A “smart” building can mean a lot of things. To be simple, here’s what JLL offers its clients:
Smart Buildings: Introduce new technology and connect systems to enhance the productivity of buildings, workplaces and people. Get access to real-time data to ensure your property or portfolio operates efficiently.
A litany of co-existent systems (see graphic 1) make a building “smart”. In a dream world, they’d be interconnected. In reality, they almost never are, and to the extent that they are, it is generally for reporting purposes with very limited operational functionality. This makes basic automation nearly impossible for most buildings, let alone capabilities like AI (though it does not stop companies from marketing it...).
Building Systems + Investment Dollars into Related Data Companies
Source: Keyframe Analysis
The topic began to interest me as I came to understand the massive opportunity related to how energy inefficient real estate is across most real estate asset classes, and why more energy efficiency solutions weren’t being adopted when the payback on doing so was almost always positive.
I wrote about that in 2021, in a blog post aptly named “Buildings are f’d”: https://www.keyframecapital.com/post/buildings-are-f-ed (summary: buildings are totally f’d)
What I have continued to observe since is that some real estate asset classes are obsessed with energy efficiency (i.e., data centers) while others view it as a nice to have (i.e., most everything else).
While a variety of factors drive this, I have only one valid explanation: Energy efficiency is a systems problem, and most all available smart buildings products are point solutions.
At the center of it all is tech that is supposed to solve this problem: Controls.
Forever, it has been to the benefit of companies who sell controls (JCI, Honeywell, etc.) to avoid interoperability, so they could sell you follow on products and services. Trapped. Without interoperability, there is no energy efficiency at scale. Systems are simply too inter-reliant upon one another to execute energy efficiency well without impacting unintended elements of the tenant experience or building purpose (i.e. it may be energy efficient to turn off the HVAC on a hot day, but probably not good for rents…). They need to communicate with one another and be responsive to the other's needs for any hope of scaling solutions.
There are exactly two ways to solve this problem:
Approach 1: Middleware.
Described well below by Nexus Labs, if all point solutions interface with a middleware bi-directional integration layer that enables both read and write capabilities to the existing building control system, you can create parameters so that changes in one tentacle of the system do not have unintended consequences in others.
The only middleware I have seen in the market both capable of this, and with the logic to manage tenant experience effectively is Jetstream, from Buildings IOT – used by many of the largest real estate companies in the world.
Approach 2: Replace the system.
The other path is for the underlying controls systems to facilitate interoperability itself by being accommodating to point solutions continuing to change throughout the life of a building. However, none of the incumbent solutions do. Given the 20+ year old system architecture of many incumbent solutions, this will require a massive cannibalization of existing product suites at companies like Honeywell and Johnson Controls for them to shift. They say they are going to. For the world's sake, I hope they do, but also the perfect market for an outside disruptor.
Thankfully, there is PassiveLogic, who holistically integrates the controls system from design through implementation – to eliminate gaps in the system’s ability to communicate efficiently and respond to new design elements and point solutions.
Source: https://passivelogic.com/
Either approach enables energy efficiency of the real estate sector at scale.
Through these two solution types, and specifically through Buildings IOT and PassiveLogic (two Keyframe portfolio companies), point solutions find incredibly efficient customer acquisition – as they are able to access end building users at scale and seamlessly implement their point solution with limited set up cost or time.
Without either approach, energy efficiency will likely continue to be heavily reliant on regulation and/or be the sort of thing that only the largest, most sophisticated real estate owners have the resources to figure out.
If you’ve made it this far, my questions for you are:
Where am I wrong?
What other approaches or products do you think will enable scale in this space?
You know where to find me...
The above is not a comprehensive list Keyframe’s investments in this industry. Keyframe is not making any disclosures in this blog post about its portfolio – only highlighting how previously available information relates to its market views.
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