Building IQ expands with broadband connectivity

04 Apr Building IQ expands with broadband connectivity

Did the Houston-based Hines real estate firm do a proper due diligence when they purchased the UBS Tower in Chicago? If they did, they would have looked at the Building’s IQ. The questions that they would have asked would include: “How smart a building are we buying?” and “How good is the network infrastructure of the building?”
Did they even evaluate the network infrastructure of the building? I do not know.
UBS Tower IQ
According to Crain’s, “A fund managed by Hines Interests L.P. closed on the $540 million purchase of UBS Tower, in what could be the largest sale of a downtown office building in 2008.”
With this big a purchase, if Hines did not look at the technology and network infrastructure that supported the building, they may have overspent for a building that scores a low IQ, which also translates into buying a potential maintenance nightmare.
If we are sinking into a commercial real estate slump as an aftershock from the financial missteps in the residential markets, the need for intelligent amenities to prop up leases as well as core building values becomes more important than it has been in the last 20 years.
There have been some discussion on what attracts and maintains first-class tenants within commercial space, and one of those intelligent amenities is bandwidth connectivity. Not DSL or T1 lines, but multi-gigabit capabilities that are not readily available everywhere.
Network infrastructure is a critical need today as stated in my recently published white paper, “Intelligent Business Campuses: Keys to Future Economic Development.” As the white paper states: “Economic Development equals Broadband Connectivity and Broadband Connectivity equal jobs.” Broadband Connectivity (network speeds of 1 gigabit or more) should be viewed as another layer of critical infrastructure that is a must have and not a hoped for in planning and developing commercial real estate and regional economic centers. This applies to existing buildings already leased up as well.
Broadband connectivity is considered to be one of the top three site selection criteria today; 10 years ago, it wasn’t even on the list.
Those buildings that don’t provide this capability will simply be passed over by corporate site selection committees that already use broadband connectivity as a criteria that is expected in order to locate new corporate facilities.
The same applies to residential developments. If you have a new development that does not have broadband capabilities built in upfront, you have just created an obsolete development.
That sounds harsh but in today’s residential market, projects that were on the books to be initiated have already been halted. Until the dust clears in the residential markets, these projects have been put on hold or in some cases, totally abandoned. If those projects did not include high-speed connectivity as a featured amenity, those developers that take up the planning again will have a rare second chance to get it right. If they don’t plan for broadband connectivity, they will be stuck with houses that will be lacking in a wanted feature.
How do you measure building IQ?
How do you compare commercial buildings to find out which is a better fit for your company? You compare the systems and capabilities of one building to another within a geographic area.
The need for available intelligent amenities like broadband connectivity is becoming more common as tenant companies get more selective on commercial space.
This concept is not new. It has been around for over two decades and was pioneered here in Chicago as a way to help a property management firm market office space in Seattle.
The pioneering yardstick to measure differences in commercial building amenities has been the Carlini Building Intelligence Test which originated over 22 years ago as a way to compare downtown office buildings. The focus was “simple yardsticks must be used as they tend to take out the mysticism of technology, network design, and infrastructure implementation for people looking at leasing space.”
There should be easy rules-of-thumb and simple formulas to take out the mysticism of planning, design, and development of building and campus network infrastructure that has always been a coveted secret of the telcos, like Colonel Sanders’ 11 secret ingredients.
When purchasing a commercial building, it is imperative to understand what is actually supporting the tenants from a technology perspective. In another case with a developer buying an older large headquarters building in Kansas City years ago, by doing an assessment of the network infrastructure of the building, we uncovered many problems and hidden damages to the infrastructure.
How far has the market come?
Those real estate “traditionalists” in both commercial and residential that still think having broadband connectivity is not an intelligent amenity to worry about, are those whose strategies consist of lowering the price until a building sells or leases up in the markets they think they control. Their approach to due diligence is also flawed.
To them I pose the question, “Would you sell a building or commercial space without air conditioning?” Eventually someone might buy or lease, but you definitely will not be targeting the majority of the market, let alone the premium-paying candidates of the market.
As I stated in several articles in 1985 and 1986, including one in the fall edition of Real Estate Review that was focused on measuring a building’s IQ, “ As more of the real estate industry becomes more comfortable with the idea, sophisticated marketing approaches will be created and refined. The question of ‘How smart a building do you need?’ will become as common as ‘How much space do you want to lease?'”
Evidently, many in the real estate industry have to catch up to what has been evolving for over two decades. Measuring a building’s IQ and then marketing the building’s IQ in competitive markets is critical.
I hope the purchase of the UBS Tower in Chicago included a full due diligence of reviewing the technology and network infrastructure within the building, but knowing how most firms buy commercial buildings today, that part of the due diligence was probably not done.
Recent articles by James Carlini
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