Buildings of the Future provide non-financial as well as financial benefits

We need a new model for Return On Investment to account for the longer term value that intelligent building design provides, says Peter Greaves, Buildings of the Future Leader at Aurecon

Story by: Peter Greaves, Aurecon
Buildings of the Future provide non-financial as well architecture, building, shopping mall, brown
Buildings of the Future provide non-financial as well as financial benefits

A revolution in construction and maintenance of buildings of the future is not being adequately reflected in traditional Return on Investment (ROI) business cases and this is blocking important, forward-looking design innovations, and significantly damaging the future value of major building investments.

The short term focus on start-up and construction costs denies investors and building owners access to design innovations that are increasingly key to the construction of digitally smart, ‘intelligent’ buildings which use technology to dramatically improve operational efficiencies, employee productivity and reduce maintenance costs.

At Aurecon, we’ve explored a new narrative around the ROI of intelligent buildings to demonstrate the crippling effect that a short-term focus on start-up and construction costs often has on design innovation. The property and construction industry is evolving dramatically as digital disruption, changed building practices and the need to respond to climate change and reduce energy consumption impact the sector. Yet many building owners and investors are locked into relying on more traditional ROI metrics, designing for the short term while ignoring the importance of designing buildings for the longer term.

We need a new ROI model which accounts for financial as well as non-financial benefits such as improving employee productivity and wellbeing, while maintaining design flexibility to plan for a rapidly changing future. Buildings of the Future have marginally higher start-up costs (2-6% more expensive than traditional buildings) in the short term. But they can deliver significant savings, with a good ROI being achieved quickly – in six months to two years – if focus is given to heating, ventilation, air conditioning (HVAC), lighting and some types of electrical loads.

This can lead to a 10-50% reduction in operating costs against traditional buildings. This approach also reduces maintenance costs by 8-12%, increases employee productivity by 10%, and gives landlords the ability to charge 5% more for premium property rentals of these innovative new buildings.

To provide a more accurate ROI analysis on Buildings of the Future, a three-dimensional approach is needed – one which presents the elements of design as interconnected pieces of a living and dynamic puzzle.Buildings of the Future must be designed to meet future expectations, while avoiding wasted space, inefficient designs and inflexible storeys. Long-term thinkingThat ROI model needs to reflect the importance of designing buildings for the long term and look at both the financial and non-financial benefits of intelligent buildings, while maintaining design flexibility to plan for a rapidly changing future. 

Long-term thinking can help companies avoid potential disruption. The importance of designing for the longer term and for changing space requirements was never better illustrated than when architect Norman Foster admitted he had got it wrong with Apple’s Campus 2 – its massive underground carpark for 11,000 cars doesn’t allow for retrofitting into habitable spaces if garages become less important and transportation patterns evolve.

Legislation can also present significant disruption for those who don’t invest in the right tools and methodologies from the outset. For example, the European Commission has proposed a voluntary scheme for rating the ‘smart readiness’ of buildings. The scheme, which is expected to be adopted by the end of 2019, will include the development of a Smart Readiness Indicator (SRI), which will measure a building’s capacity to use ICT and electronic systems to optimise operation and interact with the grid.

Changing nature of construction

The changing nature of construction design and materials also plays an increasingly significant role in ROI. We are seeing an evolution in construction and maintenance with prefabricated construction, automated technology such as robotics to install it and additive printing, which drives down short- and long-term costs. The ROI on a 3D printed building, for instance, is almost immediate, with its parts integrated into a digital model of the building that makes maintenance very easy.

Beyond construction and maintenance, these embedded digital parts also capture and monitor consumption and usage to optimise building performance over the long term.

A holistic approach

Based on these non-financial factors, Buildings of the Future demand a more robust evaluation of ROI.Intelligent buildings are the quintessence of future-ready architecture, but their true value lies in innovation and a shared vision. This necessitates moving away from old, one-dimensional models of measuring ROI, to synergetic models that encourage and thrive on collaboration throughout the entire lifecycle, starting at the design stage.

For Buildings of the Future, idealistic future-focused models are necessary to measure value, instead of spending too much time trying to demonstrate the financial ROI of intelligent buildings.Rather, we should be asking, what will the cost be of not innovating?”

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May 10, 2018

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