December 9, 2023

Developers are leveraging the growing obsession with data to improve office buildings in ways that reduce costs, streamline operations, and save owners millions of dollars annually.

The field known as real estate technology, or proptech, has become a booming commercial property sector as property managers seek to use data collection and artificial intelligence to control systems such as heating, lighting, air quality, and even work flow.

While builders juggle the complications of getting workers back to their offices safely after the pandemic, investors are investing money in proptech startups like Cherre and HqO.

However, this data collection raises cybersecurity concerns: A Deloitte report from 2021 found that “cyberthreats are becoming increasingly complex”. Thieves have become more adept at chopping, even using the thermometer in an aquarium to gain access to a Las Vegas casino network.

The increased use of Internet-connected sensors is turning high-rise offices into “computers with a roof” that must protect against security breaches, said Arie Barendrecht, managing director of WiredScore, an organization that certifies digital infrastructure in buildings.

“Anything smart and connected has a downside, and that’s an increased risk,” he said.

However, developers believe the industry is on the verge of a significant change: the post-pandemic re-evaluation of corporate real estate plans in an oversupplied office market means there is even more pressure to better understand and improve commercial real estate.

“There will be a dramatic increase in information about how people use our buildings and more sensors will be used,” said Charlie Kuntz, innovation manager at Hines, a large real estate investment firm.

In Houston, for example, the proposed office tower known as 1550 on the Green is slated to be a cutting-edge addition to downtown. It is expected to open in 2024. Skanska, a Swedish developer, hired Danish architect Bjarke Ingels to design the 28-story tower, which will contain a range of environmental controls and smart building functions.

The project will include a network of sensors that will track movement, occupancy and efficiency. Skanska, which is responsible for both development and construction, plans to install thousands of sensors to collect anonymized data on an area of ​​375,000 square meters, including cameras, optical sensors, parking scanners and QR code readers on security turnstiles .

“We used to build first and then talk about adding technology to a building,” said Robert Ward, president and general manager of Skanska USA Commercial Development. “Now it’s like, ‘How do we build the building around the technology?'”

A range of apps and sensors, as well as the artificial intelligence that analyzes the data they collect, provide tenants with more information on productivity. The immediate focus will be on how to get employees safely back into the office, but the technology also holds promise to uncover areas that need to be streamlined. Some sensors can monitor air quality and even environmental performance, improve energy efficiency, and comply with municipal emissions regulations.

That data will eventually become part of the standard disclosure between property buyers and sellers, said Kevin Danehy, general manager of North America at Willow, a building services company in Sydney, Australia.

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“The only place where the owner and user had shared concerns was in the lobby,” he said. “It is only in the last three or four years that these systems have become affordable and scalable.”

The pandemic has widened opportunities for the sector, said Vik Chawla, a partner at Fifth Wall, a venture capital firm that has backed proptech firms like Enertiv and Loft. He sees an imminent “digitization of office assets”.

“Employees want a more technological, high-tech experience,” he said. “There will be orders of magnitude more investment this year and when the offices are empty this is the perfect time to upgrade.”

The idea of ​​tracking how employees use the space is a central tenet of the corporate philosophy of the cooperating giant WeWork, which often bragged about its technological capabilities.

“Aside from the hype and megalomania, WeWork was on its way to flexible space and the challenge of underutilization,” said Dan Ryan, managing director and co-founder of VergeSense, a company that makes optical sensors for buildings. “This philosophy that we can all work remotely is adopted by every company.”

The technology used to monitor office activity is usually nondescript. The VergeSense sensor, shaped like a smoke detector and roughly the size of a deck of cards, counts the number of people in a room and measures pedestrian traffic. The company has a proprietary algorithm that can be used to determine if an area is being passively used by someone who has temporarily stepped back. Cisco and other companies with 10,000 or more employees have signed up to use the devices with a subscription service.

Start-ups have seen strong customer interest in the past year. HqO, which provides an operating system for offices, raised $ 60 million this month. VergeSense, which has raised $ 21 million in two rounds of funding, announced a partnership with global real estate company JLL to install sensors in multiple buildings across the country. By the first quarter of 2021, VergeSense had analyzed more than 40 million square meters of real estate worldwide.

Established developers have kept pace. Hines has run numerous hardware and software tests over the past year. In 717 Texas, Houston, an office tower in the city’s theater district, Hines used more than 150 sensors to count people and measure indoor climate quality. The company is also testing how cameras can be used in lobbies on some of its buildings to provide tenants with “consistent, helpful information”.

At Atlantic Yards, an Atlanta office complex, Hines worked with Microsoft, a tenant there, to see if sensors could help improve employee efficiency. And at 10/120 South Riverside Plaza in Chicago, Hines started a project that combines occupancy and room sensors with network infrastructure to determine what amenities and technologies are being used in public areas.

However, some industry insiders are skeptical of the technology. The technology has to prove its accuracy before it’s really useful, said Greg Fuller, president and chief operating officer of Granite Properties, which owns and manages 10 million square feet of office space.

Granite is working with Fifth Wall to find out which technologies are delivering. “Real estate companies are realizing they need to stay competitive and keep up with technology,” he said.

Others have raised questions about privacy and cybersecurity. VergeSense, Hines and Skanska state that they only use anonymised data and do not record individual employees. A new SmartScore certification introduced by WiredScore last week includes cybersecurity qualifications and has already been adopted by dozens of major global rental companies.

However, it can be tempting to expand occupancy tracking, said Doug Stewart, director of digital consulting at Cushman & Wakefield. “Is it important to know that there are three people in a conference room, or who those three people are?” he said. “The slippery slope is when we start naming names.”

Still others believe that building data can help influence the design of the next office.

Skanska’s 17&M office building in Washington was designed inside-out with smart technology, Mr. Ward said, “like building the engine in front of the car.” The goal of the data collection was to create a continuous feedback loop for design improvements.

Tenants will be busy getting back to the office, but the next few months after the reopening can be an important decision-making time for companies curious about this technology.

“It’s the economic offer,” said Mr. Chawla. “These technologies mean lower risk, lower operating costs and higher rents. They don’t do this because the tech is cool. “