CREW DC: News-Program Summary

PROGRAM SUMMARY

January Program: The Next Generation of Intelligent Buildings!

January's program focused on the role real estate plays as technology; the workforce and the environment intersect. Matt Klein, President of Akridge, moderated a panel of industry experts with a holistic view of design and development. Included were Diana Horvat, AIA IIDA LEED AP, Partner – Envision Design; Tommy Russo, Chief Technology Officer – Akridge; and James Whalen, Senior Vice President/Chief Information Officer – Boston Properties.

Mr. Russo was the first to speak, enlightening the audience with examples of cutting edge buildings visited during a recent trip to Asia . While many of these technology advances are visionary for the United States , most are now fundamental aspects of life in Japan , Singapore and China .

Among his observations were:

Exit Signs – Lighted exit signs based on the floor that allow people to identify the appropriate exit in a smoke filled room while crawling on their hands and knees
Stairwells – Motion detectors that automatically turn on the lights when someone enters a stairwell thereby saving electricity when unoccupied
Windows – Small horizontal openings on top of windows that allow hot air to escape thereby cooling down the interior space
Green Roofs – Taking the typical green roof to the next stage . . . on top of a building, wheat is grown and harvested twice a year for use by restaurants; in the off season, rice is grown
Security – Fingerprint detectors used in lieu of keys to unlock doors, whereby eliminating the need for carrying a bulky key ring
Hotel Rooms – Bedside panel that can turn lights off/on, television off/on, etc. to facilitate guest comfort
Bathrooms – Routing a copper hot water pipe behind a bathroom mirror to defog the mirror as hot water passes behind it when the shower is running
Traffic Center – Digital signage that displays real time updates on traffic conditions allowing commuters to adjust travel routes if needed
High-Rise Building – LCD panel displaying an image on the side of a building that can be used for advertising purposes or in emergency situations
Building Wireless – Offices, garages, etc. that provide wireless cellular services so connections can be made effortlessly and prove advantageous for emergency personnel such as firefighters
Parking – Credit card panels that are mounted inside cars and which customers are mandated to use to pay parking fees

Mr. Whalen was next to speak, expanding on the convergence of Information Technology and Facilities Management. His perspective was from what can be achieved through a network of intelligent buildings, rather than just one building. His discussion took us through the various “touch points” of a network, from Facilities Management to Telephony, Energy Reporting, Fiber Connectors, Wireless Campus Networks, Airborne Fiber Networks and Centralized Command Centers. To illustrate the tremendous dynamic occurring in the market and the challenges of building a platform, he described several acquisition scenarios, including one of Prospect Place in Walham, MA in December 2005, a project that was undercapitalized with high operating expenses and below market rents. Prospect Place represented typical practical hurdles: lack of one view, varying support levels, varying levels of technology sophistication and security (of high tech systems). The takeaways for the future include: eliminating historic barriers, establishing an operating platform for new acquisition and development, working through a dynamic but fragmented market and using the network as an enabler (as a way to look at solutions).

The next topic to be discussed was sustainable design, led by Ms. Horvat. Sustainability, as she described, entails tapping into some level of energy. The drivers of sustainability are energy issues, water issues, jurisdictional requirements, and the cost of doing business and social awareness. Generally speaking, the awareness of environmental issues is moving from the “liberal elite” into the public mainstream.

Buildings serve the following needs and expectations: shelter, security, safety/health, flexibility and identity/brand. By marrying sustainability practices with technology, Ms. Horvat noted that we could achieve widespread sustainability. The potential impact of this is far reaching. In the United States, buildings account for 36% of total energy use, 65% of energy consumption, 30% of greenhouse gas emissions, 30% of raw material use, 30% of waste output and 12% of potable water consumption.

Sustainability is the new standard for good design. It considers the “Triple Bottom Line”: environment impacts, social responsibility and economic realities. Good design can no longer include strategies that harm the environment, and we must think in terms of values versus cost. There is an opportunity for everything to be redesigned.

Where are we in the process? The current mainstream is experiencing increased yet moderate sustainability design. It will be through the efforts of innovators and leaders in green technology that drive widespread sustainability into the future mainstream.

What is big business doing today? Over the past decade, DuPont has increased production 30% by cutting energy use by 7% and GHG emission by 72%, thus saving more than $2 billion. IBM, British Telecom, Alcan, NorskeCanada and Bayer have collectively saved another $2 billion by reducing their carbon emissions by more than 60%. Moreover, in May 2005 GE vowed to raise its energy efficiency 30% by 2012 to enhance shareholder value.

What is "a building that is a living machine?" Similar to Mr. Russo, Ms. Horvat remarked that intelligent buildings are becoming an intrinsic part of the cityscape in the Asia Pacific arena. To illustrate, Capital Tower in Singapore has an integrated Intelligent Management System that is built on top of a 5km fiber optic backbone. Over 20 automated sub systems, including mechanical and electrical systems, CCTV, video on demand, multi-media signage and kiosks, are managed from a single, unmanned command center. Moreover, tenants such as Cisco Systems and JB Morgan, have access to features from the desktop. Another example in this country is 1001 New York Avenue, NW in Washington, DC, developed by Louis Dreyfus Property Group. This project has a green roof, green power, cistern for 65% rainwater catchments, waterless urinals, ECM “smart motors” technology in VAV boxes and 500 SF recycling area, among others.

How is LEED changing the way developers think? To answer this question, Ms. Horvat quoted Sean Cahill, Senior Development Manager with Louis Dreyfus Property Group: "We are taking a bet that a LEED building will have more value in 10 years. We also believe that a LEED building will have more value than a green building that is not LEED certified. When we go to the closing, the LEED certification will be worth something." Also, "If you are already building good buildings, LEED is easy. If you are building cheap buildings, LEED is difficult."

In closing, Ms. Horvat projected that the next generation of buildings will require integrated design solutions and longer-term views of building performance.

Before launching into a questions and answers session, Mr. Klein took a few minutes to discuss how developers look at technology from a Return on Investment perspective. This was illustrated through a case study on the Homer Building. The new Homer In-Building neutral host wireless is a highly flexible technology backbone for the building that allows three core purposes: 1) cellular, 2) wireless infrastructure—from internet to security cameras to building controls and 3) fire and life safety. The total cost for this technology typically will range anywhere from $1.00 to $1.75 per foot to install. While the ROI is sometimes quantifiable/objective, in the case of the Homer In-Building, the ROI was more subjective. While it created some cost savings, the primary driver was to make an on-going investment to maintain the status of a premier, trophy building and to keep clients happy. The ROI that resulted was derived from higher rental and retention rates.

Regarding LEED certification and sustainability, Mr. Klein noted that ROI generally incorporates some objective, some subjective and some civic value. There is value in the branding but equally, if not more important, is the fact that some clients are starting to state that they want to be in a green building. While the math does not necessarily make sense, consumer trends show that this is a functionally good call.

Mr. Klein commented that an important lesson learned from the mistakes of many large, national companies, such as bundling technology and services, is that developers should not stray too far from the core purpose of efficiently delivering a product that addresses the needs of building occupants. Needs can be functional plus take into consideration the location, aesthetic and sustainable features of a building. Mr. Klein suggested that developers pursue technology as they would any other feature or amenity to a project—it is something clients or prospective clients value.

In closing, Mr. Klein remarked that there are a lot of new technologies in the marketplace, which move fast, and that real estate will not keep up. Accordingly, one of the important technology strategies is building flexibility and staying in touch with the latest innovations in the context of how clients might benefit. As part of the shift from production to information, US business has seen a dramatic increase in productivity over the last ten years. America is the most productive in the world. It is the job of developers to continue to provide the buildings that will continue to fuel competitiveness and productivity of the users.

Questions and Answers

1) Other parts of the world are way ahead of us in the use of technology and application of sustainable design principles. Why do you believe this gap exists and do you see this gap growing or shrinking in the years ahead?

The gap exists, but some companies are making headway. Also, greater technology and sustainable design principles are coming to the states, and we will surpass them as we always have.

2) Where should we research the topics of today's event?

Google was noted as a good starting place, but the search needs to be specific. Other sources included AOBA, BOMA and USGBC.

3) Can you recover the capital costs from tenants?

First, tenants should be encouraged to be as efficient as possible. Secondly, costs should be recovered as the base year resets. On a NNN basis, as with most Class A leases, all operating expenses are passed through.

4) What happens when the power goes out?

When everything is integrated, there should be cogeneration plants within a building that are utilized. Nevertheless, emergency generators still need to exist.

5) How do you guarantee reliability in a network of buildings?

Build it into the design. Take a redundant approach to reduce risk.

6) Are unions embracing all this technology?

It is a factor now with all jobs, so there are increased expectation at all levels in property management. There has to be training, in addition to user-friendly systems.

7) What about communication with tenants and government authorities during an emergency?

Akridge noted a case study where it had installed technology in a project that could communicate with an antenna on a fire truck and broadcast their system inside the building. Also, digital signage can help during an emergency.

8) What about GSA and older buildings?

Buildings should not appear like they have been retrofitted for new technology. For every piece of technology, there is a way to fit it into the building.