Real estate and construction sector investment logic on smart buildings

Smart buildings have been described as the embodiment of digitalisation in the real estate and construction (REC) sector. These buildings typically utilise a variety of interactive technical building systems, which operate autonomously through a smart grid without constant input from users. A clear definition of a smart building is, however, missing. Moreover, the added investment value of a smart building is not well measurable through the traditional real estate investment logic, which is based on the universal property value equation.

The objectives of this thesis are to review the definition of a smart building through the Smart readiness indicator (SRI) introduced by the European Commission, and to observe the added value of a smart building from the investment point of view. The research was accomplished through two research methods, a case study and interviews. In the SRI-methodology, the definition of a smart building and high SRI-score has been tied together. Therefore, in the case study the SRI-framework was applied to a multi-purpose campus building to evaluate, how well it takes into account the building’s smartness. The interviews were carried out with Finnish REC-sector specialists to identify the key investment drivers, which are adding value to a smart building. Additionally, their effect on the investment logic was identified.

The case study showed that the smart readiness of the campus building was approximately 58% from the maximum obtainable SRI-score, but the framework did not take into consideration all the smart technical building systems implemented in the building. From the interviews it was discovered that the traditional methods of calculating a property’s value, where the investment logic is based on the property level drivers of rental income, operating expenses and required yield, do not explicitly show the added investment value of a smart building. Instead, the added investment value of smart buildings is perceived to be related to the synergistic benefits in smart communities. Thus, a revision of the regular real estate property value equation and investment logic are considered as a prerequisite to be able to explicitly represent the added investment value of a smart building.