Smart buildings – the self-financing potential

  • New research from Siemens Financial Services (SFS) estimates the potential for self-financed conversion to smart buildings in commercial buildings, government buildings and hospitals
  • Private sector finance solutions, known as “Smart Buildings as a Service”, capture future savings from energy efficiency and then deploy those savings to ‘self-finance’ smart buildings conversion
  • The study notes that smart technology can reduce energy consumption in non-domestic buildings by up to 25%
  • Each day that is not spent converting to smart buildings is a day in which valuable financial and environmental resources have been, in effect, wasted

Siemens Financial Services (SFS) has released a new research paper which examines how smart-building conversion can be achieved without the need to commit capital, using techniques known as “Smart Buildings as a Service”.

Converting to smart-building technology enables organizations to reduce energy costs, meet regulations such as air quality and provide optimum environments for occupants, visitors and employees. Pressures on public and private sector budgets, however, mean finance managers and CFOs are struggling to prioritize capital investment for buildings conversion.

As a result, alternative forms of finance from the private sector, “Smart Buildings as a Service”, that harness savings gained from smart upgrades are emerging to facilitate self-financing style investment. The paper estimates the potential for “self-financing” smart-building conversion across 13 countries in three sectors: 1) commercial buildings, 2) government buildings and 3) hospitals.

Smart buildings use advanced technology and data to improve building performance in areas such as energy, operations, security, and comfort; ultimately lowering the costs of building operations and service; and generating significantly higher user-satisfaction rates and employee productivity. To achieve these benefits, smart buildings deploy the intelligent infrastructure that digitalization enables.

“Smart Buildings as a Service” represents a shift in mindset on the part of financial managers and CFOs. Pioneering CFOs have identified the potential to enhance efficiency and productivity. By deploying financing arrangements that in effect pay for outcomes – in this case energy savings and other smart-building advantages – buildings owners are often able to realise the benefits at lower or zero net cost relative to their existing set-up. By engaging with integrated technology-service-finance companies to finance the digital transformation of their buildings, landlords and owner-occupiers are able to conserve their capital for alternative business initiatives.

“The smart buildings technology market is growing and innovative private sector financing methods are likely to accelerate that growth by allowing organizations to achieve conversion sustainably,” says Gary Thompson, Siemens Financial Services. “CFOs in the private and public sector are increasingly recognizing the compelling case for smart buildings conversion, but find it difficult to prioritize such capital investment over other business or operating requirements. The benefit of self-financing arrangements, which harness future energy-savings, is that capital is no longer an obstacle”.

Methodology

Proprietary data on the average cost of smart-building conversion per m2 was applied to the commercial buildings, government buildings and healthcare campuses in each of 13 countries. In the first two segments, the top 40% of cities were taken as the base subset. For healthcare, acute treatment centers (public and private hospitals) were considered alone. These financial volumes were then reduced by 50% to eliminate the effect of existing smart-building conversion rates, new construction that already delivers smart capabilities, and building stock that may not – for whatever reason – be susceptible to self-financing arrangements that use energy savings to fund a smart-building upgrade.

For further information, please see: www.siemens.com/smart-start-for-smart-buildings