The real estate industry thus far has been relatively slower than others to adopt emerging technologies and digitally transform. Yet, things are changing fast as evolving priorities make the benefits of smart building technologies clear for all stakeholders in the real estate value chain.
In the second half of 2019, Schneider Electric launched a real estate specialization in its EcoXpert channel partner program to address the growing demand for smarter, sustainable buildings, smart workspaces, and excellent tenant experiences. In this interview, we take a deeper dive into these and other evolutions in the real estate industry, what matters in the buildings of tomorrow, and how the new specialization fits in it all.
In case you’re new to EcoXpert: the partner program of Schneider Electric offers several certifications and specializations enabling partners to differentiate themselves in specific segments or areas of expertise, from building management systems and critical power to retail facilities and substation automation. Before they can follow a specialization track, partners need to have a certification that depends on the conditions of the chosen track.
With this in mind, here is an exploration of the shifting needs in real estate and the role of smart technologies in creating more value. Our guests are Hugh Lindsay, Strategy Director and Global Segment Architect, Real Estate, and Youcef Gharoual, Solution Architect in the Global Real Estate team, both at Schneider Electric.
Focus on the full real estate value chain
Hugh, end 2019, you introduced the new EcoXpert real estate specialization in a blog, pointing out that the specialization helps EcoXperts expand their capabilities in multiple areas throughout the real estate value chain, specifically in the area of commercial buildings. Schneider Electric is active in real estate for a long time. What is new with this program?
Hugh Lindsay: We indeed have a decades-long legacy in the real estate market. There is our history with electrical switchgear, the power management side with energy management systems, and of course, our building management systems.
Yet, we decided to focus on the value chain more broadly. With the importance of digitization, the Internet of Things, smart buildings and ample challenges that can be solved with the types of solutions we offer, the time/opportunity had come to articulate better the value proposition we have for the real estate industry. This includes our portfolio and the channel partnerships which we develop with EcoXperts and innovation alliances with technology companies such as Microsoft, Cisco, and others.
We have taken the message about the role we play in buildings – in particular, commercial buildings – and raised it a level to focus on the smart building message, the software side, the future, and IoT and cloud connection.
So, essentially it’s a reshaping of our value proposition and our approach to be more comprehensive about what we are capable of in meeting the needs of the commercial real estate industry and, in particular, how we can leverage our partner network to expand on that.
Youcef Gharoual: Indeed, we’ve been in buildings for decades. But with the real estate specialization and the value proposition, we’re addressing a different, larger audience.
The broadening of our focus on the real estate value chain means that we take into account the full chain. So far, in the scope of real estate and buildings, the majority of the stakeholders we worked with were people like general contractors, HVAC consultants, mechanical and electrical consultants, etc.
Taking the whole real estate value chain into account as we do with this specialization means that now we try to understand the challenges of all stakeholders: from investors to tenants, going through developers, property managers, asset managers, and others. We try to understand their needs and highlight our approach and the solutions to help them with their daily challenges and problems. That’s a difference in the real estate approach we have created.
Helping customers prepare for LEED and BREEAM certifications
To follow the specialization program, EcoXperts can, for instance, have a BMS certification. The broadening of the scope to encompass the whole real estate value chain no doubt has an impact on the training for the specialization with a commercial element on top of a more technological one?
Youcef Gharoual: It’s sales-oriented and technical but even more important: it’s market-driven. The elements which we’ve built into the training are all based on experience and what we have observed in the market, for instance, in the demands and challenges encountered in many real estate projects.
Some of them weren’t addressed in-depth in other trainings and are in this specialization. A typical example is the important domain of sustainability certifications and other labels for buildings.
We detected an opportunity to specifically train partners on how to use our solutions and which ingredients to leverage to be able to make a smart building design or a green building design. We cover these various certifications and labels, as well as the ways to obtain them so partners who consider helping a customer get one, clearly know how.
So, for EcoXperts this is the specialization that will teach them everything about how to get a LEED (Leadership in Energy and Environmental Design) green building or BREEAM (Building Research Establishment Environmental Assessment Method) building sustainability certification with their clients?
Youcef Gharoual: Exactly. We, for instance, present them LEED, explain the categories of assessment, and then, based upon our experience, we explain which solutions we have put in the design of buildings to reach a very high level of certification.
A few years ago, we were mainly mentioning the example of The Edge building in Amsterdam, once called the greenest building in the world by BREEAM.
The real estate industry value proposition includes solutions and architectures to increase building asset values and create better human experiences through digitization, occupant well-being and security (including cybersecurity), and through a results-driven emphasis on sustainability and efficiency.
Now, we’re basing the training on the buildings, IntenCity, at our site in Grenoble, France, with an even higher level of certification, whereby our goal for one of the buildings, is for it to be the first building to exceed 100 LEED points, with a target of 102 under the more challenging LEED Version 4. So, explaining how we get there and which solutions are being deployed, is the ideal way to make sure EcoXperts can help their customers build green smart buildings with a high certification.
Can you give an example of how, for BMS EcoXperts, for instance, this has a consequence on the level of the solutions and the overall Schneider Electric portfolio value proposition towards real estate customers that goes beyond what they already know?
Youcef Gharoual: In the end, a building management system is a product to build an application. In the scope of real estate, we don’t limit ourselves to one activity and indeed try to embrace all the capabilities we have in all divisions of Schneider Electric.
In the context of LEED and BREEAM, there are indeed aspects you couldn’t cover in BMS, for instance, concerning microgrids. So, we need to go beyond the BMS scope. Every solution from Schneider Electric that can be used for it, regardless of the division, must participate in a global sustainable building project.
Hugh Lindsay: What Youcef and I have been focusing on a lot in establishing the specialization and training is ‘the why.’
Why are these certifications important for the real estate industry and, next, how do we apply Schneider technology to help support the initiatives, whereas, BMS is much more about the how: how would you set up the BMS to measure energy and perform the calculations to do carbon emission estimates, for instance.
So, it’s more about the direct, practical implementation than questions about the importance, the benefits, the rationale to make the investments, and so forth. It’s a different way of thinking.
Sustainable buildings in context: from value and ROI to the workforce
That’s clear. Now, there are many priorities and changes in the real estate industry. Let’s perhaps look at a few of them, starting with that sustainability aspect. How important is it really for real estate companies that buildings are sustainable today – and why?
Hugh Lindsay: Keeping in mind that today our focus is more on the office space, so commercial buildings occupied by a corporate customer, we see that most large corporate companies we work with appreciate that there is a need to become more sustainable.
They are making investments and commitments to their shareholders that they will work to achieve sustainable goals. This translates through to the spaces that they occupy, and therefore the buildings that they’re leasing or owning, etc. And it translates much more back to the motivations of the investors, the employees that work for that company, the leadership, and more.
Sustainability has been a buzz in the building world for some time, but the focus was more on the question, “How do we just build more sustainable?”. Now, there is clearly a shift with big investments and questions such as “How do we operate more sustainably? What can we do to improve? What kind of net gains in efficiency can we make?”.
MIT Center for Real Estate researcher Alfredo Keitaro Bando Hano found that smart buildings, those who mix smart features, a connected infrastructure, and a green strategy, have achieved a considerable 37% premium in rents and 44% premium in transaction prices
On top of the need and will to do all this, there is the regulatory aspect and what happens on the policy front. Cities and states like New York are starting to mandate that energy efficiency and sustainability become part of the ongoing maintenance and operation of buildings.
The financial element works into that as well because it is already coming about that less efficient buildings aren’t just more costly from an energy perspective, but they will also be more costly from a carbon regulation perspective, and potentially, from other tax or regulatory expenses. So, there’s lots of innovation on the sustainability side indeed.
In parallel with that, there is also the health and well-being of the occupants of the building that gets more attention.
Sustainability factors into this, but so does air quality, comfort, whether or not you have the right lighting, whether or not your building is operating well within the scope of a smart city, the list goes on.
Another – related – aspect is the demographic shift and the younger generations of workers. Take the example of New York or London or Hong Kong or any large city. Cities are full of corporate companies that had to adapt their work environments to attract talented people. Tech companies like Google and Apple set a high bar for workspaces that are engaging and cool places to spend time in.
We see that most corporate entities, regardless of the industry they are in, also look to enhance the workplace experience with modern, hip and smart workspaces. And there’s growing evidence that these spaces are also more productive. We can help organizations realize these ambitions by supporting such initiatives on the infrastructure side.
Youcef Gharoual: The younger generations definitely have an impact on the sustainability demand side. You see young generations caring about the ways we produce, how we work and they demand change as we can often witness in protests but also feel in the business.
We should remember that buildings are responsible for the consumption of nearly 40 percent of the world’s energy, so there is increasing attention and concern with regards to the way we use resources and produce waste. The building industry has a real impact on the environment and is one of the segments that should be concerned about the fact that not just these younger generations but an increasing number of people indeed pay attention to resources and so forth.
We talked about the LEED and BREEAM certifications before. They have categories and assessments for things such as land use, materials, and recycling; it’s all in there.
Moreover, the investors will indeed find a better return on investment if they pay attention to it. One MIT study concluded that Smart, Connected and Green Buildings “…have achieved a considerable 37 percent premium in rents and 44 percent premium in transaction prices, relative to non-Smart, Connected or Green buildings.”
The tenants and employees will also be committed to the company, not just having a better image of it but also feeling better in their workspace. So, all the actors in the real estate industry have a real interest in working in a sustainable building.
In the past, we used to have the location as the main argument for real estate value. The revalue of a building was the town, the city, the borough, the neighborhood.
Today, the technology and all the mentioned aspects, such as the digital services that you make available in the workspaces, are key elements for real estate actors. Whether it’s profit, performance, or enhanced human experiences, it’s all powered by the technical solutions we can put in right from the start and during the operation cycle. So, the impact of the investment on the real estate value is tangible and real.
Optimization in the smart building – how everything is connected
Like Deloitte puts it: it used to be ‘location, location, location,’ then it became ‘location, data, analytics,’ and now it’s ‘location, experience, analytics.’ And, as you mention, it’s all connected: the human experience, the profit, the performance, productivity and well-being and, with that, an increasing focus on things like space management, to name just one.
Youcef Gharoual: Right. You might know the JLL ‘rule’ or 3-30-300 rule; companies, on average, spend $3 in utilities, $30 in rent, and $300 on salaries per square foot per year.
Essentially it means you needed to save energy, then optimize the surface and, in the end, make people more productive; that’s the evolution. Obviously, these figures differ per organization, but essentially, it’s what we’ve been seeing.
We have spent much time on saving energy and increased our levels of energy efficiency. However, we keep going on because, for some time, we’re seeing more and more projects aiming to be energy-positive, meaning that they produce more energy than they consume.
We have also been working on space management, or surface optimization, with the appearance of ‘flex desks’, new ways of working with the workspace and the ability for employees to work in almost any place in the company.
And then it’s indeed productivity, which is perhaps not that easy to measure but it’s clear that financially speaking, salary is the first load of a company and if you want people to be more productive you need to start with very small things. You start by making them lose less time to do simple things such as finding and booking a meeting room.
Another way of increasing productivity is by making sure that there are fewer short leaves. Well, we demonstrated that in a healthy building that’s in a healthy condition, has good air quality and so on, the short leaves could be reduced by up to 30 percent, meaning that more people are present in the company which again has a financial and productivity impact.
Many simple factors can add to the productivity of people. The human experience is one of them. It goes from the ease to book that meeting room, to having a workspace, an ambient condition in which it’s better to work, the comfort level overall and the data and digital tools we nowadays have to collaborate in better ways.
The more digital services people have to make their lives in the buildings easier and more rewarding, the more effective they are, and the more they enjoy their work. And the more they enjoy their work, the more committed they are to the environment and the organization. So, everything is really connected and comes together.
That’s also the reason why HR teams push to have resources for the smart building and smart office approach that’s sustainable, comfortable, healthy, modern, equipped with digital services, and simply more fun to work.
A smart building is a safe building: physical security and cybersecurity
It indeed all nicely comes together. We talked about sustainability, space management, workspace, well-being, the occupant experience, real estate value; they all come back in the value proposition, and in the offering of EcoStruxure for Commercial Real Estate, that aims to, I quote ‘help real estate professionals build and operate sustainable commercial buildings that deliver high asset valuation, lifecycle flexibility and enhanced human experiences.’ Another aspect I noticed is security. Why and where is that such a big priority, and what do EcoXperts going for the real estate specialization learn?
Hugh Lindsay: There are two vectors in security. One is the physical access to a with, among others, security control, access control, surveillance cameras, etc. Next, there is the cybersecurity side, so the protection of the networks and digital devices that are now pervasive within the buildings infrastructure systems. We cover both of these perspectives in the training with our EcoXperts.
As we make buildings smarter and start exposing BMS systems to cloud-connected services, we’re exposing them to potential vulnerabilities and for EcoXperts, it’s important to understand our end-to-end cybersecurity approach when working with real estate companies. This end-to-end cybersecurity idea is a foundational element of our EcoStruxure stack.
It consists of three – very closely interconnected – cybersecurity aspects:
- There is the product level where we follow the IEC 62243 standards that set out how we develop products that are cyber secure, and we detail the policies and procedures we follow to continuously improve on that over the product life cycle.
- One level higher there is the system whereby the question is how to design smart building control systems in a way that there are embedded protections in the network to keep it secure from external or even internal intruders (editor’s note: Hugh is the co-author of a paper in which Schneider Electric’s cybersecurity consulting specialists developed a practical framework for approaching the cybersecurity topic for smart building control systems: “A Practical Framework for Cyber Secure, Cloud Connected Smart Building Control Systems.”).
- The third element is a more strategic one that completes our end-to-end approach and revolves around the ongoing services we can provide to deliver the strategic monitoring and maintenance of secure systems through the life cycle; right from where it started and through changes that could happen over time to any potential major retrofit or other evolution.
Youcef and I have been focused on adapting the cybersecurity best practices and tools from the industrial world, specifically for smart building applications. We think it’s important that our EcoXpert partners build up a competency in this, so we’ve made it a cornerstone of the training.
In the beginning, you mentioned technological partners such as Microsoft and Cisco in your real estate value proposition. If I’m not mistaking, Cisco is an important partner in the integrated cybersecurity approach?
Hugh Lindsay: Indeed. We have designed some architectures with Cisco that would be leveraging its platform to provide a more secure network infrastructure, which is a good start.
Yet, on top of that, smart building systems need to be monitored and managed over time, which is an essential service that Schneider and an increasing number of our partners can provide. Many corporate IT teams lack the domain expertise of building control systems and protocols so in some cases we find ourselves in a position of needing to complement their skills with ours. As you know, in the buildings control world, the IT team of a corporate entity doesn’t tend to be that much involved in the OT (operational technology) side of a network, yet.
With smart buildings, we’re in an area where IT and OT converge. Moreover, EcoXpert partners with a real estate specialization are typically active in a technology environment where IT and OT meet as well. Could real estate EcoXperts play somewhat of an evangelist role in regards to end-to-end cybersecurity towards customers, you think?
Hugh Lindsay: Yes. Definitely. I think it’s increasingly a part of our collective responsibility to raise the cybersecurity awareness and competencies in the industry and with our customers. Within Schneider Electric, we have a cybersecurity services team with over 100 people across the globe who can assess, audit, design and consult with customers on their cybersecurity posture, both in the industrial space and the commercial building space.
They are also vendor-independent and can essentially work with any system, not just a Schneider Electric ecosystem. It could be a Johnson Controls ecosystem, Honeywell; you name it; they have the expertise to provide the necessary insight into cybersecurity protections.
In the training, we educate the EcoXpert channel about the fact that we have this capacity, that cybersecurity is a big topic, that they should take it seriously and improve their skills, and what the end-to-end cybersecurity idea means. Now, of course, cybersecurity is a big topic that you can’t cover everything you would like in just a few days. But then, Schneider Electric has the competency to be able to work with our EcoXpert partners and with their customers to protect those systems better. So, that’s something they definitely can create more awareness around.
What’s a smart building anyway? All-electrical, all-digital and human-centric buildings
Something entirely different. You have a real estate and smart building value proposition. Smart building is an often-used term nowadays. When you talk about smart buildings in the real estate business, what exactly do you cover?
Hugh Lindsay: Well, we indeed had to define what we mean. Like so many things, in the end, it becomes a buzzword that is open to everyone’s interpretation.
Our most recent perspective on a high-level smart building view is to think about it in terms of the future: where will smart buildings evolve to? And here there is this view of all-electric, all-digital and human-centric buildings.
The electrical side focuses on the sustainability message we tackled before since the more we can electrify a building and remove any fossil fuel-based consumption of energy within the building, the better we’re doing for the planet.
The all-digital aspect is more or less factored into that as well since when a building is all-electric, it becomes much simpler to understand and orchestrate the various elements of the building. So, digitization is an opportunity to improve efficiency, to improve those experiences we’ve talked about, and to improve sustainability.
There is definitely also a role for smart buildings in future smart cities if you take it a level higher, with more interconnection with those cities. Think, for instance, about grid-interactive buildings that have some level of micro-generation and some level of energy storage and can become part of an active electrical grid in a smart city. That requires a lot more intelligence and a lot more insight into the real-time performance and risks of participating in that kind of a program. Speaking about smart cities, it’s clear that with ongoing urbanization and the nature of the commercial real estate market, the focus of the specialization is a lot on big cities, all across the globe, since big cities have equivalent problematics and therefore it would be sensible to be present and active in them.
The human-centric dimension of the smart building as we see it, finally, touches upon other topics we’ve talked about earlier such as the experience, the well-being, and health, how to navigate to a conference room, find colleagues, collaborate, get around a building; let’s say the mobility side. That human-centric dimension, again all is connected, factors in with both the digital and with the electric value proposition as well.
Youcef Gharoual: If you would have to resume it in two words, you could say performance and (human) experience.
Performance can be financial for some stakeholders, and for others, it’s technical. And the human experience concerns both the people who are in the building and those that operate the building. These two terms can be applied to all stakeholders in the real estate chain as they are the translation of it all: the whole chain of actors can have better performance and higher user experience.
Moving to the next level with analytics
Clear. If you look at this whole story with smart buildings, smart cities, the growing urbanization we see, and so on all the evolutions that are taking place are really about a bigger picture of the whole built environment that is evolving. Do you have the impression that partners and real estate developers look at this bigger picture?
Hugh Lindsay: I think that we’ve hit one of those inflection points where previously those things weren’t the strong drivers that they are now.
However, the industry overall is coming around to it as an opportunity, similarly to how we had a shift in the conversation about climate change from seeing it as a risk to seeing it as an opportunity. I think that smart buildings fall into the same category. Youcef earlier gave the example of The Edge building that we worked with. The developers of The Edge understand that digitization and the smart side of the building can be leveraged for a lot more than simply operating the HVAC system.
Once they can gain insights and provide some analytics and artificial intelligence, there is value in that data that we may not even understand yet. But the smart and innovative developers see that there is value in capturing that data, starting to run analysis, starting to figure out where there are efficiencies and where productivity and all the things that we’ve talked about can be gained. The leading-edge and more active developers are moving in this direction rather rapidly, and I believe that we will see that evolution accelerate.
Youcef Gharoual: We indeed encountered developers in virtually all countries, who are very advanced in these visions while others are less, but it does take time.
Nevertheless, if you look at what’s said at exhibitions, at what analysts say, what media write, there is indeed a trend and it’s definitely increasing in the real estate developers world.
With EcoXperts, it’s slightly different, I think. Some of them are very dedicated to what they have been doing with building management systems and find it difficult to change. Others are really open and have already been involved in, for instance, the IT architecture part and everything that makes them more smart building integrators than BMS integrators. And we also have new integrators coming who are different than our former BMS integrators.
A glimpse into the future of the EcoXpert real estate specialization: community and Exchange
That brings us to the future. The real estate specialization is still relatively new, but perhaps there are some things you want to share with regards to the next steps of the program and participating partners?
Hugh Lindsay: When we put the program together, we wanted to create an ongoing relationship with the partners. We launched the program in the second half of 2019 and managed to organize lots of trainings across the globe which also enabled us to build some relationships.
In 2020 we continue doing more of the same with trainings in more countries. However, we also work with the rest of the EcoXpert management within Schneider Electric to host summits in the places where we already did training so we can go back, reinforce what we have done, talk about new things that are coming, get feedback from partners on what’s working and what’s not, understand where they are finding success and where they need some help, so really an ongoing relationship.
As mentioned, we also plan to bring in new types of partners that come from an IT background rather than the pure BMS OT world. The latter have a lot to contribute and are very valuable in the real estate space, but with the convergence of IT and OT and the focus that is shifting towards the smart building, we’re also going towards IT technologies as the way to get from a legacy OT system up to the cloud, the IoT infrastructures that are being put in place, etc.
And then the security, microgrid, and data center part as well as we saw in interviews on other specializations and certifications where partners with an IT background are joining several programs?
Hugh Lindsay: Exactly.
In 2019 there was the launch of Schneider Electric Exchange. In interviews with your colleagues from other programs, we saw they all use it, sometimes in a different way, but always with the community aspect being essential. Since you’re looking to build ongoing relationships, is that what you intend to do for the real estate specialization as well? Anything else like integrations with partners?
Hugh Lindsay: Initially, the focus is indeed on the community aspect. However, Youcef mentioned the new buildings in Grenoble earlier, and in one of them, IntenCity, our artificial intelligence and data analytics team, have done some very interesting things.
They combined data that we get from the BMS or the EPMS (Electrical Power Monitoring Systems) with some services from our software partners on Exchange. This way, we can, for instance, bridge a connection between the core OT systems in a building and the reporting requirements of LEED so that the LEED rankings essentially can be calculated in real-time which could have some interesting implications on the LEED recertification process. So, we’re starting to experiment with integrations through Exchange and how we leverage the ecosystem to create new things we couldn’t have created on our own.
Youcef Gharoual: There is also the marketplace dimension of Exchange, where we can also involve our EcoXperts in another area: the collaborations we have with some partners on artificial intelligence.
We’re convinced that in our smart building design and package, we have to open the way for our EcoXperts to work more in this field as well. A good way to start this is by looking at the examples that already exist in the Exchange marketplace and the work that our innovation team did in Grenoble with collaborations they have for a certain number of partners.
Schneider Electric and EcoXpert for the real estate value chain – an ecosystem play
Exchange as a community and as a place to innovate with partners and with EcoXperts who can grow their smart building and real estate expertise even more with a taste of everything that’s coming. A final question: how would you summarize the place of Schneider Electric in the real estate industry and, within that context, the EcoXpert specialization?
Hugh Lindsay: We have a strong all-electric, all-digital, and human-centric value proposition enabling the evolution towards smart buildings for the real estate market.
EcoStruxure is broadly recognized as an industry-leading platform and is the foundational platform of our offering. Moreover, we have a very strong ecosystem focus with, among others, Exchange and the EcoXpert program since we realize that a smart building requires partnerships and innovative technologies that complement what we offer.
A very strong message indeed. Gentlemen, thank you for your time and insights!
Disclosure: this is a sponsored interview in the scope of the commercial collaboration between i-SCOOP and Schneider Electric, containing sponsored links to solutions and the EcoXpert partner program of Schneider Electric.