The Asset Manager’s Dilemma

The Asset Manager’s Dilemma

#tags: building investments building operations ESG proptech

Leveraging Technology to Make Better Investment Decisions


An asset manager’s primary goal is to yield the greatest possible return on their portfolio. Asset managers must maximize revenue by sustaining high occupancy rates and increasing rental rates through the prioritization of investments that make their buildings more attractive to potential tenants and increase retention of existing tenants. With COVID-19, these now include investments to make their buildings safer for tenants. They also must invest to improve a building’s efficiency while simultaneously reducing its carbon footprint, an area of increasing importance for their tenants, investors, and own firm’s Environmental, Social, and Governance (ESG) mandates.


Although an asset manager’s objectives are clear, it is anything but easy. Tenant mix, building design and location, and the owner’s investment strategy create a unique DNA for every commercial real estate property, making it difficult to ascertain whether or not all its resources are properly leveraged and what initiatives should be pursued.


The Investment Dilemma


Deciding which investments to prioritize is a common challenge for asset managers. As part of the acquisition process, financial models are developed that include assumptions on rents, operating costs, and planned capital costs to upgrade the building. These models are based on both the building’s past operating results and the new owner’s past experience in similar properties. For operating and capital costs related to HVAC, lighting, and building envelope-related infrastructure, these assumptions often fail to take into account the building’s inherent capability to operate more efficiently based on its design through quick payback optimizations of its existing equipment and a more comprehensive analysis of equipment replacement and upgrade options—rather than those based solely on like-for-like replacements or engineering industry rules of thumb.


While leadership may endorse many types of investments, such as assuring tenant satisfaction and improving building operations, building owners want to accomplish all of their goals as inexpensively as possible. To that end, not only does the asset manager encounter complexity in the upfront investment prioritization, but they must also monitor the KPIs associated with the implementations of these investments to ensure the cost incurred is producing the intended utility and financial benefits. Measuring the incremental financial impact of investments can also be difficult. Making sound before-and-after comparisons, as well as gauging performance against outcomes forecasted by the model, require baseline data integrity and sound modeling practices.


Using Technology to Make the Right Investment Decisions


Thankfully, new forward-looking, holistic technologies can solve the investment dilemma by helping asset managers identify, prioritize, and implement the investments with the highest return.


Step 1: Establish a Building Performance Baseline


In order to make the best decisions for their building, asset managers first need to understand how their buildings are operating today versus historically. The first step is providing their property team a tool to automate the collecting and analyzing of utility bills, which takes into account differences in occupancy and weather versus prior periods.


Step 2: Benchmark Building Performance and Standardize Reporting Processes


The next step is benchmarking a building’s performance against other buildings in an owner’s portfolio and other similar buildings of comparable size, utilization, and geographic location. Once collected and analyzed, utility bill data should be submitted to ESG reporting bodies (ENERGY STAR, GRESB, LEED, etc.) to update them on the building’s performance. A good utility bill management solution should help an asset manager and their property team do all these things.


Step 3: Augment Building Performance Data Visualizations, Diagnostics, and Management Capabilities with Software


Once asset managers have benchmarked their buildings’ performance, the next step is providing their property teams additional tools to monitor their building’s operations to identify and minimize the impact of operating issues. A good software solution will collect and visualize all the important building data at the building, zone, and equipment level to allow for quick problem diagnosis and corrective action. It also should track equipment schedules and provide notifications for unexpected performance deviations.


Step 4: Adopt Simulation Technology to Forecast Performance and Evaluate Building Investment Opportunities


While utility bill analysis and reporting, and building performance monitoring are important activities, thoroughly evaluating prospective investments for upgrading a building’s performance and ensuring selected projects are implemented correctly are essential for maximizing investment returns. The final step is utilizing simulation technology that can create high-fidelity building performance baselines and accurately forecast the impact of investments on performance and the associated savings in relation to their costs, plus confirm these investments perform as expected over time. Simulation technology also can assist in energy cost budgeting and the evaluation of the operating costs of different space utilization.


The Result


Through the adoption of modern technology, asset managers can relieve themselves of the pressures they face in their roles. Using a robust software solution that addresses all of the steps outlined above – baseline data collection, benchmarking, analysis, and investment evaluation – removes tedium, reduces errors, and allows asset managers to focus their energy and expertise on strategic decision-making.


Bractlet Can Help


To see how Bractlet can help your organization increase returns and keep your building healthy, contact us today.