Financing SMART buildings – delivering value in the ‘new normal’

Exploring how modern financing techniques can help hospital trusts to develop SMART buildings which are more energy efficient and help to improve patient outcomes

SMART buildings leverage artificial intelligence to optimise performance and reduce energy use

The Coronavirus pandemic has altered the way we use indoor public spaces, shining a light on the need to optimise the hygiene, safety and energy efficiency of these facilities.

And, in the past year, we have seen a massive global effort to rapidly and urgently adapt hospitals to cope with these new pressures, ensuring they can operating safely and with the flexibility needed.

Making buildings ‘SMART’ allows this flexibility.

“In hospitals, smart, adaptive building systems can provide ideal conditions for patient recovery by leveraging artificial intelligence to optimise temperature, air quality and flow – which is vital for infection control – lighting and other variables within patient rooms, as well as optimising energy consumption,” explains Mark McLoughlin, head of Siemens Industries and Markets at Siemens Financial Services.

“Ultimately, through this approach, patient safety and outcomes improve, length of stay is reduced, and patient throughput for the hospital increases.”

The added value offered by SMART buildings has already been widely acknowledged among expert commentators

There is a currently a ‘perfect storm’ of factors which are coming together to simultaneously drive change and make buildings SMART.

Firstly, the economic pressures resulting from the pandemic are focusing minds on ways of achieving building management cost efficiencies, especially through energy efficiency.

At the same time, COVID-19 has introduced new rules and ways of working to ensure hygiene, infection control, and safety within buildings.

Alongside these topical pressures are existing and emerging regulatory requirements that make fire and security upgrades mandatory.

And various policies around the world are setting targets to reach higher environmental standards in buildings, including the NHS’s pledge to achieve zero-carbon emissions by 2040.

McLoughlin said: “SMART buildings deploy automated and digitalised technology to enable more-efficient, more-effective building capabilities and management.

“And the data generated by IoT sensors provides real-time information for quick reactions.

“SMART technology helps transform the building from a cost burden to an active contributing partner – a new team member – in running a business or a public-sector organisation, like a hospital trust, and coping with the ‘new normal’.”

Ultimately, through this approach, patient safety and outcomes improve, length of stay is reduced, and patient throughput for the hospital increases

This whole new perspective is making building owners and managers look afresh at the underlying operational cost base of their assets.

“The added value offered by SMART buildings has already been widely acknowledged among expert commentators,” said McLoughlin.

“According to the European Commission report on Macroeconomic and Other Benefits of Energy Efficiency, a smart, higher-performing building can conservatively add as much as 11.8% in lease value and can ultimately yield 5% to 35%-higher sale values.

“And, in hospitals, smart, adaptive building systems can provide ideal conditions for patient recovery.”

While there is wide consensus around the need to make buildings SMART, all countries and sectors need a way of making that conversion financially sustainable.

The data generated by IoT sensors provides real-time information to help hospitals improve performance

But how can this be done?

The starting point is to use smart technology to reduce energy consumption in buildings,” said McLoughlin.

“This produces hard financial savings that – through smart financing arrangements – can be harnessed to subsidise, or even pay for, overall smart buildings conversion.

“And this can be done at an enterprise level, or in small incremental steps, each of which proves its own return on investment.

“For whole-building and multi-building projects, budget-neutral schemes are available from specialist financiers to enable conversion.

“They are increasingly becoming known as Building Efficiency as a Service (BEaaS) arrangements.

In the post-pandemic period, where cash reserves have been used up and revenues are experiencing a downturn, the idea of self-financing SMART building conversion becomes even more compelling than before the crisis

“The integrated solutions provider introduces technology and systems to create smart buildings which deliver a clearly-predictable level of energy savings. The reduction in energy costs is then harnessed to effectively fund the cost of conversion.

“Throughout, the building’s owner has conserved their own funds for strategically-important development activities – whether commercial growth or improved public services.

“In the post-pandemic period, where cash reserves have been used up and revenues are experiencing a downturn, the idea of self-financing SMART building conversion becomes even more compelling than before the crisis.”

The latest insight paper from Siemens Financial Services (SFS) establishes the urgency and value of SMART buildings conversion, as well as the mandatory drivers that are focusing attention on converting existing buildings to greater energy efficiency.

“At a time when building owners and managers are having to invest in measures to make their buildings safe and occupiable, and are also being restricted on the density of occupation; it is arguable that only SMART buildings will present a sufficiently-attractive proposition to potential tenants and occupants,” said McLoughlin.

“In a budget-constrained environment, energy efficiency savings are increasingly seen as the ideal starting point for SMART buildings transformation, either as a single investment or as a series of incremental projects, with smart financing techniques playing a major role in enabling those future savings to finance the cost of conversion.

To find out more about how SMART buildings are helping the healthcare sector, click here.

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