June 2011

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Smart Building Automation ROI
What are the R’s in your ROI?

John Greenwell

John Greenwell,



Ask your CEO, which offers a better return on investment (ROI) – a 5% increase in the productivity of your employees, or a 10% increase in the productivity of your buildings?  On the surface, you’d expect your CEO to choose employee productivity, since employees costs typically exceed building operating costs by a large margin (certainly by more than a factor of two, as in this example).

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If you dive deeper, you can see it’s a trick question, since efficient and productive buildings enable productive employees.   Because buildings exist to serve the needs of occupants, when you measure your ROI for investments in your buildings, it makes sense to consider the impact of those investments on your people too.   Buildings and people are two sides of the same ROI coin.

Another thing to consider when measuring ROI is productivity of a smart building.  Labor productivity is relatively well defined (at least according to the U.S. Bureau of Labor Statistics).  It relates output to labor hours used in production of that output, reported monthly and drawing the attention of stock analysts.  But what is the productivity of a building?

Sure we can measure the initial cost of your building and its operating costs over time, like maintenance, energy and water use, but how about the “output” of a commercial building? Is it just comfort, or is there more we can measure.   From the point of view of a commercial real estate owner, it’s all about lease revenue and occupancy rates. 

For corporate buildings, again it comes back to the people in the building.  How do they use the facility and what do they value?  This of course varies depending on your business.  A smart restaurant, a smart school, a smart hospital and a smart parking garage - each will have a unique value proposition or output characteristics you must take into account if you want to measure the productivity or ROI of your investment in making a building smart.

Effective automation depends on pro-active monitoring and instant control of HVAC, lighting and power supply elements to create a smart building.  Since these elements are often provided by different vendors, they do not readily communicate with each other, so system integration platforms like BUILDINGWORX by CEPORT have evolved to normalize and integrate the data from disparate systems.

Let’s consider examples of several kinds of savings or ROI’s that you can achieve by investing in building intelligence, automation and facilities information systems.  There are at least five categories of ROI:

•    employee productivity
•    space utilization
•    energy and water
•    operations and maintenance
•    building security

Employee Productivity

The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) have estimated that investing in new building systems can enhance productivity by 14% or more.

Of course employees prefer to work in modern buildings with high-tech tenant amenities and tools to aid productivity.   Visionary executives appreciate the value of interior design to enhance productivity.  Invest in well designed offices, comfortable chairs, meeting rooms, white boards, good coffee, etc.  The menu of building features and amenities goes on.  They pay for themselves by increasing productivity of employees.   By the same token, firms have for years have invested in ergonomic computer keyboards, HD displays and collaboration software tools like e-mail and intranets.  Today it’s becoming possible to drive productivity to even higher levels by including buildings services data in your overall strategy for employee productivity.
Aside from sleeping, many people spend more time in the office than they do at home, so it’s vital to design your individual office spaces to be comfortable and productive.  Increasingly you can integrate building information systems to address specific needs of your business. 

Evidence and historical precedents for this are many.   In 1950, a landmark study of productivity involved varying the levels of light at a Western Electric manufacturing plant outside Chicago.  Surprisingly, the researchers found short term gains in productivity no matter how they changed the illumination.  The so-called Hawthorne effect was also measured as a result of other changes, like maintaining or relocating the workspace.

In other words, people value all kinds of improvements and will respond accordingly with higher productivity.  For today’s information workers, keep in mind the psychological effects of changing systems and the growing potential to integrate data from building automation and related systems with web-based employee-facing software systems on kiosks, wall mounted displays, PC’s and mobile personal devices  like tablets or smart phones.  Even elevators now have displays that you can use to keep your employees engaged and informed about what is going on in the smart building.

Modern building systems not only can maintain set-points for heating, cooling, and ventilation.  They also can support energy conservation, security systems and emergency procedures.  They can monitor locally generated independent power supplies and enable demand response.  Such systems enable employees and other occupants of your facility to be more productive in the new energy paradigm. 

By pulling together a holistic set of building services data, and providing easy web-based access to your employees, you can involve them, almost intuitively, in your energy efficiency or conservation programs, without interrupting the normal flow of their daily work schedules.  For example, an employee who can easily glance at the clock at the end of the day, just as easily call up digital video of her path to the parking lot to ensure it is safe, then leave the office knowing that even the elevator is on its way.  It’s easy to imagine similar scenarios when she arrives in the morning, or leaves her office to attend a meeting.  A smart building will know her schedule, the weather forecast and the physical characteristics of the conference room.  At the end of day, she will have been more productive because she could trust her smart building, integrated with access control, occupancy sensor and business data, to automatically shift her work space to unoccupied mode, securing and shutting down all power to her PC, phone, lights and related HVAC systems.  While this may sound futuristic, it is not only possible today but affordable.  Thanks to Moore’s Law, we are reaching a tipping point where these features are affordable even in relatively small commercial buildings.

Space utilization

By enabling work from home and hoteling for mobile workers, smart businesses are looking at their owned and leased space more strategically, aligning their smart buildings with their business objectives for where and how people need to work.

 IBM is a good example of enabling hoteling by integrating data (currently just basic building data, HR data and card access data) across multiple buildings, campuses, regional and global facilities.

This integration can save up to 24% in capital expenditures for installation and 35% in operating expense over time.  An integrated system will have the flexibility to allow your moves, additions, and changes to your office layouts or usage patterns without additional investment in systems.

To paint a comprehensive picture of your opportunities to reduce real estate, facilities and space costs, it is useful  to develop a model of all the cost drivers.  See figure 1 for an example such a model.

Figure 1 - Source IBM

Figure 1 - Source: IBM

Energy and water

[an error occurred while processing this directive]Smart building owners can integrate energy conservation programs into a comprehensive plan tied to occupancy and usage data from integrated access control and environmental systems.   Depending on the facility and the technologies selected, the typical ROI is quite good, as much as $0.25 - $0.50 per SF, resulting in 3-5 year payback or less.  It’s important to consider all of your energy and water use (electric, gas, steam, chilled water) across all facilities, not just electricity at your main building, when measuring the ROI.

By tracking your compliance with requirements of various government and utility incentive or stimulus programs, you can take advantage of these savings and accelerate your payback period.   Longer term you may even be able to increase your ROI by monetizing your energy efficiency investments by participating in energy savings certificates.

Operations and maintenance

Through on-demand access to HVAC, electrical and mechanical equipment for early fault detection and remote remediation, you can greatly reduce your operations and maintenance costs.  , minimize mean time to resolution for your equipment, maximize your uptime and implement changes or improvements in real-time with less downtime for your employees of building tenants.

Building security

Environmental systems can react to security and emergency requirements through automatic shutdown procedures based on preset specifications.

Integrating security and systems with fire alarms and public address and evacuation systems on the Building managers are required to monitor and control a wide variety of HVAC, electrical and mechanical equipment to achieve maximum energy efficiency.   Hence, they can no longer depend on traditional systems monitored by stand-alone controllers that leave room for human error and do not have the ability to make comprehensive adjustments required to a smart building.


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