This Q&A with Donatas Karčiauskas, CEO of Exergio, and Clinton D. Fairbanks, Founder & Managing Director of Soji Enterprises LLC, principal partner of Exergio, shares Donatas’ expertise on the current state of property management in the United States.
Can you outline/explain the current state of commercial buildings in the U.S. – how badly aged they are, what the reality is, and what the consequence of this is?
The average U.S. commercial building is estimated to be approximately 53 years old. When we look at commercial buildings, various types of structures serve multiple uses. For some structures, the lifespan can be longer, while others with intensive usage are shorter. However, on average, a building will need significant renovation between the 50- and 60-year mark. These renovation projects are significant to keep the buildings up to code for safety and operational efficiency.
Given the state of these buildings, many need these restorations, but the post-pandemic and current economic situation in the U.S. is forcing building owners to make difficult decisions.
According to the National Association of Realtors in the United States, commercial real estate for office properties continued to surge in vacancy rates, now nationally estimated at 14%. However, in major cities, such as Chicago and New York City, the vacancy rates are above 20%. In addition, there has been a decline in rent growth.
Building owners have the choice of investing capital for renovations or running the building to fail. The consequences are many, including, but not limited to, safety, tenant wellness, and an overall decrease in property value.
However, our experience shows that when the owners implement AI, machine learning, or data analytics-based technological solutions, it helps to boost the efficiency of running a building in many cases, i.e., by better space management, optimized energy consumption, increased comfort at the building, implied predictive maintenance, etc.
While solutions as such do not entirely eliminate the need for renovation, they help ensure efficient and “smart” utilization of existing systems by helping buildings adapt to ever-changing needs of the real estate market.
Why do commercial building owners need to take this reality seriously?
As buildings age, the requirements for maintenance and capital investment increase. The average commercial U.S. building that is 30+ years old will require its first round of renovations to keep the building functional. Depending on how the building was maintained, reactive repairs versus preventative maintenance will make all the difference in the amount required for these renovations. In consideration, reactive maintenance and repair can be three to five times greater than regular preventative costs, and in combination with increased renovation costs, building owners can significantly increase the cost of operations over the life of the building.
During the last few years, we’ve also seen some worrying tendencies that have to be addressed by the building owners. One of those is increasing energy prices – no one can deny the effect of increased energy prices on the building owners.
This tendency pushes real estate owners to pay more and more attention to energy management in general and energy efficiency in particular. Moreover, the increased sensitivity towards maintained comfort conditions can also be seen in the commercial real estate market.
Trends as such push owners of the buildings to adopt new solutions, ensuring better control of the buildings and existing HVAC systems.
How can AI help? What difference can it make in sustainability and in building management?
When implemented correctly, the power of machine learning will open significant value to building owners in terms of sustainability, property and facility operations, and energy management.
Currently, it is property and facility managers who leverage predictive analytics. They are implementing AI-powered maintenance programs to more strategically mitigate the need for reactive repairs and maintenance.
Architects and building designers are utilizing building information modeling (BIM) that creates a digital twin of a property for improved building design, engineering, construction, and building asset management.
With energy and electricity demands increasing over the years, the cost of electricity continues to rise, while demand continues to increase worldwide.
Using AI, buildings can create more sustainable energy management solutions through intelligent automated building controls. An example of the benefits this automated functionality provides can be a reduction of equipment runtime that, over the course of time, reduces maintenance costs, thus allowing for greater comfort for the occupants.
What are the first steps that owners can take on this journey?
The first and foremost step for building owners is to pinpoint exactly where they are in the journey. The next step is to understand what is needed to future-proof their properties and then create a V.I.K.I: 1) Vision, 2) Identification, 3) Knowledge, and 4) Implementation Roadmap.
In simplified terms, there are five real estate and facilities lifecycle phases – Acquisition, Design, Build, Operate, and Disposal (ADBOD). Building owners need to understand that the decisions and strategies that were made for each phase can have a ripple effect on each subsequent phase of this lifecycle.
Hence, bad decisions that are made during the acquisition or design phase, which do not take into consideration the build, operational, and disposal aspects, can lead to significant costs down the line. By utilizing a V.I.K.I. roadmap to future-proof facility and property management, building owners can:
- Create a holistic vision of the problem that needs to be solved;
- Identify all the requirements, summarize existing information, point out the gaps, and understand the impacts of the day-to-day operations;
- Conduct the due diligence to gain the knowledge needed to build the go-forward action plan and
- Implement the action plan.
Utilizing AI across many different programs can help shorten this process by providing in-depth information.
Where do you see the role of AI going in the future?
We are in the infancy of AI. Like the automobile and the airplane at the turn of the 20th century, we have yet to understand the opportunities with AI fully.
Computers have been modeling and designing complex equipment, such as commercial aircraft, for the past several decades. With the addition of AI, the ability to create new materials and design support structures is going to change the way we build, utilize, and maintain commercial buildings.
If sci-fi movies indicate our future, we see AI as something that enhances our lives through seamless automation and real-time information. In the movie The Matrix, there is a scene where Trinity is asking for information on how to fly a helicopter. The interesting thing is that this scene is close to becoming a reality within this decade.
Service technicians, property managers, and others will have wearable devices where the AI will conduct real-time analysis and provide the necessary information to assess a problem.
And that is only within this decade. Obviously, it is hard to imagine further advancements, considering that the buildings we build today may already be in need of major renovations. Nevertheless, we will definitely see various AI-human collaborations and interactions that will reshape the industry.
Exergio is a company born from extensive experience in building maintenance. Recognizing the inadequacies of conventional approaches, the firm introduced an AI-driven system that analyzes real-time building data, enabling informed decision-making and yielding up to 20% in energy savings. This innovative solution goes beyond static systems, ensuring adaptive building responses to environmental factors, thus optimizing energy consumption without compromising comfort or operational efficiency. The company also has ongoing projects in Poland, the United Kingdom, Ireland, the Czech Republic, Hungary, Oman, Sweden, and Lithuania, while expanding to the United States, Germany, and France.