What is the true value of a connected building?
We know that connected buildings improve occupant wellbeing and environmental performance, but how much value can it truly generate for building owners?
It is widely acknowledged that a modern, digitally connected, energy-efficient building that prioritises varying occupant needs while consciously reducing carbon emissions and mitigating against its environmental impact is seen as more appealing to tenants, therefore, can provide a competitive edge. In fact, buildings with the highest levels of green accreditation make up less than 10% of the London market but account for around 60% of all space leased in London this year, according to Savills.
These buildings can only achieve these green accreditations if they have an accurate awareness of current emissions and work towards setting reduction targets to reach net zero. Hence integrated software is required to gather all of the disparate data from various sources and provide insight for the building manager and owner to review.
These green-connected spaces are in high demand, and tenants are willing to pay more for them. It is estimated that 72% of digitally unconnected spaces could become obsolete in the not-so-distant future.
"Property consultants Cluttons have reported that 78% of landlords have been able to achieve rent increases due to improved connectivity and that 72% have been able to reduce voids in occupancy rates" (PBC Today 2020).
Further research published by HeckHome shows that tenants like tech amenities, and 1 in 4 of them have said they were willing to pay an additional $30 or more per month for spaces that include them.
Awarding bodies, such as WiredScore, rate buildings based on connectivity assurance. Others, such as WELL, rate how effective a building is for occupant wellbeing, and standards such as BREEAM measure sustainable value in a series of categories, ranging from energy to ecology. WiredScore state that buildings in London have been able to charge a 5%' digital premium' on their space as a result of the certification (PBC Today 2020). In addition, JLL stated that green certifications such as LEED and BREEAM result in a rent premium of 6% and a sales premium of 8% (BISNOW 2022).
Clearly, digitally connected, green buildings generate a lot of value for savvy building owners who have the capital to invest and upgrade their portfolios.
Researchers at Columbia and New York University estimate $500bn in office value could be destroyed by 2029 as demand falls and green standards kick in. Savills estimates the cost of upgrading a building from today’s standards to 2030 requirements to be roughly £40 per sq ft, on top of normal refurbishment costs. Hence, there will be lots of standard assets as some landlords will be able to afford this; however, in premium areas, they will be able to recoup some of the cost.
The fact of the matter is - these decisions are becoming less of a choice for building owners. New legislation penalises owners who do not upgrade their building stock by driving down the value of their assets and enforcing fines if they do not comply.
In the UK, buildings receive an energy performance certificate, or EPC, with a top grade of A and a bottom of G. Ministers intend to ratchet up minimum energy efficiency standards (MEES), making it illegal to let out offices with an F or G rating from April 2023. Estate agents estimate that will leave 5-10% of UK offices high and dry.
The minimum standard is set to rise to a C rating by 2027 and to a B by 2030, a level which around 70% of offices in London fall short of, according to Savills.
Gain higher value through increased productivity
Creating these high-performing environments can also lead to increased productivity rates, employee retention and reduced sick days, which as a result, creates further value for tenants and landlords alike.
Companies are introducing healthy circadian lighting, flexible working hours, and innovative technology to improve tasks, automate cleaning schedules and increase contactless operations to create healthier environments.
The World Green Building Council says, "productivity improvements of 8%-11% are not uncommon as a result of better air quality" (Building 2019)
Through movement sensors and other digital tracking products, companies can adapt spaces to meet the needs of employees. Integrated systems continuously record data relating to energy usage and occupant patterns leading to optimised, automated environments that connect the two essential themes – sustainability and wellbeing.
Recent studies have shown that office workers' productivity has increased by up to 20% following the introduction of circadian lighting. It has also been linked to a reduction in sick days as employees generally feel healthier and happier. Another study conducted by Cohere found that workers in offices without windows took 6.5% more sick leave each year. This is the same issue that circadian lighting aims to resolve, providing (as closely as possible) the same benefits as natural light.
The value created for building owners by upgrading current buildings and focusing on a connected approach is overwhelming. It is the fundamental backbone of a building to achieve wellbeing and sustainability strategies which create worth in the form of increased revenue, increased asset value, improved tenant retention rates, and more productive and happier tenants, and it future-proofs your assets against changing market conditions.