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The Reinvention of Buildings in the Digital Age

All buildings, from hospitals to data centers, are undergoing a subtle revolution. Behind the scenes, it’s a new world. Inside the walls and tucked away in server closets, the Internet of Things (IoT) and cloud-connected building management systems (BMSs) are re-shaping the way buildings work in the digital age.

Three step changes

The next phase in the evolution of buildings is not architectural — it’s digital.

Where exactly this digital transformation is headed is a big question, and for good reason: We spend, on average, nearly 90 percent of our day inside buildings[1] — they are central to our lives.  In this post, I want to explore three changes that are creating long-term value for both investors and end-users alike. These step changes are efficiency, buildings as financial assets, and end-user centricity.

The efficiency challenge

McKinsey Global Institute Industry Digitization Index 2015 digital ageUnquestionably, buildings and cities face an efficiency challenge. By 2050, 2.5 billion people are expected to migrate to cities.[2] Rapid urbanization requires far-reaching efficiency gains in space and energy use.

Another challenge: The construction industry’s efficiency gains have nearly flatlined over the last 70 years, whereas other industries have seen dramatic improvement.[3] According to McKinsey[4], construction is poorly digitalized ranking 21 out of 22 industries studied. There is a correlation between the lack of digitization and the lack of efficiency gains that cannot be ignored.

The construction industry needs a more efficient approach, and the tools for that approach are increasingly available through digital technologies. In the past, contractors would hand out projects to an array of subcontractors, often without the necessary integration or management measures in place. Digital approaches, such as Building Information Modeling (BIM), can bring new efficiencies and savings to the design and build phases.

Efficiency gains are also possible during the operating stage. Older buildings are often run through trial and error, fragmented institutional knowledge, and reactive decision-making. Predictive maintenance, real-time monitoring, and cloud analytics are more efficient — powered by a central digitized platform that is open to all systems and vendors. When the BMS is connected to a BIM design, the entire building is mapped and structured in a way that allows for informed decision-making and rapid issue resolution.

Buildings as financial assets

Buildings aren’t just buildings anymore — they’re a new form of currency that must be managed to maximize long-term value.

Older buildings and outdated BMSs present an array of headaches: mounting maintenance costs, energy waste, and limits on occupants’ ever-increasing demands for IoT connectivity.

Digitally driven BMSs alleviate these issues. They minimize labor costs by predictive and therefore effective maintenance. They reduce energy costs with cloud-based analytics and renewable technologies. And they ensure occupant satisfaction through a BMS that provides temperature sensors, network connectivity, and room controllers. BIM also aids in profitable management by streamlining information such as maintenance plans and lease contracts.

Smart buildings are only part of the story. Smart buildings deserve smart cities. Occupants are looking for both, galvanizing buildings and cities around the world to compete for top business and talent through attractive housing, office space, and infrastructure.

The rise of the end-user

The changing appeal of buildings is another step change. While location mattered in the past and still does, end-users are also hungry for the latest tech — energy-efficient design and seamless IoT connectivity, to name a few.

With the rise of smart and green buildings, end-users now have more choice. They expect highly customizable, app-based environments where they can control their own thermostats, lighting, access control, and parking preferences. Occupants can use BIM designs to navigate within the building, while facility managers can use them to diagnose issues faster, thereby ensuring greater occupant comfort.

In addition to comfort, sustainability is another key end-user preference. Numerous studies have shown labels such as LEED and Energy Star are increasingly a differentiator in building desirability.[5] As these end-user preferences continue to change, the simplicity and openness of a single integrated system will enable facility managers and owners to keep pace.

The bottom line for investors

Beyond the numbers, though, are deeper human values. Our lives unfold in buildings. The buildings that offer the most efficiency and end-user value are also the buildings in which we will most want to live, work, and play. That is the true bottom line worth considering.


[1] US Environmental Protection Agency, “The National Human Activity Pattern Survey,” 2001

[2] United Nations, “World Urbanization Prospects: The 2018 Revision,” May 2018

[3] McKinsey Global Institute, “Reinventing Construction: A Route to Higher Productivity,” February 2017

[4]McKinsey Global Institute, “Digital America: A tale of the haves and have nots,” December 2015

[5] United States Green Building Council, “New Research Supports the Business Case for LEED,” May 2017

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  • Peter Parsons

    4 years ago

    very well written article with a eye to a future that should have been here long before now.

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