Smart is sexy. Just look at how often the commercial real estate (CRE) industry mentions “smart building.” Everyone is seemingly excited by the opportunity presented by outfitting buildings with sensors and connecting those sensors to the internet.

These sensors attach to a building’s HVAC, lighting, and other systems, and transmit data over the internet to a control system. Incorporating the Internet of Things (IoT), this control system typically connects to a property’s building management system (BMS). A building needs network standards to allow wireless and/or wired data transmission, actuators that use the data generated by the sensors to respond, and data storage and analytics to automate building operations.

Smart buildings enjoy a window into data that helps them:

• Reduce building operating costs
• Improve maintenance
• Adapt to occupancy levels and tenant demands
• Increase employee happiness and productivity
• Increase energy efficiency
• Become more sustainable

Because of global warming, energy efficiency and decarbonization are pressing issues in the media and corporate board rooms. And old buildings are some of the biggest and most inefficient users of energy.

As the pandemic gradually recedes and offices slowly reopen, demand for safer environments will likely drive further investment in smart building technology. This includes managing building entry, cleaning and sanitization, optimizing space for physical distancing, and measuring temperature and humidity. IoT systems can also track employee movement in real time to help mitigate disease outbreak.

The size of the global smart building market was $57.3 billion in 2020, and is projected to grow to $67.6 billion this year. According to Fortune Business Insights, it is forecast to reach $265.37 billion by 2028 at a compound annual growth rate of 21.6 percent.

Some more old school CRE professionals are a little more skeptical of smart buildings however. And for understandable reasons.

Barriers to Converting an Old Building to a Smart Building

The first, and probably biggest barrier? Smart building technology hasn’t exactly been cheap. You have to install many different sensors. These measure everything from temperature, to humidity, to lighting, to HVAC functioning, on every floor of a building. (Or you may have to install entirely new lighting and HVAC systems.) Then you have to wire all those sensors on every floor. Then you have to connect them to your BMS. And you have to connect your BMS to a building operations platform. Then you have to hire data engineers to be maintain the system and make sense of all the data generated.

Unwanted Legacy

Old buildings come with legacy infrastructure, equipment, and systems. Usually these are added over time, so everything functions in a silo, and any data generated is a mixture of structured and unstructured.

Wot, Me Worry?

Some people also worry smart buildings will be hard to maintain and update, or that the design of their particular building will make it difficult to install lots of new equipment. Others worry that the upfront costs of retrofitting will be too high, and the payoffs will take too long.

Incentive Alignment

There can also be a disconnect in incentives between tenants and the landlord. If a smart building retrofit focuses solely on energy savings, there’s little incentive to invest if tenants pay directly for their energy consumption and would gain all the cost savings.

Smart Building Cyber Security

For all the opportunity connected devices offer, every device connected to the internet offers another access point for potential hacking. As Siemens argues in their white paper New Criteria for a New, Smart Building Era, “With critical building systems networked to allow remote management and monitoring, and both IT and OT communicating with each other, a cross contamination risk is real.”

So smart buildings must counter both physical and cyber-security risk to limit threat potential. “On one layer,” continues Siemens, “physical building access must be monitored with occupancy monitoring and control systems for anomalies that could indicate a cyber-attack. On another, digital networks must be safeguarded with firewalls and data encryption. Thirdly, system integrity must be ensured with individual systems and terminals protected from access by unauthorized individual as well as unauthorized changes.”

Those Smart Building Barriers? Now Falling Down

Take the example of one of the world’s most iconic older buildings, the Empire State Building. Built in 1931, in the past decade it was retrofitted with smart technology. It has since seen a 38 percent decrease in energy consumption and enjoyed $4.4 million in energy savings every year, according to Jones Lang LaSelle (JLL).

While ten years ago retrofitting a building may have been prohibitively expensive for most, that’s not necessarily still the case. You can connect modern sensors wirelessly, without installing expensive hard-wiring. Many sensors are low energy and low maintenance, with some harvesting energy from the light and movement around them, and others being ultra-low power, long battery life.

And while many older buildings may have cramped equipment areas, the latest smart technology is lightweight and compact enough to fit into even awkward to reach areas. Repeaters and signal boosters can extend the range of products previously thwarted by thick walls.

Lighting and HVAC are the two building systems that consume the most energy. But if investing millions in all-new lighting and HVAC systems isn’t feasible in the near term, you can invest in smart thermostats and sensors instead for a fraction of the cost.

Don’t forget about city, state, and federal incentives for retrofitting. There are many programs available that can help reduce implementation costs, as well as tax credits for increasing energy efficiency.

Have a Strategy to Smarten up Your Building

First, remember that retrofitting a building doesn’t have to a one and done process. Gradually increasing a building’s efficiency creates compound savings you can use for iterative building upgrades. So a retrofit doesn’t have to be one grand makeover. If you have a clear plan, retrofitting a building can be a continuous process of becoming more and more ‘smart.’

Regardless, the three main cost categories for a retrofit are implementing an IoT system, improving lighting systems, and improving HVAC systems. You also need to integrate closed circuit TV (CCTV) systems, enterprise resource planning (ERP) systems, and ticketing systems.

Transforming a building while maintaining operating margins requires a structured approach. Begin with a discovery process to learn which building equipment, processes, and systems you can and can’t digitize.

You also need to clearly define objectives and ensure all relevant stakeholders align on those objectives. This includes the building owner, property management team, engineering management—and tenants and vendors too. Objectives could include energy reduction targets, acquiring “green” certification, agreeing on an implementation roadmap, and future enhancements.

Once you have an agreed upon set of objectives, undertake data analysis to inform and set the KPIs that matter most for achieving the objectives you decided on.

Finally, decide on a building operations platform that can integrate with, and manage your BMS, HVAC, lighting, security, and access. Once you have all these elements in place, you’ll be in a good place to decide whether the ROI of a smart building retrofit is worth it for you.

Nearly All Commercial Buildings Will Eventually be Smart Buildings

According to Research And Markets, over 75 percent of new construction will involve at least one facet of smart building-related technologies over the next five years. And roughly 85 percent of legacy buildings in developed economies have issues that will require substantial retrofitting.

The need for better energy efficiency, lower operating costs, and greater responsiveness to building conditions and tenant activities is only going to increase. Which means it’s a matter of when, not if, your building will need to incorporate smart technology.

Get ahead of your retrofit. Ensure you have a future-proof building operations platform that can improve your building’s operating efficiency right now. Arm yourself with the Building Engines 2021 Buyer’s Guide to CRE Building Operations Technology.