From Conflict to Convergence
Tech's Role in Office Building Investment
By Robert Kroon
A Tale of Two Approaches
The debate over upfront costs in commercial office space has long divided REITs and private owners. REITs, often under pressure to deliver consistent quarterly returns, tend to prioritize minimizing initial expenses. Their focus is on getting the building up and running quickly and cheaply, sometimes opting for less expensive materials and construction methods, even if it means potentially higher operating costs down the road. It's like choosing the budget airline ticket – cheaper now, but maybe less comfortable later.
Private owners, however, often take a longer view. They're more willing to shoulder higher upfront costs if it translates to significant long-term savings. They invest in durable materials, energy-efficient systems, and advanced building technologies, understanding that while the initial outlay might be greater, the payoff comes in lower operating costs and increased property value over time. They're in it for the marathon, not the sprint.
August Berres’ Respond! 2.0 solution reduces initial investments by avoiding electrical connections to every workstation. It reduces operating costs by being an endpoint in a DC-powered building design.
But the narrative is changing, thanks to technology. Emerging solutions are starting to bridge the gap between these two approaches, offering potential cost savings for both REITs and private owners. Consider onsite electricity generation, for example. While there's an upfront investment in solar panels or microgrids, the long-term savings on electricity bills are substantial, appealing to both REITs seeking predictable operating expenses and private owners focused on long-term value.
Powering Efficiency
Then there's fault-managed power delivery. These systems offer more efficient and reliable power distribution, reducing energy waste, minimizing downtime, and simplifying maintenance. This leads to lower operating expenses and happier tenants – a win for everyone.
And what about battery-powered agile workplaces? Imagine office spaces designed for maximum flexibility, easily reconfigured without costly rewiring. While there's an upfront investment in the battery technology offset by avoiding the cost of AC wiring, the long-term savings in renovation and reconfiguration, combined with the appeal of agile workspaces to tenants, can be highly beneficial for both REITs and private owners.
A New Era of Opportunity
These technologies, and others like them, are shifting the landscape. They offer the potential for reduced upfront costs in some cases, lower operating costs across the board, and increased tenant appeal. Modern tenants want sustainable, efficient, and flexible workspaces, and buildings equipped with these technologies are more attractive, leading to higher occupancy rates and potentially higher rents.
The future of office building development likely lies in finding that sweet spot where smart upfront investments lead to long-term cost savings and enhanced value. Technology is making that possible, blurring the lines between the traditional approaches of REITs and private owners and creating a new era of opportunity for both.
