How smart can a smart building be?

By

Selina Short

EY Global Real Estate, Hospitality and Construction Innovation Leader

Leader of EY Oceania Real Estate & Construction practice. An expert in intelligent buildings and smart cities. Champion of innovation and the strategic importance of cities.

5 minute read 5 Mar 2020

Show resources

Digital twins can help us make smart more human.

A digital twin can help us cut construction costs, smooth out supply chain inefficiencies and reimagine building design.

But the digital twin’s greatest value won’t be delivered around the design table or on the construction site — it will be determined by how it enhances the human experience.

In fact, 41% of real estate professionals rank “better user experience” as the greatest opportunity for digital twins to deliver value, ahead of “budget reliability (33%) and “faster delivery” (21%).

This was just one takeaway from EY’s recent webinar poll with Dr. Andrea Chegut, Co-founder and Director of the Real Estate Innovation Lab at Massachusetts Institute of Technology (MIT), and Bill Ruh, CEO of LendLease Digital.

A deep dive into digital twins

The webinar’s deep dive into smart buildings and digital twins delivered some surprises, but also confirmed a lot of our suspicions.

For example, 48% of firms attending the webinar aren’t even exploring the potential of digital twins. A further 8% said that they had decided not to invest. Just 14% are actively deploying digital twins in some of their assets.

Watch the second webcast in EY’s webinar series: A deep dive into the future of smart buildings.

Deployment of digital twin

14%

of real estate firms are actively deploying digital twins in some of their assets.

The big picture story for smart buildings isn’t much better. Just 2% of poll respondents are using algorithms or robotics to respond autonomously to building or user needs.

It was observed that nearly one-third (31%) of poll respondents globally were applying smart building management tools to boost energy efficiency and sustainability. However, 46% weren’t investing in smart buildings at all — not even to enhance security measures, manage operations or to improve the user experience.

Despite this underinvestment, we now have hard evidence that smart building technology boosts the value of assets.

Dr. Chegut told our webinar audience that her team has compared smart building features of commercial office buildings in New York City with financial performance data, such as transaction prices and effective rents.

“Smart, connected and green buildings rent for 8.2% more than the buildings without those features. And they trade for 23.7% more than the buildings without those features. The greatest value is extracted when intelligent, smart, connected and green combine,” Dr. Chegut said.

A central feature in the smart building strategy

When it comes to the digital maturity curve, real estate remains behind many other sectors.

Bill Ruh, who led transformation programs at General Electric (GE) and Cisco Services for more than two decades, says, “the real estate sector is at the same place that retail was in the late 1990s.”

“We are in the early application of digital technologies,” Ruh said.

He is now working on a vision for a ’smart building ecosystem’ that will increase the number of live data points in Lendlease buildings by tenfold. Digital twins are a central feature in this smart building strategy.

Digital twin technology isn’t new. Virtual replicas of physical assets have been used in aerospace, engineering and manufacturing for decades. Digital twins helped rescue the Apollo 13 mission, clean up the Fukushima nuclear reactor after the 2011 tsunami and enhance the performance of Formula 1 racing cars. But using digital twins to optimize real estate is new.

While Lendlease has applied digital twin technology to just six buildings so far, Ruh said they are an ‘area of great promise’ for construction companies looking to address the productivity puzzle. Modeling buildings — ‘down to the last nut and bolt’ — means dealing with design, planning and supply chain deficiencies before anyone turns up on-site.

We’ll move from a spreadsheet and drawing-driven environment to a data, analytics and AI-driven environment.
Bill Ruh
CEO, LendLease Digital

“By the end of the decade, a developer will have deep data and analytics to drive decision-making. Instead of considering 10 alternatives for a parcel of land, we’ll be able to simulate a million design options. Designs, structures, façades and material costs will be assessed simultaneously, enabling design teams to understand cost implications in real time,” Ruh said.

According to Ruh, “at the operations phase, digital twins will support predictive maintenance. Nothing will ever break. It may sound like magic, but other industries do this very effectively.”

There are technology hurdles, Ruh admitted, as building a digital twin is “computationally intensive.” But the biggest challenges are not technical, they are structural and cultural. He pointed to the fragmented nature of the real estate sector, its complex supply and value chains, and the cultural change required to upskill people for an autonomous future.

Learning from the leaders

While real estate may be behind the digital maturity curve, this gives us an opportunity to learn from other sectors.

EY is already working with clients across the world to build digital twins. One project with a global mining company improved the efficiency of its crushing technology by building a digital twin of the equipment and applying AI.

Annual savings using digital twin in mining

US$76 million

annual saving delivered through digital twins in a mining setting.

Another project with the world’s largest autonomous train network used digital twin technology and machine learning models to optimize and track maintenance. The digital twin helped our team to analyze major risks to safety, productivity and business performance, ultimately stripping 60 minutes from the round trip from mine to port. Breakdowns have decreased and so have maintenance costs.

These examples illustrate how digital twins can be applied to any capital-intensive sector.

“While only a small number of studies have examined digital twins in real estate, the evidence so far points to a 7% reduction in construction time lines, up to 20% percent decrease in capital expenditure and a 3.5% increase in occupancy,” Dr. Chegut said.

Reimagining real estate

The biggest potential for digital twins, however, will be in how they help real estate reimagine the user experience.

This is where the 3-30-300 rule, developed by the real estate giant JLL, applies. On average, real estate tenants spend US$3 on utilities, US$30 on rent and US$300 on payroll per square foot every year — which is why anything that delivers even a small productivity uptick gets attention.

Space utilization is an obvious quick win for digital twins. CBRE has found that just 60% of seats in workplaces globally are in use at any one time, while 70% of the time, meeting rooms are empty.

But the real-time data and deep insights we gather from digital twins will also drive us toward mass customization and individualization of space as we better understand each person’s unique experience within their building.

And making that data available to tenants through dashboards, for example, will help them see how digital twins save time and resources, reduce friction, and maximize their building’s amenities and experience.

Digital twins bring smart buildings to life.
Dr. Andrea Chegut
Co-founder and Director, MIT’s Real Estate Innovation Lab

As we embrace digital twin technology, we can’t afford to forget the real estate industry’s entire purpose: to support humans. With the help of digital twins, we can make smart buildings more human.

Summary

Digital twins can reduce construction time lines by 7%, cut capital expenditure by 20% and increase occupancy by 3.5%. But their greatest value will be in helping real estate reimagine the user experience.

About this article

By

Selina Short

EY Global Real Estate, Hospitality and Construction Innovation Leader

Leader of EY Oceania Real Estate & Construction practice. An expert in intelligent buildings and smart cities. Champion of innovation and the strategic importance of cities.