Trying to predict the future of commercial real estate always carries risks. Choosing the right technological tools and updated thinking can provide agile companies with an edge in successfully evaluating, acquiring, improving and managing properties, adapting to market change and elevating ROI.
Making such adjustments is especially critical in today’s CRE landscape, since we live in a period of aging commercial and government infrastructure in the United States.
The industry is moving toward a predictive spending model that allows owners and managers to get ahead of issues such as predicting maintenance demands, rather than reacting to problems as they occur.
In the past, for example, a facility manager would typically receive a set amount—say $500,000—to manage properties during a certain time period. It was up to the facility manager to make evaluations and prioritize spending on factors such as lights, parking lot, HVAC and roof repairs.
In contrast, a modern Facility Condition Assessment (FCA) uses smart technology systems to develop digitalized plans covering anywhere from one to 10 years or more, permitting owners to accurately predict the remaining useful life of their buildings and their assets, and plan effective capital outlays.
FCAs employ predictive technology
As opposed to a periodic, stand-alone report on each building, a digitalized FCA provides real-time reports for all of a company’s properties in different geographic locations. FCAs combine historical data (such as build and upgrade dates, installation information and operating specs of lighting, mechanical and HVAC systems) with data from sensors to develop preventive maintenance and operating plans, as well as guidelines for short- and long-term capital spending.
For instance, a comprehensive FCA was carried out in 2018 for the Ann Arbor, Mich., public school system. The FCA provided the district with thorough analyses and status reports on all 35 of its schools (the average age of which were 63 years), identified critical maintenance needs and the risks associated with deferred maintenance, and outlined future capital spending requirements over the next 20 years. It included inspections and evaluations of building structures and envelopes, site improvements, building interiors and services (mechanical, electrical, plumbing, safety), as well as equipment and furnishings.
The FCA executive summary said that the facilities “were found to be in overall good to fair condition and have had an adequate level of maintenance over the past few years.” However, without substantial upfront investment, many of the schools’ Facility Condition Indexes (covering immediate and short-term needs/replacement value of each facility) “will fall into the ‘poor’ rating within a few years.” In addition, the FCA pointed out that the Ann Arbor’s sinking fund would run out of money in five years.
Ultimately, the data mined from the FCA supported the district’s successful campaign for a major bond proposal.
Energy efficiency delivers significant savings
CRE investors and managers are keenly aware of the cost advantages of energy efficiency, but they may not know if their properties are being operated to achieve optimal design efficiency. Government and private studies indicate that a very high percentage of buildings in the United States are not. Energy audits can uncover current problems, predict future issues and generate significant savings across the board.
In the United States today, CRE executives face the challenge of managing and improving a vast, aging infrastructure of private and government properties. Critical to this task is choosing and applying the right blend of technologies, including predictive analytics, business intelligence, digital tools and access to real-time data.
To help develop the best FCAs, energy audits and other tools, it’s important to choose experienced, independent technical assessment enterprises—not companies with something to sell. Independent evaluations provide companies with unbiased options. They are agnostic and are not out to sell or recommend specific equipment brands.
