The advancement of technology has ushered us into the era of smart buildings and smart offices.. As per reports, the smart building market size expected to reach US$ 5 billion in 2025 , registering a CAGR of 13.6%[i]. The technology behind smart buildings should be evaluated from multiple perspectives, including environmental friendliness, reduced energy consumption costs, capital gains from selling smart buildings, and economic value addition through rental income.
As per the recent data available online, the Global smart building size is 2-3 percent of the global building market and expected to increase with an annual growth rate of 13 percent[ii]. Constructing smart building is expected to escalate the construction cost by 25 percent. The Royal institution of chartered surveyors (RICS) found that buildings with high energy efficiency ratings can command rents that are up to 8% higher than those of comparable non-efficient buildings[iii]. As per the survey conducted by building owners and managers association (BOMA) this rate can reach up to 14 %. In India the average rental yield for residential properties is between 3% and 5% and for commercial properties it is typically at 5% to 10%. Let us consider that the rental income at higher rate of 10 percent , increase in capital investment by 25 percent and increase in rental income by 8 to 14 percent for changing building to smart building , then calculation shows that effective rental yield is reduced between 1.36% to 0.80 %. From this analysis it shows that , the economic value addition from smart building to rental income perspective is negative.
However, the above said analysis is not revealing exact picture of economic value addition by smart building. For that we have to take other factor also into consideration like capital gain, reduction in energy consumption expenses might indicate a positive outcome to analysis. As per the research article published online, smart building requires 25% higher initial cost than conventional building to produce 38% of efficiency regarding operational and maintenance for 30 years[iv]. And from the capital gain angle 5% to 35% appreciation from conventional buildings are expected from smart buildings. It is evident that in the coming years smart building gain more popularity and government are also promoting smart building by offering attractive incentives and subsidies. The main hindering aspect of smart building is its upfront cost in executing smart building. However, the operation, maintenance, and end of life costs are less than that of conventional buildings by 35 to 41%, 26 to 30% and 6 to 18% respectively[1].
References
[1] chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.arcom.ac.uk/-docs/proceedings/9e3d4fff94acbb59642417394d770de5.pdf?utm_source=chatgpt.com
[i] https://www.6wresearch.com/industry-report/india-smart-building-market-outlook
[ii] The figures are compiled from the following online sources, https://www.grandviewresearch.com/industry-analysis/global-smart-buildings-market, https://www.imarcgroup.com/buildings-construction-market
[iii] https://claritybuildingcontrols.com/the-economic-value-of-smart-building-systems/
[iv] Improving building performance using smart building concept: Benefit cost ratio comparison, Mohammed Ali Berawi; Perdana Miraj; Mustika Sari Sayuti; Abdur Rohim Boy Berawi 14nov 2017