Facility management teams really start to pay attention once building analytics and KPIs that focus on maintaining and improving comfort are deployed. Counterintuitive as it may seem (especially from an energy efficiency engineer’s perspective), energy savings are not a large driving factor in facility management (FM), but cold calls are. They’re a significant pain point. Building analytics that allow FM teams to solve problems in their buildings that lead to cold calls make their lives easier. It also allows FM teams to start being proactive in terms of how they address cold calls, instead of reactive. Reactive maintenance usually involves responding to complaints from unhappy tenants.
Pinning down the return on investment associated with maintaining higher levels of comfort, reducing cold calls, and generally increasing occupant satisfaction, is not easy – mainly because the benefits are not direct, like energy savings, rather they are indirect, things like better lease renewals rates, higher patient satisfaction scores in hospitals, or increases is productivity.
Losing a tenant can be expensive and just downright painful. What are the costs exactly? – using a 20,000 sf space in a 200,000 sf building as an example. At $30/sf, lost rent alone is significant at $50,000 month. Realtor fees to find that new tenant let’s say 6% of the total lease value – so if it’s a 3 year deal that’s a $108,000 fee. Vacant space can also negatively impact the overall property value. Clearly as a building owner anything that can be done to keep a tenant happy, and profitable, aligns with their best interests. The cost of a building analytics deployment on a property of that size, is about $40,000-$60,000. Costs from not keeping tenants happy and not keeping spaces leased can quickly escalate, dwarfing the cost of building analytics.
A major revenue driver in healthcare is patient satisfaction scores. Higher patient satisfaction scores result in higher reimbursement payments (more revenue) not to mention a better reputation. There’s a lot more to the patient satisfaction scores than patient comfort, things like quality of care, cleanliness, and responsiveness. Since Medicare and Medicaid account for roughly 1/3 of a hospital’s annual revenue, anything that can be done to drive higher patient satisfaction scores leads to increased revenues and really drives a quick return on investment in building analytics.
Keeping tenants (employees) happy and productive, can really help drive business results. The 3-30-300 rule, $3/sf for utilities, $30/sf for rent, and $300/sf for payroll, illustrates this best. Let’s look at what we get from a 1% improvement in the 200,000 sf building we were talking about before. Some quick math gets us to 1% reduction in utilities = $6,000/year, 1% lower rent cost = $60,000/year, but a 1% improvement in productivity can yield a $600,000/year benefit. Clearly if you believe that comfort = improvements in productivity, then the investment in building analytics will have a fast payback.
The challenge is that the major benefits from improving comfort in buildings, longer leases, higher patient satisfaction scores, and increases in employee productivity are not directly measurable. While tracking cold calls and closely monitoring comfort related key performance indicators is easily achievable, correlating improvements that directly have a positive impact on the bottom line is difficult. One could argue the benefits are real but the leap is, is it really driving value for your organization? Given the amount of value it could be driving – it’s probably worth the risk.