Upgrading legacy IT systems can lead to transformative changes that cut costs, improve efficiency and introduce a higher level of automation
By Michael Sellai, Partner, BPM
Commercial property owners as a group face similar financial challenges, like maintenance. This cost is typically budgeted for, as are significant investments in things like new roofs or windows throughout the lifecycle of the building. Some investments can have a positive ROI in the form of reduced energy consumption, like high-efficiency HVAC systems or LED lightbulbs and fixtures. But costs like those associated with keeping the properties clean are mostly just a need-to-do rather than anything that tangibly improves the value of the property.
One often overlooked investment that can dramatically increase the value of the property for tenants and investors is its IT infrastructure. As commercial real estate owners refurbish their properties, many are missing out on an opportunity to embark on a digital transformation that could boost efficiencies, cut costs, and make their properties more attractive to a larger group of potential tenants.
Building Value Through Technology
Typically, the largest investment most commercial real estate companies make in IT is for software like Yardi. Yardi is the industry standard property management software as a service (SaaS) platform that helps a company keep track of everything from leases, rent, vacancies, listings and vendor relations. But there is a growing list of technologies that many tenants are demanding and that savvy property owners are working to implement.
Some of the most common items tenants in commercial real estate properties ask for are devices and services to help physically secure the building. These include closed-circuit television cameras (CCTV) that can digitally record feeds, day or night, on the property. Other popular installs are security cards and scanners that limit access to offices, electors, the building, or (ideally) all three. Another growing trend for modern properties is offering amenities and extra services, like delivery lockers for online shipments, guest Wi-Fi, or even environmentally friendly building management systems that automate equipment like lighting and locks. However, all these add-ons and services require a reliable and steady connection to the internet.
Managing these systems requires technical expertise. Unfortunately, many property companies undervalue IT, which leads to them either making costly mistakes or facing frequent technical issues. The focus for most of these organizations is operational initiatives, which are predominantly about maintenance. Meanwhile, as companies expand their holdings and add new buildings, they hire vendors to source and install equipment to power in-demand services and amenities. One company might install the security card scanner system, while another handles the CCTV and another wires the building for internet, while yet another sets up the delivery lockers. Having so many companies installing their equipment can lead to duplication or triplication of certain services. This is not only inefficient and expensive but could pose a severe security risk.
Imagine this scenario. A commercial real estate company has 17 properties spread out across the Bay Area. This organization works with individual vendors to service these properties. One installs the Wi-Fi, another the card scanners, and another the CCTV. They all provide their equipment on-site, with each piece requiring a router, modem and internet hook-up at all 17 buildings. The costs for this IT infrastructure alone, stripping out the vendor fees, could run in the thousands of dollars per month, not including the redundant equipment.
A strategic digital transformation project would, among other objectives, seek to identify and resolve these types of redundancies and inefficiencies. The results could be significant cost savings by consolidating all the systems under a single vendor. In this scenario, all three systems could be set up to use one router, modem and internet connection without disruption or a service reduction. Reducing service fees alone could save between $20,000 and $50,000 per year, while consolidating redundant equipment could save as much as $300,000 on maintenance and replacements over the building’s lifetime.
Another obstacle that can cause issues during a digital transformation is the grade of equipment, cabling and workmanship that’s used. Typically, real estate companies use cheap, consumer-grade equipment for their various services. These plug-and-play devices are relatively but lack much functionality beyond their primary, consumer-oriented usage. This is another area where strategic digital transformation can contribute to successful property management by implementing enterprise-level equipment that offers significantly more functionality and can be customized and configured to support the company’s technology strategy needs. The other benefit of this higher-level equipment is that it can provide robust system insights, data and analytics, which can save time and money and reduce risk. For example, suppose a security card reader stopped working. A company with a well-designed commercial real estate IT stack could be notified about the issue immediately, allowing the IT team to remotely identify the problem and have repairs handled quickly. For property without this enhanced equipment, it could take a few days before anyone recognized the problem and even longer for a work order to be completed.
Automation Saves Money and Reduces Risk
There is significant potential for cost savings and efficiencies in store for property owners who embrace this trend towards digital transformation by automating processes and systems. A building that is securely connected to the cloud can be monitored after hours from virtually any place in the world. For example, a connected building with a burst pipe on an upper floor over a long weekend could automatically issue an alert about the flood. A property manager could access the system and remotely shut off the water, contact a plumber for emergency repairs, and have a restoration company clean up and restore the damaged units with minimal impact for the tenants. In the past, this type of failure might have resulted in a catastrophic flood that would have taken months and hundreds of thousands of dollars or more to repair. Instead, the damage can be minimized by a manager with access to a mobile device.
Other systems throughout a commercial property can be automated too, including:
· Lighting and other electrical systems, emergency backup power
· Plumbing systems
· HVAC systems and rooftop units
· Fire alarms plus other emergency systems
· Elevators and similar mechanical systems
· Surveillance cameras and security systems
Of course, all this can only be reliably supported and managed with the help of a robust IT system.
The Time Has Come for Digital Transformation
The commercial real estate sector is prime for a digital transformation. Considering the size of the high-tech industry around the Bay Area, it is surprising that more have not embraced it. There is an obvious cost to upgrading these systems, but the level of automation and increased efficiencies, along with the removal of legacy or low-quality systems and equipment, could lead to significant cost savings. When you factor in the potentially lower insurance premiums, reduced risk for catastrophic damage, reductions in operating costs, and the increased desirability of the property that the ability to monitor and control remote systems for every building in a company’s portfolio offers, this strategic investment can pay significant dividends in the long run.
Michael Sellai is a Partner in the Advisory practice and leader of the Managed IT Services team at BPM, one of the 50 largest accounting and advisory firms in the country. With more than 20 years of Information Technology experience, he helps clients in a variety of industries manage, maintain and upgrade their information systems.