Capturing and creating value from built assets

Today’s successful companies like Uber, Alibaba, Airbnb, Twitter, Facebook and Google are reshaping entire industries with digitally-enabled business models that are faster and cheaper to scale up. They break through market barriers, bring down monopolies, and monetize others’ building assets without bearing the costs of operating them.

Organizations who own or lease real estate can find themselves at a disadvantage against “asset-less” players, fighting on multiple fronts to match the new pace of business model innovation, and to reduce the capital strain that buildings place on their balance sheet. But as stakeholders increasingly select suppliers, partners or employers based on their sustainability credentials, incumbent organizations with large real estate portfolios who green their assets can meet sustainability expectations better – and in doing so, also leverage them to improve profits and create long-term value.

Approach real estate performance strategically

The second largest expense on companies’ balance sheets, real estate accounts for 40 percent of primary energy use globally, with up to 50 percent going to waste. When you consider that energy represents 30 percent of building operating costs, reducing this waste should be an intuitive proposition. So why do many still struggle to build a compelling case around sustainability? A common pitfall is to measure success by cost savings or reduction in energy consumption alone. Yet the implementation effort is multi-dimensional. “As a result, it can seem harder to balance the efficiency books. This is why setting the right goals is an important part of our advisory process,” says Peter Halliday, Head of Building Performance and Sustainability at Siemens. “Our discussions with clients typically start with energy efficiency, but expand into risk management, strategic procurement, process re-engineering, financial modeling, human capital management and data strategy.”

Efficiency projects can generate and internal ROI of up to 40 percent – well above the average 10–15 percent for typical business investments, but most organizations are unlikely to have the skills required in-house. A partnership with building performance experts is therefore key to developing realistic efficiency improvements and driving their implementation. “We help balance resources and budgets with improvement priorities – often with outcome-based financing solutions such as Energy Performance Contracting and Managed Energy Service Agreements,” continues Halliday.

Our discussions with clients typically start with energy efficiency, but expand into risk management, strategic procurement, process re-engineering, financial modeling, human capital management and data strategy.
Peter Halliday, Head of Building Performance and Sustainability at Siemens

Improve building economics

Green buildings can command up to 17 percent higher rent premiums and 23 percent higher occupancy rates – and resale values can be up to 30 percent higher – in part because efficiencies, by extending a building’s life cycle, can reduce maintenance costs. “Data and technology have a key role to play – as does the availability of building data analyst skills,” says Halliday. “But in a fast-moving regulatory and technological landscape, the costs and efforts of keeping up with changes can outweigh the benefits of bringing these skills in-house.”

“We combine our data-driven Performance and Advisory services with Navigator, our cloud-based Energy and Sustainability Platform,” says Halliday. “For organizations looking to gain control over their energy, the platform unlocks key insights into building performance indicators. Siemens experts draw from these to benchmark a building’s performance against best practices and compliance requirements – and prioritize investments from maximum ROI and risk mitigation. This helps reduce complexity and speeds up the time-to-value of improvements,” he explains.

Unlock the hidden value of carbon reduction and compliance

Gaining transparency into how buildings perform can reduce the effort and cost of navigating through the myriad of national regulations and voluntary certification schemes for environmental compliance. The benefits are both financial – building depreciation, utilization rate, management cost, obsolescence risks – and reputational: increased attractiveness to customers/investors, wider choice of financing sources and even productivity improvements. And there are incentives in the form of tax credits introduced to drive green developments and retrofits. The key is to define measurable action plans to meet short and long-term energy and carbon efficiency targets and to implement a framework that facilitates the integration of new reporting requirements.

Organizations that fail to form the right partnerships to leverage their buildings are not just leaving money on the table, they are restricting their ability to invest in business model innovation.
Peter Halliday, Head of Building Performance and Sustainability at Siemens

This again requires a know-how that is increasingly best sourced outside the organization. “As the pace of disruption accelerates, organizations that fail to form the right partnerships to leverage their buildings are not just leaving money on the table, they are restricting their ability to invest in business model innovation – and to ultimately respond to this disruption,” Halliday points out.

Turn buildings into true stakeholder value creators

Optimizing building performance – from improving energy efficiency to understanding its impact on carbon footprint and contribution to workplace innovation – can lead to greater value creation. By reducing risks and easing budget pressures, efficiency projects can free up resources that can be reinvested into delivering new and better products or services.

 With public opinion valuing transparency above all, companies that invest in data analytics and reporting systems and services are better positioned to prove what they claim. “When you consider that 78 percent of millennials take into account social and environmental issues in their decision of where to work, building performance has a direct impact on an organization’s ability to attract and retain the skilled employees it needs to respond to disruption. This is also why Siemens is investing EUR 100 million in efficiency projects over the next three years, with a view to becoming carbon-neutral by 2030,” concludes Peter Halliday.

2017-04-13

Picture credits: Siemens AG 

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