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Today's Differentiator Is Tomorrow's Standard: How Developers Approach Smart Buildings

Rudin Management’s first foray into smart building development was prompted by one of life’s great motivators — fear.

“I wish I could say it was a grand epiphany. But it wasn’t,” Rudin Chief Operating Officer John Gilbert said. “We had a vacant building. 55 Broad St. had been vacant for six years [and we were asking] ‘What the heck are we going to do to differentiate this building from all other vacant buildings in Lower Manhattan?’”

View Inc.'s Erich Klawuhn, Silverstein Properties' Guy Vardi, Rudin's John Gilbert and SOLiD's Scott Gregory at a 2018 Bisnow event

In the early 1990s, Lower Manhattan had around 30M SF of vacant office space, Gilbert said, likening the time to a depression.

The answer, the company found, was taking the aging office building and equipping it with the best smart features of the time. It opened as the New York Information Technology Center in 1996.

Twenty-two years on, the technological demands of tenants — and what is considered to be a "smart" or “wired” building — is very different. But landlords are under more pressure than ever to offer buildings with advanced features, and to use data to run them efficiently.

The development of smart buildings, and why commercial real estate can be slow to adapt to changes, was a major topic of discussion at Bisnow’s NY CRE Tech event this week.

Though buildings with sustainability and wellness credentials are held up to national LEED and WELL standards, there is still no universal measurement of a building's “smart” credentials.

But panelists said the market is forcing landlords to adjust and improve their technology, and delay on making changes is a mistake.

“If a building doesn’t have connectivity, it’s starting to lose value,” said SOLiD Technology Director of Marketing Scott Gregory, whose company provides antenna systems and other products to improve connectivity, with a focus on venues and densely populated landmarks.

“What is your differentiator today, or your competitive advantage, is tomorrow’s industry standard,” said Felicite Moorman, the CEO of both STRATIS and Bulogics. STRATIS is a software platform for multifamily and campus communities, while Bulogics designs wireless devices.

While there is no doubt offering a building that has cutting-edge features for tenants and that is run efficiently is beneficial to the market, getting to that point can be a challenge.

“We are slow [to adapt to technological changes] because the industry is slow … It takes 10 years to develop a building,” Silverstein Properties Chief Innovation Officer Guy Vardi said. “We are not an early adapter. Making a mistake in real estate is very costly.”

Vardi pointed out that there is not a word in English to describe the relationship between an individual in a building and the building itself — as opposed to the tenant/landlord relationship and employee/employer relationship.

“The reason for that is no one cares about it,” he said, adding that improving technology features is one way to change that. "The main focus is to see how to advance the end user’s experience. How can we make the company much more productive and increase retention?”

StackSource's Tim Milazzo, STRATIS​ ​and​ ​Bulogics' Felicite Moorman and Convene's Tom Zampini

Convene Chief Product Officer Tom Zampini believes technology can offer ways to give workers the ability to use their office space better. It is about providing answers to questions like, "how can I be better connected to the space and the amenities and know where my team is sitting?"

Gilbert pointed to Rudin’s property technology company, Prescriptive Data — which created Nantum, an intelligent, mobile, machine-learning system that integrates all building operations using prescriptive and predictive analytics — as an example of a way to improve individuals experience in their buildings.

Because the system provides real-time data about the number of occupants in buildings, fan speed, chillers and energy consumption, it allows for the reduction of operating cost.

It also means tenants can have access to information that will improve the experience for their employees. For example, running too many fans when there are few people in the office is not just a waste of money, it makes the temperature uncomfortable for the people still at work.

Large enterprise tenants, Gilbert said, want the data that Natum can provide.

“They need to be able to message their story [and show] they are saving energy to their customers, to their employees and to their investors,” he said. “Across our portfolio, we have cut our electrical consumption by almost 41% — while tenants' consumption is up by 11% over the same period. We need to give them tools to cut their consumption, period.”

But, he said, Nantum is not just being used in their office and residential portfolio.

Homeless shelters have also started to use the product, giving them information about things like bed occupancy and tuberculosis spore detection.

“It’s not just for the Blackstone and BlackRocks of the world — it really is for everyone,” he said. “The concept of an operating system is catching on.”