Real Estate Toothache: Turning Old Buildings into Performing Assets

In the realm of real estate, a prevalent and persistent issue mirrors the discomfort of a toothache: it may not always be felt, but neglect only worsens the condition. This metaphor aptly describes the dilemma many property owners face with buildings hitting the 20-year mark that are underperforming in today's market. These structures suffer from low occupancy rates, stagnant rental yields (which, when adjusted for inflation, translate to a devaluation of the property), and the constant pressure of competing against newer, more appealing facilities. This situation is further exacerbated by low demand and the continuous influx of new capacity into the market. So, how can property owners transform these aging assets into viable, performing entities?

No Sensors, No Data

The solution lies in making these buildings "smart" by integrating advanced technology. By outfitting older structures with an array of intelligent sensors, property owners can harvest critical data that, when analyzed, can inform better management decisions. These sensors can monitor everything from occupancy levels to energy usage, providing a comprehensive overview of how the building operates and where inefficiencies lie. Moreover, automating the control systems for lighting, heating, cooling, and air quality doesn't just make for a better working environment improving indoor space comfort levels; it also translates to significant cost savings. Such efficiency not only enhances the occupant's comfort but also substantially reduces the building's carbon footprint and operational expenses. Automated systems can adjust to real-time conditions, ensuring that energy is not wasted heating empty rooms or lighting unoccupied spaces. Implementing these smart technologies can result in energy savings ranging from 20% to 50%*, a substantial reduction in overhead costs.

Nevegy clients, automation in Jiushi and Brita have reduced energy consumption of equipment with in this range… – Nevegy audited report Pablo Fernandez nevegy

Old Building, Smart Building

But the benefits of converting an old building into a smart building extend beyond immediate cost savings and environmental stewardship. This transformation can also unlock access to previously unreachable market segments. Today's tenants are increasingly demanding, seeking spaces that not only meet their operational needs but also align with their sustainability goals and wellness standards. A smart building, with its optimized energy use and improved indoor environment quality, can meet these criteria, making it more attractive to a broader range of potential occupants. This appeal can lead to higher occupancy rates and, consequently, an increase in rental yields. ??

Lighting is only one element of data tracking on energy consumption. Heating and cooling systems are key but institutional landlords typically centralise these systems.? ?It’s becoming ever more important and common for occupiers to request such data from landlords. Sustainability is not about hard and fast TA terms but collaborating / partnering with landlords to have a meaningful impact on lowering carbon emissions.

Standout with Certification

Additionally, such buildings often achieve certifications that attest to their environmental and operational efficiency, further enhancing their marketability. Certifications like LEED Certification (Leadership in Energy and Environmental Design) or WELL can make a property stand out in a crowded marketplace, attracting tenants willing to pay a premium for spaces that support their values*.

Accredited buildings now ranking 3rd most important criteria for building selection according to this research – JLL Q4 2023 仲量联行

Conclusion

The underperformance of aging real estate assets is a nagging issue that won't simply vanish over time. Like a relentless toothache, it requires proactive intervention before the condition deteriorates irreversibly. Investing in smart technology and automation not only revitalizes old buildings but also repositions them as competitive, desirable, and sustainable assets in the modern market. As the real estate landscape continues to evolve, the decision to upgrade and innovate is not just a remedy for the current pain—it's a strategic move to ensure future health and profitability.