Is smart profitable for real estate? - Evaluating the viability of smart energy management system investments for real estate owners

The real estate sector is responsible for approximately 40% of the global energy demand and one-third of the produced carbon emissions. Promoting smartness in real estate is expected to further the achievement of the set energy efficiency and climate mitigation targets. Thus, future buildings should have the technological capabilities for two-way energy flow control to participate in the renewable energy resources-based energy markets. To accelerate investments in smartness in real estate, the European Union has introduced the smart readiness indicator (SRI) rating scheme for buildings. However, the financial and operational viability of the investments aiming to improve the smartness of real estate has still remained unclear for the owners. This dissertation aimed to evaluate the profitability and viability of smartness for real estate owners. The study applied a mixed-method research design using both qualitative and quantitative data. Because of the complex nature of smartness, the study first tested and developed the selected concept (i.e., SRI) in Finland and further in the Nordic real estate market. Second, the study observed the viability of the real estate market-specific investment evaluation metrics and property valuation for evaluating the profitability of income-generating smart energy management systems in buildings at the property and building portfolio levels. This dissertation was the first study to combine the theoretical grounds of smartness in buildings and the operation logic of real estate business to evaluate the economic and strategic benefits of smartness for real estate. The study found that the advance smart energy management system was the core technology making a building "smart." Furthermore, the study found that the economic benefits of smartness were gained through the energy markets enabled by a building's smart energy management system. Still, the new cash flows were strongly related to the on-site energy storage (i.e., battery). Surprisingly, the financial profitability was not solely enough to execute the investment of smartness in buildings. Other strategic benefits generated by smartness, such as user adaptation and real estate brand (generally difficult to evaluate in financial terms), are expected to affect the real estate owners' readiness to invest in smartness in the future.