VIEWPOINT : A Word to the Wise on Those New ‘Smart’ Office Buildings
Ready or not, here comes the “smart building.” In downtown Los Angeles alone, half a dozen new or renovated buildings have this high-tech innovation, including Citicorp Plaza at 7th and Figueroa streets and the former First Interstate Bank headquarters at 600 S. Spring St.
In Manhattan, Rockefeller Center has announced plans to offer state-of-the-art shared tenant communications services in all its buildings. More recently, Morgan Guaranty Trust has decided to erect a “smart” Wall Street corporate headquarters that will be “a building of the next century, technologically speaking.”
If you listen to some real estate developers and leasing agents, smart buildings are the greatest office invention since the elevator or central air conditioning. These boosters cite Chicago’s 40-story smart One Financial Place, where average rents have been 20% higher than those at nearby prestige office buildings without these high-tech features.
Outfitting smart buildings is also becoming big business. Real estate developers purchased about $100 million of communications equipment for these projects last year--a figure predicted to reach $3 billion by 1990, when the United States could have 2,600 smart office buildings.
Today’s smart buildings already boast built-in electronic nervous systems that bristle with apparent intelligence. Suppose you need to revise a proposal with an out-of-town colleague. The smart building will find the cheapest telephone connection and allow you both to change the document on desktop monitors as you and your colleague speak. A push-button phone command sends the report to a printer or via satellite to another partner overseas.
When you leave your office, sensors will flick off the lights, shorten your wait for an elevator and warn guards of any intruder in your absence. The next morning, your desktop computer will offer stock market quotations, the weather report, even the takeout menu for lunches that can be ordered and delivered at the push of a button.
But if smart buildings are so great, why are many corporations and developers still apprehensive about constructing them? And why do some corporate and professional tenants have doubts about moving into these buildings?
High Price
For the developer, smart buildings don’t come cheap. Computers and communications hardware and hookups add about 2% to construction costs--hardly welcome news in the current office glut. And smart buildings are more expensive to run because owners must hire highly skilled maintenance crews for the sensitive equipment.
Nevertheless, some developers are adding intelligence to new buildings and renovated older ones because they hope it will provide a competitive edge. They also see another source of revenue by selling their tenants smart-building telecommunication features such as telephone equipment, local calling and long-distance service.
But before leasing space in a smart building, tenants should carefully consider whether the developer or owner has the financial stability, management responsibility or depth of knowledge to deliver these promised services. And what happens if some of the companies that supply this high-tech equipment go out of business? You can replace your “orphaned” personal computer far more easily than your landlord can rewire a building’s high-tech system.
Another lingering question about smart buildings is the true extent of the market for their services. Even smart-building enthusiasts concede that tenants of larger offices--say those of more than 20,000 square feet--are not likely users, because they can purchase their own telecommunications as cheaply as the shared services offered by a smart building and keep total control of their system.
Helps Smaller Firms
Therefore, the most profitable smart-building market may be smaller 10- to 30-person firms that cannot afford a complete computerized telecommunications system, including services such as freeze-frame teleconferencing or unlimited on-premises computer storage. This premise has been borne out by the popularity of discount long-distance services among small tenants. Smart-building operators buy a mix of long-distance services at bulk rates, then offer subscribers the cheapest connections on any given call. They report subscription rates of 65% to 87% by promising to cut phone costs at least 15% below any single long-distance service. But it’s a solid price advantage that makes the sale, not the high-tech image of a smart building.
When you look beyond all the ballyhoo, the most successful smart buildings are the ones that enable tenants to make their computerized offices more efficient and comfortable by reducing the clutter of tangled cables and the crowding of ever more office machines. For professional firms where employees often work late or on weekends, the smart building reduces pass-through operating costs for lighting and ventilation, and it offers improved security with key-card access to elevators and floors during off-hours.
Providing these tenant services reliably at competitive prices may not be glamorous, but it is the smart building’s greatest contribution to increased owner profits and tenant satisfaction today. And no matter what you call it, no building can be more intelligent than that.
