SPARK16 Presentation: Connecting Facilities Performance Data with Your Real Estate Investment Strategy

Connecting Facilities Performance Data With Your Real Estate

Investment StrategyDavid Metcalfe

CEO Verdantix

Connecting Facilities Performance Data With Your

Real Estate Investment Strategy

September 15, 2016

David Metcalfe, CEO at Verdantix

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Verdantix is an independent research and consulting firm with expertise in emerging technologies for EHSQ, real estate, facilities and energyThrough our research and advisory services we help corporate managers, investors, technology executives and services firm leaders to make robust, fact-based decisions. We are committed to delivering objective, timely, and accurate analysis to help our clients succeed.

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Theme

You need an information management strategy that integrates energy data with

other facility-level performance data

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Agenda

• Why do you need an information strategy that integrates energy data with other facility data?

• Who is implementing strategies that take advantage of multi-dimensional facility-level data?

• How will the market for facilities optimization management software evolve over the next 5 years?

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Energy Efficiency Software Propositions Run Into Four Financial And Organizational Barriers

Spend on electricity not increasing in aggregate

Energy spend small as % firm-wide opex

Energy programs are complex to implement

Owner/tenant split incentives

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Two Thirds Of Energy Managers Expect Spend To Stay Flat Or Decline In 2017

67% no change

or reducing

Source: Verdantix “Global Energy Leaders Survey 2016: Budgets And Priorities”, June 2016

N =250

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The Facilities View Of Energy Costs Is Not in Tune With The CFO’s View

Source: American Iron & Steel Institute, BOMA, Capgemini, EPA, National Grid

Ener

gy S

pend

As %

Tota

l Ope

ratin

g Co

sts O

r Ass

et O

pera

ting

Cost

s

Facilities View Energy spend

as % asset opex

CFO ViewEnergy spend as %

firm-wide opex

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Build A Business Case On Total Facilities Opex Including Space Costs Not Just Utilities

Source: BOMA, thesquarefoot.com, RMI

Assumption$7.50 / sq ft on

operating expenses

6% on utilitie

s

5%

5%Assumption $1.65 / sq ft on utilities

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Build A Business Case On Total Facilities Opex Including Space Costs Not Just Utilities

Source: thesquarefoot.com

3%

3%

5%

2%

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Delivering Energy Efficiency Programs Is Complex


N =250

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Onsite Generation Makes Energy Programs Even More Complex


N =250

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Building Owner / Tenant Split Incentives

10-30 years 3-10 yearsTime perspective

Cost BenefitCapital upgrades

Low relevance Varied relevanceGHG emissions & sustainability

Maximize yield Minimize cost per sq ft or per employeeFinancial concept

Building Owner Tenant

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Building Energy Management Software Market Is Fragmented With Vendors Struggling To Get Critical Mass

Source: Verdantix “Green Quadrant Building Energy Management Software”, October 2015

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Problems For Information Management Strategies Focused Exclusively On Energy

• Flat or falling electricity prices which undermine the rationale for energy efficiency programs

• Insufficient energy experts to generate value from complex analytics and project tools

• Energy and facilities services firms acting as a barrier to stand alone software implementation

• Problems establishing brand awareness and relationships with diverse owners of energy management

• Low barriers to entry impacting profit margins and the potential to grow the business

• Dwindling investor interest in the sector requiring growth through cash flow

Source: Verdantix “The Future Of Building Energy Management Software”

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The Value Of Energy Data Alone Will Not Get This Ecosystem Over The Chasm

Source: Geoffrey Moore “Crossing The Chasm”

BEMS

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Agenda




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Broader Facility Level Factors Already Influence Energy-Centric Facility Optimization Plans


N =250

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A Broad Facilities Optimization Software Offering Overcomes The Challenges Facing BEMS Vendors

Undermines business case Minor impact on ROIFlat electricity prices

Energy Software Offering

Facilities, Energy & Maintenance Offering

ROI hard to achieveProposition focuses on

ubiquitous facilities directors

Lack of energy experts

Block direct sales of energy software / sell

own

Provide systems integration and act as

channel partnersRole of facilities

firmsScattergun, complex

sales processesSales focus on facilities

and maintenance directorsVaried job titles responsible for

energyVery low due to hosted apps and cheap sensors

Moderate due to complex data sets and analytics

Barriers to entry for software

Close to zero due to lack of success story after 15

yearsGrowing due to multiple

success stories Investor interest

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Facility Optimization Strategies Create Data Cubes Which Offer More Valuable Insights

Source: IBM

Site-by-site variances in

back charging for space usage

Upper quartile electricity costs

per sq ft normalized for location and

external temperature

Benchmark of retail store

lifecycle costs from acquisition

to disposition

Correlation between

maintenance work order

completion time and space occupancy

Multi-dimensional

benchmark of facilities

services agility

Utility costs and non-

utility costs as % of lease costs and per

employee

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University of Central Florida

Source: AssetWorks, UCF

Vital StatsFounded 1963

60,000 students10,700

employees

1,500 acre site186 buildings

12m sq ft

Challenges• Legacy CMMS no longer fit for

purpose• Unable to run maintenance

reports• Political pressure to be more

efficientKey Project Insight

Data structure of the AssetWorks AiM system was far more comprehensive than CMMS point solutions enabling more powerful analysis

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Telefonica

Source: Archibus, Telefonica

Vital Stats120,000

employees$60bn revenues

7,500 buildings in Spain

40 million sq ft

Challenges• Property data in Access database• 12,500 CAD drawings in different

systems• Internal resistance to changes• 1 work request every 2 minutes

Key Project InsightLarge-scale data standardization, aggregation and systems integration project delivered cumulative EUR 968 million in savings in 3 years from space rationalization

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Ball Aerospace

Source: Archibus, Telefonica

Vital StatsSubsid of Ball Corp

$15bn revenues15,000 employees

34 leased and owned buildings in

US1.4 million sq ft

Challenges• Leases on paper and in financials in

Excel• Utilities costs in separate systems• Space management data logged in

Excel• Very slow turnaround time on

reportingKey Project InsightData standardization and aggregation increased space and utilities data accuracy from 70% to 99%. Big savings from linking utilities data to lease records in a single report.

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Danfoss

Source: Planon, Danfoss

Vital StatsFounded 1933

EUR 5bn revenues24,000 employees

300 locations 16.1 million sq ft

Challenges• Global Services: 15 real estate

systems• Slow to respond to internal

stakeholders• Lack of comparability for FM costs• Meeting real estate compliance

needs Key Project InsightConsistent, high quality repository of worldwide real estate master data has enabled Danfoss Global Services to implement a charge back model based on pay per use.

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Real Estate & Facilities Information Management Landscape

Centralized Maintenance Management Systems

Building Energy Management Software

Computer Aided Facilities Management

Integrated Workplace Management System

Facilities Optimization Management System

Lease Management Software

Brea

dth

of F

uncti

onal

ity

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Agenda




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Five Predictions For The Next Five years

#1 IWMS will be the convergence platform

#2 Energy software will fragment into customer specific

niches #3 Private equity investment

in IWMS will ramp up#4 Systems integrators and real

estate consultants will turbocharge the market

#5 Social media platforms will become a essential element of

IWMS platforms

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#1 IWMS Platforms Will Consolidate All Facilities And Real Estate Information Management Functionality

Energy Asset Management

Maintenance Lease Management

Space & Occupancy

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#2 Energy Software Will Fragment And Get Subsumed

Energy Management Software

Building Energy

SMB Energy Reporting

Energy Use, Generation &

Storage

Industrial Energy

Efficiency

Carbon Emissions Reporting

IWMS Utility CRMDecentralized

Generation Asset Mgt

Manufacturing Execution Systems

EHS Platform

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#3 Private Equity Investors Will Boost The IWMS Market As It Has Crossed The Chasm

Source: Geoffrey Moore “Crossing The Chasm”

IWMS

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#4 Systems Integrators Will Turbocharge The IWMS Market

Complex IWMS

software platforms

Real estate consultants and systems integrators

CFO, CIO, VP Real Estate

convinced of value prop

$5m to $10m software and

services deals

Growth investors and

large tech firms fund

product dev

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#5 Social Media Functionality Will Differentiate IWMS Platforms

• Founded in 2008. Valued at $16bn• Social media firm that runs real estate

assets• 77 locations, 300 planned for 2017 and

2018

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Real Estate & Facilities Information ManagementResearch Solution

MARKET COVERAGE DELIVERABLES• Integrated Workplace Management Systems

(IWMS)

• Building energy management software

• Computerized Maintenance Management Systems (CMMS)

• Smarter buildings and Internet of Things (IoT)

• Real estate and facilities management technologies

• Integrated facility management software

• 20 new real estate and facilities information management reports published per calendar year

• Analyst Inquiry service to discuss real estate and facilities software topics with Verdantix analysts

• Quarterly webinar focused on real estate and facilities software market trends and regulatory issues

• Where appropriate, inclusion in Verdantix reports, email newsletters, blog posts and press releases

Thank you!David Metcalfe

[email protected]

Data & Analytics

SPARK16 Presentation: Connecting Facilities Performance Data with Your Real Estate Investment Strategy