layer; this is nearly double the number that plan to use a single integrated solution, suggesting that owners are engaging with different vendors and asking them to work with their competitors. “Openness and integration are now mission-critical for vendors,” Readman said. “The upshot is that system integrators are expected to thrive in a new era of point solutions and integration.”