One of the pandemic’s many holdovers was its negative effect on the commercial real estate market in the US. The Great Resignation, coupled with the number of businesses that have either adopted a hybrid work environment or allowed many employees to work from home, has created smaller real estate footprints for many companies and lower occupancy rates in many office buildings. Moody’s reported an office vacancy rate of 19.8% in Q1 2024. Moody’s predicts vacancy rates will reach 24% by 2026.
The biggest culprit is work-from-home. While many companies have ordered employees back to work, some employers have embraced work-from-home or hybrid workplaces. Others have accepted it as part of the new normal but are not necessarily happy with it. Some have even embraced it. Rightly or wrongly, the last few years have given more power to employees to make demands, and employers have accepted this.
How can owners of existing and future projects combat this declining occupancy trend? How can they see higher occupancy and lease values in their inventory? How can they make their buildings more attractive in the eyes of tenants, increase tenant satisfaction, and present a more desirable workplace for employees who don’t always have to be in the office?
At least one of the answers is simple: incorporate a building management system into your next building or space. It makes a difference.
What’s inside this blog post:
- A clarification of terms
- A look at the numbers.
- Tenants pay lower utility rates.
- BMS means happy employees.
- Energy-efficient buildings help tenants attract new employees
- Owners benefit from BMS in other ways
- Consult the experts—call FICO.
A clarification of terms
If you have inquired into a building management system for your next project, you might find it confusing. Building management systems (BMS) are often called building automation systems (BAS). You will also hear the term smart building or intelligent building solutions. When consultants and other industry members use these terms, clarify what they are discussing. In this guide, though, we will refer to these systems as building management systems, and to make things easier, we’ll often use the acronym BMS.
What is a building management system?
Modern building management systems revolve around a central computer system and software that controls the environment and energy infrastructure in your building through sensors and actuators. As recently as just a few decades ago, BMS controls were limited to HVAC. However, technology has now made it possible to expand BMS to electrical distribution, water, natural gas, alternative energy, and even building security. A building management system’s net result and benefit is a smoother operating building that saves money by consuming less energy and keeps everyone happy with a comfortable working environment.
A look at the numbers
According to the US Green Building Council, properties with energy-efficient buildings with certifications such as LEED, WELL, and BREEAM command a rent premium per square foot of as much as 21.4% higher. Even without the certifications, owners of energy-efficient buildings can charge 8% to 35% higher lease premiums than comparable buildings in their area.
Owners of energy-efficient buildings controlled by BMS see occupancy rates at a minimum of 8% to 18% higher than comparable properties without BMS. Those higher occupancy rates are in addition to commanding more for leasing those properties.
It’s only logical that BMS-controlled buildings also have higher sales value. According to Forbes, real estate investment professionals are willing to pay property sales prices as much as 17% higher for buildings with BMS and other sustainable systems. This is all from a feature that adds only about 2% to your building budget. Owners can often recoup that increase through government grants (see FICO blog post Take Advantage of Utility Rebates and Government Incentives for your BMS project).
Tenants pay lower utility rates
One-third of non-fixed operating expenses in an office building go to energy consumption. Tenants often pay for their share of the utilities in a building, and electricity is by far the most significant energy bill. You can increase that for the many businesses that maintain energy-intensive features, such as a data center on-site (even though they might maintain data off-site, too). Reduced energy usage because of a BMS translates to lower utility bills for tenants.
A building management system incorporating smart building technology reduces energy use by an average of 10-25% in a mid-sized building. An analytics platform, one of the building blocks of next-generation BMS, can increase savings even further by allowing building operators to analyze data and usage trends.
BMS means tenants have happy employees
A building maintenance system means a comfortable, regulated environment. Employee satisfaction and productivity show marked increases in better working conditions. The medical and HVAC communities have long been aware of sick building syndrome. This malady, identified by the National Institute of Health, refers to when employees in a building “feel unwell and uncomfortable, seemingly related to their stay there, even when no particular disease or cause can be found.” Numerous sources report that as many as 23% of employees report symptoms of sick building syndrome, including dry or itchy skin, eyes, nose or throat, rashes, headaches, lethargy, or an inability to concentrate. It’s a wonder the number is so small, considering that some estimates have the number of buildings with sick building syndrome issues as high as 57%, according to Intelligent CIO.
Seasonal flu outbreaks cost the economy $10.4 billion each year in direct healthcare expenses, and that doesn’t consider the indirect costs of lost productivity and absenteeism. Workplaces with poor ventilation are Petri dishes for the flu. Any supervisor or manager can tell you that the annual flu season can decimate a workforce as employees spread the virus to one another. Projects get delayed, teams miss deadlines, and reputations suffer.
Employees are more productive in a building with BMS
Building management systems ensure a cleaner indoor environment. Poor circulation, decreased ventilation, and higher levels of CO2 contribute to lower productivity rates for employees. Numerous studies have shown declines in cognitive abilities and decision-making. Adequate ventilation is also a considerable step towards limiting workplace epidemics. Health issues in the workplace can cause a reduction in motivation (69%) and a struggle to concentrate (55%). Happy employees mean more productivity and a better quality of work.
Energy-efficient buildings help tenants attract employees
We’ve already discussed how the Great Resignation has given employees more power. That includes selecting the company where they work. A business in an office with smart building technology helps employers in the all-important task of attracting these employees. A workplace outfitted with high-performing HVAC, smart lighting, and efficient electrical governance sends a message about how the business and the building owner take energy sustainability seriously. Employees are also attracted to the other amenities afforded by BMS. These include workplace apps, smart lighting, enhanced security, fire detection, and more.
Employees are also demanding their employers become more sustainable
According to the 2021 Global Status Report for Buildings and Construction, buildings emit 37% of global carbon emissions and are responsible for 30% of all energy consumption, mostly electricity, in the US. Forbes recently reported that 79% of surveyed corporate tenants indicate that reducing carbon emissions will be part of their sustainability strategy. Employees are demanding it.
Sustainability is increasingly important to US companies
A building owner’s commitment to building automation systems and sustainable building design is also good for business. Prospective tenants increasingly want to align themselves with sustainable causes because they perceive the direction of the international business community. A McKinsey report on COP26, the UN Conference on Climate Change Glasgow in October 2022, cited that “over 5,200 businesses pledged to meet net-zero carbon targets by 2050, and some 450 banks, insurers, and investors—collectively representing $130 trillion in assets and 40 percent of the world’s private capital—committed to making their portfolios climate neutral during the same period.”
That’s a lot of business potential because your building has a building management system.
Saving your clients from the utility’s highest rates
Utilities in large cities and high-growth areas often face peak billing by utilities. Peak billing is how utilities establish a baseline for large energy consumers to ensure they can meet demand during high-use periods. Exceeding these baselines means incurring penalties or surcharges from the utilities. Building management systems can help balance energy consumption. For instance, during the warm summer months, the BMS can direct the chiller system to take the lead on building cooling, saving on electricity. Or it may direct a larger share of electricity from solar panels on the roof. Facility managers can maintain a lower peak level of consumption in their buildings.
Owners benefit from BMS in other ways
Building owners are also finding that outfitting their projects with a robust building management system allows them to reduce overall building costs. That’s money they can plow back into the building or show in the profit column.
Lower operating costs
Even with building tenants paying their share of the utilities, a portion still falls to the owner. Building management systems can reduce energy costs by as much as a third.
Compliance with state and local regulations
Electrical blackouts and brownouts are common in big cities, adjacent suburbs, and high-growth areas. State and local governments find themselves compelled to pass legislation mandating energy-saving measures. Building owners can expect these regulations to affect them, if not now, certainly in the near future.
Saving money on building maintenance
Building management systems help facilities managers and owners monitor systems and components in their energy and utility infrastructure. They make it easier to detect and isolate a faulty relay or a failing bearing in the HVAC system before it causes serious harm. A building management system also easily detects and pinpoints leaking water, which can quickly damage a building. Thus, facilities managers and owners can detect and address maintenance issues in a building’s infrastructure early, before extensive damage causes more significant repairs and considerable expenses.
Consult the Experts—call FICO
FICO has been providing turnkey building management systems (BMS) for businesses, schools, office buildings, hospitals, and others in and around Montana for more than twenty years. We are also experts in building management and system integration services, and our staff has numerous industry certifications. FICO works with leading BMS component manufacturers to provide optimum environments that are comfortable for employees and save energy.
