While headlines are no longer dominated by the impact of the COVID-19 pandemic on the commercial real estate (CRE) industry, building owners and facility managers continue to face significant challenges. Interest rates are rising, hybrid work arrangements are contributing to higher vacancy rates and stakeholders are under increased pressure to reduce carbon emissions. To remain competitive, optimize building operations and ultimately advance business objectives, CRE and FM leaders must invest in innovative building upgrades.

A recent Forrester survey in collaboration with Johnson Controls found that investments in smart buildings are a critical differentiator. Smart building investments enable them to more effectively reach sustainability and security goals, while providing optimized occupant experiences for all stakeholders using their buildings. However, many organizations have siloed building system data or lack the expertise to leverage building system insights.

CREs and FM teams can take strategic steps to enhance their appeal to tenants, investors and communities and unlock maximum value from their buildings, turning them into true assets rather than hinderances to business objectives.

Upgrade spaces while preserving capital

Only 13 percent of CRE and retail leaders report investing time, people and money to fully integrate their building systems and equipment.

However, the path to full integration can require significant, long-term financial investment that many organizations cannot afford, whether due to lack of available funds or to avoid significant interruptions to business operations.

Infrastructure-as-a-service (IaaS) models offer an ideal solution for CRE and FM leaders looking to upgrade their organization’s facilities and equipment with little or no upfront capital. They also help bring visions of modernizing facilities and upgrading systems to life, creating a better environment for building occupants. Under these models, investors pay a predictable monthly service fee and receive project development and delivery support from their chosen service provider, allowing for strategic infrastructure upgrades that will not stretch already thin budgets. In turn, FMs can leverage guaranteed future savings to help finance current projects, bringing both immediate advantages and long-term benefits.

Tackling deferred maintenance, for example, becomes much more approachable when utilizing IaaS models for projects like improving indoor air quality, upgrading HVAC systems and implementing smart building technology as part of broader maintenance initiatives.

Make the best, most cost-effective use of space

Once priority projects and upgrades are completed, CRE and FM leaders can continue to use IaaS models for initiatives such as space optimization. CBRE’s 2023 to 2024 Global Workplace Insights Report found that office and workspace utilization rates remained under 40 percent in 2023 compared to 64 percent prior to the COVID-19 pandemic. Additionally, according to the U.S. Department of Energy, an average of 30 percent of the energy used in commercial buildings is wasted, presenting FMs with a major opportunity for cost savings through data-driven building upgrades.

Space utilization solutions can gather data from occupancy sensors to manage factors such as air flow and electrical use. Data also helps to determine how space is used and how to increase flexibility while adjusting staffing and operations as markets fluctuate. Aligning equipment use with building use ultimately reduces energy consumption and carbon emissions, supporting an organization's operational and sustainability goals.

Mining existing building data, whether from one building or enterprise-wide, for insights can reveal additional opportunities to cut utility costs and hit operating KPIs. Measuring carbon emissions in near real time, for example, as opposed to quarterly or annually, assists in identifying accurate recommendations to optimize building systems. Data visualization is another powerful tool that can assist in unifying systems, utilizing analytics and AI to consistently identify operational shortcomings and offer recommended next steps. Harnessing data and AI from occupancy sensors and core building systems assists with managing airflow, electrical use and equipment alignment, enhancing operational flexibility while also reducing energy consumption and costs.

Ensure building systems operate reliably

Building systems contain a variety of critical components, including security devices, fire safety equipment, heat pumps, chillers and building automation technologies. These systems have a direct, day-to-day impact on reliable building operations, making it important for CRE leaders to optimize performance of all critical systems and avoid unexpected downtime. The costs of run-to-fail continue to rise; parts may be hard to find, emergency repairs are expensive, and the impact of downtime can range from unhappy customers to large-scale renovations necessitating occupant evictions.

Having a thorough plan in place for equipment maintenance and repairs is key to operating a resilient building system. Tools like planned service agreements can streamline this process by offering easy access to skilled technicians and facility experts, easing the burden on in-house operations teams. Proactively investing in a service agreement also reduces the financial burden of unexpected repairs and allows commercial real estate leaders to maximize their allotted maintenance budget.

Set a realistic path to reduce emissions

Many organizations have set ambitious sustainability goals in response to increasing regulatory pressure; as of early 2024, building performance standards (BPS) cover about 25 percent of all buildings in the U.S. However, such goals require a clear path to achieve them. All strategies must be aligned with broader sustainability targets to minimize redundancy and increase enterprise-wide visibility.

IaaS models have the combined effect of preserving capital for future investments and driving commercial real estate toward net zero goals, as the offset costs from IaaS-funded building upgrades allow for investment in infrastructure that assists in the path to net zero emissions. In a similar manner, investment in renewable energy sources provides both short-term savings and long-term opportunities for additional revenue streams that can be reinvested in building systems.

Renewables like solar and wind energy come with several regulatory incentives and penalty evasions, in addition to more broadly demonstrating commercial real estate leaders’ commitment to sustainability in an era of increased emphasis on corporate social responsibility. Over time, renewable energy sources that produce a surplus of energy can offer additional revenue if this surplus is sold back to the grid. More broadly, identifying gaps in operations and maintenance that can be supplemented with service partnerships or internal operational shifts ensures organization-wide alignment in reducing emissions and pursuing sustainability goals.

Through strategic investments in building upgrades, CRE and FM leaders can break the cycle of deferred maintenance, increase cost efficiency and resiliency throughout building operations, and make progress toward a more sustainable future. In turn, infrastructure upgrades can drive higher occupancy rates, offset rising infrastructure costs and help commercial real estate stakeholders maintain an edge over their competitors.