The Cost Of Doing Nothing For The Built Environment

Determining the cost of change management and value creation in digital transformation of the built environment

As a business owner, you are constantly tasked with the need to make decisions that will have an impact on your bottom line. 

Sometimes, this means making investments in capital improvements – upgrading your machinery, expanding your production capabilities, or even just maintaining and repairing what you already have. At other times, it may mean cutting back on expenses, even if that means forgoing some short-term gains.

But how do you measure the effectiveness of those changes? Most of the time, and historically, we have used ROI and NOI as an indication of how well a particular change is working. In the case of real estate and the built environment, there are other metrics that can be used to measure success: occupancy rates, rents, and capitalization rates.

There’s one measure that often goes neglected, however, and that’s the cost of avoiding change. This is the cost of not making decisions that could have a positive impact on your business. It’s the cost of sticking with what you know, even if it’s no longer working.

The fear mentality

Across all industries today, there is a need for a major mentality shift. Why? Because companies are resisting change and denying reality. Where facts and figures highlight a need for businesses to move in new directions, fearful decision-makers are instead choosing to stay the course and hope for the best.

In many cases, this is due to a fear of change – a fear of the unknown. But in order for businesses to grow and succeed, they need to embrace change, even if it’s uncomfortable. They need to be willing to take risks and make mistakes.

In real estate, this need is especially apparent. Real estate is an industry in which much has changed over the past decade; we have seen the rise of decarbonization, smart buildings, and environmental sustainability. Yet, many businesses are still clinging to the status quo, refusing to make the necessary changes in order to stay competitive.

The cost of avoiding change

If we look at the aforementioned trends, and the rate at which they are becoming more prevalent, it’s clear that businesses who don’t adapt will see this error reflected in their NOI. In particular, businesses that do not shift gears toward smart buildings will miss out on the massive potential for energy efficiency and cost savings.

Buildings are some of the biggest power users on the planet at roughly 40% of global energy demand. [1] With smart buildings, however, there is the potential for every metric and use of power to be measured – meaning that the ESG data collected makes it much easier to see where efficiencies can be made.

Let us take a closer look at the savings that will be lost should a business choose not to invest in smart buildings:

  • While HVAC (Heating, Ventilation, and Air Conditioning) makes up 44% of energy use overall, the ability to track temperatures and energy use can lead to significant savings by making minuscule adjustments on a regular basis. [2] In fact, demand-controlled ventilation has been shown to save up to 50% on energy use. [3]
  • Predictive energy insights can be used in conjunction with automated building controls to save 20% annually on electricity. [4]
  • Occupancy management monitors which rooms, devices, or systems are in use and when, in order to optimize settings for comfort and efficiency. 

Taken together, these are just a few examples of the ways in which embracing change – in this case, the embrace of smart buildings – can lead to significant cost savings. The fact is that the world is changing, and businesses that don’t change with it will quickly find themselves at a disadvantage.

The danger of falling behind

It’s important to remember that, while making a shift into the smart building space may seem daunting, the cost of refusing to do so is much greater. In fact, it’s estimated that the global market for smart buildings will grow from USD 72.6 billion in 2021 to USD 121.6 billion by 2026. [5]

Building tech is a trend happening now – not something we’ll perhaps see in the future, if the stars align. So, if your business is looking to remain competitive – or even just stay afloat – you need to be thinking about how you can integrate this technology into your infrastructure.

The big-picture cost of avoiding change

While much of what we do as business owners is to drive a profit and minimize losses, it also pays to think about the big-picture cost of doing nothing: our effects on the earth. 

No one is separated from climate change, and everyone is affected by it. The built environment, as we’ve said, is one of the largest contributors to greenhouse gas emissions. So, when businesses refuse to make necessary changes in order to become more sustainable, it’s not just their NOI that suffers – it’s the planet.

How decarbonization and smart buildings can work together

As we near the two-degree Celsius increase in global temperature – the point at which climate change becomes catastrophic – it’s clear that drastic action is needed. And that action starts with the built environment.

Enter decarbonization: the process of removing carbon dioxide from our atmosphere in order to curb the effects of climate change. This is an important process and one that cannot be done without the help of businesses.

In order for decarbonization to be successful, it’s essential that we work together. Governments need to set the rules and regulations, businesses need to comply with them, and citizens need to be on board with the idea of making changes.

Smart buildings can play a major role in this process by helping us to reduce our dependency on fossil fuels. In many cases, smart buildings are already using less energy than traditional buildings – meaning that they’re already helping to reduce emissions. 

But we can do more. There are a number of ways in which we can make our smart buildings even smarter, and by doing so, we can take an important step toward decarbonization. 

Some of these steps include:

  • Using renewable energy sources like solar and wind power to meet our energy needs. 
  • Installing green roofs, which helps to reduce energy needs by acting as insulation and cooling the building down. 
  • Using intelligent lighting systems that can be dimmed or turned off when not in use. 
  • Choosing materials that are environmentally friendly and low in emissions. 

The bottom line is that the cost of avoiding change is high. Businesses that refuse to make the necessary changes will find themselves at a disadvantage, both environmentally and financially. Embracing change – in this case, embracing decarbonization and the smart building revolution – is the only way forward.

Talk to a smart building expert to learn more about how Switch helps portfolio managers reach their sustainability goals.

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[1] Alliance to Save Energy | Buildings

[2] Yodiwo | Improved ESG metrics: Can smart facility management skyrocket your property value in 2022?

[3,4] Verdantix | Four New Ways To Cut Costs With Smart Building Technology

[5] Markets and Markets | Smart Buildings Market by Component, Building Type, and Region – Global Forecast to 2026