Practical Proptech: Why Owners Are Adopting Building Management Systems

Proptech — short for property technology — is a moniker that covers a vast array of digital “technologies” related directly and indirectly to the built environment. These technologies are designed to facilitate myriad tasks and processes affecting all types of real estate from commercial, to residential to institutionally-owned buildings and facilities.

But proptech affects more than just buildings. Asked to describe proptech succinctly, Matthew McAuley, research director, global insight at brokerage firm JLL, conveyed it as “the digital transformation of the built environment and [the] real estate industry.” He added that it encompasses "digital transformation (both hardware and software) impacting all aspects of the building lifecycle," including architectural design, construction, operational management and numerous transaction processes. Additionally, it covers "changes to business models, processes and systems as well as the governance of urban spaces."

McAuley noted “these changes are leading to new expectations of how the built environment operates and what we want from our buildings and the real estate industry.” There needs to be “a much greater focus on [the] end-user experience,” he added, whether it’s someone looking for a place to live, a customer returning items to a store, or an employee looking for an available desk at the office.

To understand the current state and future outlook for proptech, this LoopNet series examines a variety of products and services related to the commercial real estate industry. First, we’ll focus on building management systems (also called building automation systems) and how these platforms are evolving to become more useful to a host of CRE professionals like building engineers, property managers, asset managers, brokers and investors as well the user or occupant of a space or building.

While proptech related to buildings may seem mundane, technologies at the building level are the category with the largest number of proptech companies, according to McAuley. These technologies are a primary focus for the CRE units of many companies and they center on streamlining facilities management, building operations, space design, and decisions relating to leasing and other transactions.

In London, Richard J.P. Williams, managing director of real estate management for Avison Young, agreed, indicating that proptech adoption at the building level has made “significant progress … in recent years.”

Focusing on building management systems (BMS) and calling them the “the brain of the building,” Williams noted that there are many tools and companies working in this area. “Many agents use bespoke systems,” he said, “and Avison Young is no different,” referencing his firm’s own building management and analytics platform, AVANT.

Other platforms exist, each offering varied functionality, but basically, they present “base data through predictive analytics, workflow tools and document storage,” Williams said. Access control and video surveillance, which can be integrated with building management platforms are “very prevalent in new buildings and easy to retrofit in older ones,” and it is a common feature in major cities, Williams added. At 110 Bishopsgate, a 42-story commercial tower in central London, “heating, ventilation, opening and closing locks, visitor management, etc., are all managed from one app by Avison Young’s building team,” Williams said.

But energy management “has always been an important factor of building management and the energy crisis [especially in Europe] has brought on a massive increase in interest. We are now seeing that many previously marginal energy initiatives are now cost effective,” Williams noted.

Concerning energy management, the Continental Automated Buildings Association reports that companies can reduce energy consumption by 3% to 9% over two years by analyzing and acting on basic metrics related to energy consumption. That energy savings can climb to between 10% and 25% by using more advanced analytics that come from “master systems integrator (MSI) and controls” that are tied to the Internet of Things (IoT). Oracle describes the IoT as a “network of physical objects—“things”—that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet.”

According to Christian Lane, director of product management at building technology firm Johnson Controls, the earliest building management systems focused exclusively on HVAC. And despite the abilities that exist today to integrate multiple systems under one platform, “the majority of systems that actually get installed are predominantly focused on the HVAC side.”

HVAC systems were “digitized” initially because they are typically a building’s biggest energy user, so it made sense to find ways to reduce energy consumption and operating costs. Lane added that another reason this system may have been among the first to be digitized is “because of the way labor is divided when work is put out to bid.” This large and robust system with many independent components can be integrated under one software program somewhat easily because one subcontractor, the mechanical contractor, installs the entire system, requiring less coordination across trades.

Prior to HVAC software, inspecting and maintaining a building’s HVAC systems required a building engineer to go to each floor of the building, read gauges that reported humidity levels, for example, then manually record these numbers on a clip board. This individual carried out manual calculations and modified the system based on their assessment. This process was labor intensive and somewhat risky, giving one individual tremendous latitude to make changes.

Early platforms and software for HVAC systems enabled building engineers to gain some information about the operation of the mechanicals through sensors that displayed readings on panels inside utility rooms or mechanical closets. Floor to floor visits were minimized and data was displayed more transparently.

Fast forward several decades and today HVAC monitoring, as well as some changes to the system, can be made from a mobile device and the data can be accessed by parties beyond the building engineer. As these platforms evolved, they went on to integrate lighting — typically the second biggest user of energy in a building — and then access control, according to Lane. These systems “share the same occupancy schedule within a building,” Lane said, adding that “what we are trying to do in building automation is deliver that comfortable, well lit, productive environment.”

Underneath these integrated systems, owners must invest in what are called “smart” building components. For a piece of equipment to be smart it typically has sensors and ports. For example, a smart water heater will include all the customary components, but in addition it will have sensors that detect leaks and report them in real time via the software. The sensors can also prevent flooding by automatically triggering shut-off valves, without human intervention. They come with ports so peripheral devices can be plugged in, allowing for easy connection to the building management software and other building equipment.

Concerning human operation of the systems, Lane said, “I think there's an underlying acceptance that the types of operators using our software today are newer. They don't have as much skill with the mechanical operation of equipment, but they're very familiar with the layout of the building. So, if you've organized your user interface in such a way that it is familiar to the user and tailored to the building that it's operating with, it's usually pretty easy to find your way around our software.”

Today these platforms support not only building engineers, but also property managers and asset managers by, for example, centralizing data that in the past was housed on paper or in distinct and noncompatible systems. They can be customized to be made compatible with existing record keeping processes and report generation that owners may have in place with vendors, accountants, investors and others.

“Building management software is a broad term that can encompass a wide range of software types,” McAuley said. Examples he cited include computerized maintenance management systems (CMMS), computer-aided facility management (CAFM), integrated workplace management systems (IWMS) and enterprise asset management (EAM).

These are comprehensive platforms that can integrate numerous tasks and processes relating to portfolio, asset and facilities management. They help with data storage, generation and tracking of work orders, scheduling maintenance, planning for capital projects, ensuring compliance, booking rooms, and analyzing trends and data, among others.

McAuley added that several of these categories like CMMS and EAM are well-established, with tools provided by major tech companies or service providers such as JLL’s Corrigo CMMS, or EAM tools by IBM and Oracle.

Costs can vary widely, according to McAuley. He indicated that “many of these platforms operate on a modular software-as-a-service (SaaS) model or with an on-premise option, with different pricing tiers depending on the number of modules, level of functionality, support provided, etc.”

Fees for an IWMS system, for example, can range from the low $10,000s to well over $100,000 for software, and the price ranges are similar for implementation, depending on specifications, McAuley said.

Lane explained that in some cases, a building will already have some type of automation scheme, and some of these platforms will ride on top of that, providing more integration across systems. Additionally, cloud-based applications enable the building to be connected to the Internet of Things where it can interact with external datasets from, for example, utility companies.

Apart from widespread accessibility and customization, much of the value-add from these platforms comes from real time alerts and predictive capabilities. Notifications and alerts can be set to contact key individuals should a metric reach a pre-set worrisome benchmark. This enables an individual to respond proactively, potentially avoiding a costly fix or a catastrophic failure, according to Williams.

Lane noted that “the systems also provide all sorts of advanced analytics and outcomes.” One example he cited is use of some type of predictive algorithm, like machine learning, artificial intelligence, or some other advanced technique to predict faults on equipment. And what that does, he said, is help someone “avoid unexpected costs, identify system inefficiencies … and have a better estimate of when a service event is needed.”

Another predictive component could connect to a utility provider to understand at what time of the day rates will increase. “Maybe you turn off one of your elevators or a bank of escalators to save energy during a time of day when your utility charges are expected to spike. Those are all real possibilities with various software platforms that are available on market today,” Lane said.

Williams agreed that the value proposition for these systems relates to reducing operating and capital expenditures, reducing consumption of natural resources, reducing waste, and receiving real-time updates and alerts to prevent catastrophic failures. But additionally, he said owners are leveraging these types of systems to facilitate financial and ESG reporting and to keep their buildings current.

It makes sense that building owners would use the data collection and reporting capabilities of these platforms to capture revenue, expense and sustainability metrics to comply with financial and ESG reporting, given that these assets underpin their businesses. But corporate tenants filing their own ESG reports about the carbon produced, resources consumed, and waste generated by the buildings they occupy also benefit from these metrics.

As ESG practices have been adopted by more companies, more tenants have been seeking highly efficient buildings. Occupying buildings that operate sustainably and track their operations through metrics and reports are sought after by these companies.

Changing regulations are also motivating owners to adopt these more robust digitized property management platforms. Net zero carbon targets have governments, companies and investors aiming for net zero carbon emissions from their operations and portfolios by 2050 in some areas and as early as 2030 in others. Williams said that these net zero carbon targets will affect the capital expenditure strategies of many building owners “very soon.” In the UK, “there are targets around EPC’s (Energy Performance Certificates) in 2026 and 2030 which will require investment in most things mentioned above to achieve targets.”