The Internet of Things and Corporate Real Estate: An introduction. July 2016

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1 The Internet of Things and Corporate Real Estate: An introduction July 2016

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3 The Internet of Things and Corporate Real Estate: An introduction The Internet of Things and Corporate Real Estate: An introduction Background The Internet of Things (IoT) or Internet of Everything (IoE) means different things to different people. This paper, the first in our IoT series of reports, aims to demystify IoT and help professionals, specifically in the CRE space, to simplify, understand, and implement IoT strategies in what is a fast-paced race for digital transformation. So let s start with the basics. IoT is essentially the networking of physical devices (pretty much anything with an on/off switch), primarily across the internet, allowing the collection of data, which can be analysed to enable a greater understanding which in turn can drive actions and create value. The applications of IoT are vast; let s look at 4 example applications to bring it to life. 1. Industry: IoT has been a powerful driving force in several industries including energy, healthcare, and automotive among others. Gartner, a technology research group forecasts that by 2020, over 250 million cars around the world will be connected, with the number of installed connectivity units in vehicles worldwide increasing by 67 percent and consumer spend on in-vehicle connectivity doubling. Connected cars will know when you leave for work, monitor traffic delays, and redirect you to the quickest route. Additionally, the car could send back telemetry to the vehicle manufacturer to optimise the service intervals or pre-empt a potential failure. This benefits both the end consumer and the car manufacturer in generating live feedback and data to enhance the design of future vehicles. 2. Cities: A smart city aims to improve the quality of life of its citizens, promote economic growth, and respond quickly and efficiently to the socio-economic, demographic, and environmental challenges of a city. Smart lighting systems, waste and water management, smart parking, and other applications monitoring traffic flows and urban air pollution are some examples of internet of things applications in such cities/developments. Cities around the world are looking to the Internet of Things to enhance the quality of life of their citizens, and according to Intel are expected to invest USD 41 trillion on IoT technologies in the next 20 years. In 2012, Barcelona started deploying IoT solutions across a range of urban systems including public transit, parking, street lighting, and waste management. South Korea has just launched its first low-cost dedicated network for commercial IoT devices and applications covering 99% of the country s population. Other countries including UAE, Singapore and Australia have been harnessing the Internet of Things technologies to transform their cities into data-driven smart metropolises. 3. Buildings: One of the definitions of a smart building is a super-system of integrated building, technology and energy systems. This includes the ability to connect and control key power plants in a building, whilst also monitoring energy usage and other environmental factors through remote sensors, and then joining it all together on a platform that optimises not only the building conditions, but also the energy usage. 4. Home automation: This is the ability to program and connect smart devices to make home life more comfortable and secure, optimise devices and their resource usage, and thus reduce household monthly bills. IoT can greatly enhance your daily living by allowing you to monitor your house through an IoT security camera streaming live on your smartphone, or instantly switch on and off any plugged device whilst you are away at work, on holiday, or just in another room. All of the above examples working together and connected across different systems and platforms effectively create an ecosystem that enhances people s lives, keeps them secure, reduces environmental impact, and saves resources. 1

4 The diagram below from Libelium, a device manufacturer, shows just some of the devices and connectivity and represents a mere drop in the ocean of what can potentially be connected. Gartner, for example, predicts that by 2020 there will be over 26 billion connected devices. Libelium Smart World Why the IoT is important, especially in the CRE space This is the age of digital transformation. In 2016, one fourth of millennials will become managers, and the Generation Z (those born in ) will be entering the workforce. Both groups have known nothing other than digital connectivity, more so than any previous generation, and they expect to interact and engage as such with their surroundings. This means that CRE professionals need to be able to build, monitor, manage, and adapt their buildings to become part of a broader digital eco-system within the buildings themselves and also extending beyond into the smart city space. 2

5 The Internet of Things and Corporate Real Estate: An introduction There are many benefits in preparing to make this transformation early: 1. Poorly run buildings are inefficient, cost more to run, have poor sustainability ratings (and as such are harder to let/sell), and don t attract the premiums or returns required by investors. By contrast, smart and connected buildings engage with tenants and users, either through provision of information or the ability to control surroundings (i.e. heating/lighting), ordering lunch, booking rooms or reserving desks or parking spaces. All of these examples, and many more, are becoming expected in corporate offices and by the leading organisations who occupy them and use these attributes to attract and retain talent and customers. In addition, more than 5000 companies around the world declared commitments to climate change at the United Nations Climate Change Conference, also known as COP21. This can only be achieved by the right combination of policy and regulatory measure, investment in green technology, and an increase in R&D spending on renewable energy technologies. Moving forward they will be less willing to partner with inefficient suppliers who can damage their brand, including landlords. 2. Linked to the above is the Health & Wellbeing of occupants. The Facilities Management industry will be familiar with sick building syndrome and the negative impact it has on occupants. Conversely, a building operating in tune with its occupants, enhancing their experience, will result in greater satisfaction, reduced sickness, and improved productivity. 3. A connected building, combined with good workplace design enables and enhances agile working, which opens huge opportunities for CRE professionals and organisations managing large portfolios and diverse employees. The benefits that can be realised by a successfully delivered agile programme should not be underestimated. Property costs, operational costs, productivity, environmental impact, and health & wellbeing can all be improved when a holistic approach is taken, and technology/iot is the enabler. So what you should be doing, and where do you start? Very few organisations have the luxury of being able to start from scratch, but there are logical first steps that can be taken along the path to digital transformation today and result in the deployment of IoT in the CRE space. Start small, think big! 1. Start small and consider quick wins you can use to demonstrate early success, potentially using savings to re-invest in the next stages, like optimising a building s environment and energy use by making sure the building management system is running properly, energy usage is monitored, and findings are acted on and sustained. This is a great entry point with good returns. It reduces operating costs, helps meet legislation, improves working environment and enhances the marketability of the building. 2. Develop your property strategy in conjunction with your digital and business strategy. Technology is the enabler that will unlock enhanced value from your assets. Trying to bolt this on as an afterthought will never be successful. Your quick win steps and those that subsequently follow should align to the property and ultimately the business strategy, with the aim to converge as soon as practically and economically possible. 3. Don t do this in isolation. This isn t a pure property capex programme. Other key stakeholders need to be engaged to develop and deliver a successful digital transformation. IT, HR, security, the wider business, and end users should all be engaged. Deploying masses of new technology isn t a silver bullet and the cultural considerations and change management requirements are as important as choosing the right technology. 3

6 What you should look out for The previous section touched on some of the steps that can be taken to kick start you on the IoT journey and this final section draws out some other specifics that are worth spending more time considering early on. 1. Security. Millions of connected devices, especially when they are controlling your buildings, connecting your employees, and running a business, need to be secure. Each organisation will have its own security policies and processes and when engaged from the start the security teams, along with IT, will ensure that the right choices and protocols are designed in from day one. They will help, not hinder! 2. Interoperability vs. closed proprietary systems. Technology and IoT continues to evolve at a rapid pace and as such there remain numerous standards, platforms and solutions of which some are open and interoperable and some of which aren t. Choosing systems that use open protocols and are interoperable will provide greater surety of not becoming obsolete or incompatible with other systems, when you want to integrate them at a later stage. You are not the first to try something. IoT in different forms has been around for many years (in the shape of machine to machine communications in smart meters) and there are many examples of organisations and cities who are embracing IoT, pushing the boundaries and really making it work. Get out there to see whose doing what and build on their successes for your own benefit. In our next paper, we examine more closely how companies can develop their IoT strategy and some of the key steps and considerations to think about. 4

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8 Paul Eggleton Energy & Sustainability Director E : paul.eggleton@source8.com M: +44 (0) Armela Kokona Consulting & Analysis E: armela.kokona@source8.com T: +44 (0) M: +44 (0) source8.com