Real Estate

Smart buildings and the positioning of commercial

Written by lketr

Real estate as service provision. Smart buildings are constitutive of smart environments (McGlinn et al., 2010). Their
role is instrumental in activating urban smartness. By interacting with smart environments (i.e. smart grid, digital
skin, and other smart buildings), smart buildings are
enablers of smart cities.
Concretely, as mentioned in the section ‘‘Smart cities as
commercial real estate’s new urban environments,’’ smart
grids turn buildings into active participants in energy management and optimization to the point that grid-aware
buildings can become ‘‘zero energy’’ prosumers (Schibuola
et al., 2014). By the same token, the digital skin becomes
alive owing to buildings. Data used to feed analytics are
systematically collected within buildings by building management systems acting like neural networks of the built
space (Ratti and Haw, 2012). The ambient component of
smart cities’ intelligence originates in large part from buildings. Hence, the two layers of a smart city’s intelligence
(i.e. smart grid and digital skin) are intrinsically intertwined
with buildings.
With smart buildings, commercial real estate moves
from asset provision to service provision (RICS, 2017b).
As pointed out by Carvalho (2015), buildings in smart cities
are ‘‘ibuildings,’’ which allow commercial real estate players to broaden their value chains by linking the built environment with software applications. Indeed, smart
buildings have little in common with regular buildings,
leading real estate to shift from physical to digital,pub-1336910036217970 , DIRECT, f08c47fec0942fa0

(Lecomte, 2015). From architecture’s standpoint, smart
buildings are ‘‘living bits and bricks’’ which embody ‘‘a
feed-back fuelled world where we don’t just inhabit our
architecture but integrate with it’’ (Ratti and Haw, 2012).
Architecture can connect rather than divide, ‘‘awakening
from the mute motionless matter it has always been into an
active state of being.’’
Access as factor of heterogeneity and value driver for smart
buildings. When space users integrate with buildings, there
are obviously implications for their relationship to space,
location, and property heterogeneity. Noticeably, commercial real estate’s long held belief about value deriving from
location is being challenged. What are the consequences for
commercial real estate?
Hyper-connectivity, efficiency, and differentiation powered by technology (such as IoT) are becoming more
important than location so much so that the old mantra
‘‘location, location, location’’ might be replaced by ‘‘location, information, analytics’’ (Kejriwal and Mahajan,
2016). Berman et al. (2016) explain: ‘‘[Commercial real
estate] has always believed that location, location, location
rules. But in the mobile world, where ‘location’ is mainly
virtual, [ …] assets are losing ground to access.’’
In smart urban environments, buildings will act as platforms to digital. While location is not going away (e.g.
augmented places), its relative role as a value driver for
commercial real estate lessens (RICS, 2017b). Under the
radical disruption brought upon the built environment by
Weiser’s pervasive computing, access is where bits and
atoms intersect. Access defines interactive loci or gateways
where human tasks are mediated and value created.
For commercial real estate players, the emergence of
smart buildings means success will depend on their ability
to leverage on synergies between bits and atoms, by being
positioned where as many services (i.e. interactions) as
possible can be provided to space users. Buildings will
become one of the tools in that process, the other being
As buildings move toward accrued standardization of
physical structure enabling a functionalist approach to the
built environment, heterogeneity in property markets traditionally defined by space (locations) and properties’ physical characteristics will have to be redefined in terms of
technology and the ability of buildings to fulfil a wide
range of functions. As a result, technology will become a
major factor of heterogeneity for commercial real estate in
smart cities both at the city and property scales.
Property heterogeneity should therefore be incorporated into real estate modeling with a new notion of
access (or digital positionality) instead of the traditional
physical location. This shift emphasizes the dominance
of digital space in future models of commercial real
estate in smart cities. Concretely, this implies that technological obsolescence will play a major role in buildings’ overall obsolescence, whereas the physical and
economic dimensions of obsolescence become relatively
less significant

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