The Leader Magazine

MAR 2017

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MARCH 2017 43 O rganizations who own or lease real estate can fi nd themselves at a disadvantage against these "asset-less" players, fi ghting 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 that green- up their assets can meet sustainability expectations more effectively and, in doing so, leverage them to improve profi ts and create long-term value. The ecosystems across many industries are changing, bringing new business models, new competitors, new regulations or de-regulations, but, importantly, also new customers and new partners. Ultimately, there may be challenges in creating more value from building assets by better accessing and understanding the information they present to a business. With the correct strategy and expertise, the opportunities far outweigh these challenges. Approach real estate performance strategically The second largest expense on companies' balance sheets 1 , real estate, accounts for 40 percent of primary energy use globally with up to 50 percent going to waste 2 . When you consider that energy represents 30 percent of building operating costs 3 , 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 effi ciency books. This is why setting the right goals is an important part of our advisory process. At Siemens, our discussions with clients typically start with energy effi ciency, but expand into risk management, strategic procurement, process re-engineering, fi nancial modeling, human capital management and data strategy. Taking all these aspects into account, effi ciency projects can generate an internal ROI of up to 40 percent – well above the average 10 to 15 percent for typical business investments 4 , but most organizations are unlikely to have the skills required in-house. A partnership with building-performance experts is, therefore, the key to developing realistic effi ciency improvements and to drive their implementation. Improve building economics Effi cient 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 5 – in part because effi ciencies, by extending a building's life cycle, reduce maintenance costs. Data and technology have a key role to play – as does the availability of building-data- analyst skills. But, in a fast-moving regulatory and technological landscape, the costs and efforts of keeping up with changes can outweigh the benefi ts of bringing these skills in-house. Data is a vital part of driving effi ciency and buildings generate a lot of information, or big data, that helps with strategic business decisions. If big data can be transformed into economic insights, it can help with areas such as assessment of current or future building value, or best use and risks associated with a specifi c asset. With the advent of the Internet of Things (IoT), capturing data is relatively straightforward. The challenge is in how to make sense of masses of structured and unstructured data so that they help in making better real estate decisions. Furthermore, measuring process effi ciency improvements is much harder to quantify without the right data and systems to understand that data in place.

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