The concept of Smart Cities offers the promise of urban hubs leveraging connected technologies to become increasingly prosperous, safe, healthy, resilient, and clean. What may not be obvious in achieving these objectives is that many already-existing utility assets can serve as the foundation for a Smart City transition. The following is a broad discussion on the areas of overlap between utilities and smart cities, highlighting working knowledge from experience at PG&E.
Green Buildings in Sustainable Communities: Everybody Wins
Green buildings support the goals of sustainable communities and vice versa. When office, apartment and retail properties are built and managed sustainably, the surrounding neighborhood benefits. Likewise, a community that enables a sustainable, live-work-play lifestyle enhances the long-term relevancy of green buildings within its borders.
Commercial property owners have a stake in creating, preserving and growing sustainable neighborhoods. Working toward a sustainable future not only helps to reduce climate change impacts but also to enhance investment performance at the asset level. Often when people consider the financial benefits of green buildings, they focus on energy cost savings—but that’s a small fraction of the investment value that sustainability brings.
Sustainable Investing Starts With The Neighborhood
Urban live-work-play communities attract young, educated people with access to transit, amenities like bike paths, and a range of retail and dining options. Working, shopping and socializing within walking distance from home enables a convenient, sustainable lifestyle by reducing the need for car travel.
These communities often promote job growth by creating environments for start-ups to thrive. In addition, companies in many business sectors are locating offices in sustainable urban neighborhoods in order to attract the college-educated millennials who live there. As they grow, companies lease office space in buildings they believe will help them attract talented employees—and sustainability is an important part of that appeal.
Tenants gravitate toward buildings with green credentials and amenities. Certifications like LEED, ENERGY STAR and BOMA BEST show prospective employees that a company shares their values, and amenities like fitness centers, bike storage and shower facilities support their active, sustainable lifestyle.
For many commercial tenants, the real value of occupying green buildings is in the promise of increased productivity of their employees. Green buildings ensure high indoor air quality, use of natural light and thermal comfort—features that improve productivity by promoting wellness, reducing absenteeism and enhancing job satisfaction.
Investors See Value in Sustainable Communities
Green building certification creates a virtuous circle that generates value for investors and more satisfied tenants.
Real estate investors focus on live-work-play neighborhoods because these areas support sustainable job growth and population growth, resulting in higher investment yields and asset values over time. Smart investors leverage these benefits by pursuing green building certifications and providing amenities that promote wellness and sustainability.
In short, we invest in these neighborhoods because companies are following pools of educated employees to these markets, and we prioritize sustainable practices and wellness amenities because these things are valuable to apartment residents and office workers. But sustainability efforts don’t end at the property line. It’s important for building owners to work with communities on shared goals like fostering growth and mitigating climate change impacts.
Case Study: The Octagon
A case in point: The Octagon, a 500-unit apartment property on New York City’s Roosevelt Island, is LEED certified and is one of the first apartment buildings in the world to be powered and heated by a fuel cell. While most of the property is new construction, we preserved the existing eight-sided tower that gives the iconic property its name. As part of the site development, we worked with city planners to include an ecological park, playground, bike paths and express bus service to subway and tram lines—thus enhancing the entire neighborhood rather than just Octagon residents.
The result for investors? Thanks to its green certification, The Octagon qualified for the Fannie Mae Multifamily Green Financing Program in 2016, resulting in an approximately 25 basis point reduction in the interest rate of the 10-year loan used to refinance the property. On a present value basis, the savings are estimated at $3.4 million USD.
Community Engagement Boosts Sustainability
Engaging building tenants in sustainability initiatives strengthens loyalty.
Building owners can also improve investment performance by engaging with tenants as an interactive part of the community. For instance, a common goal brought together tenants and the property management team at Airport Executive Park in Richmond, British Columbia. An on-site community garden maintained by employees of the park’s largest tenant was expanded to include employees of other tenants. This innovative program provides an outlet for employees to collaborate, and builds community spirit among tenants, while reinforcing sustainable practices:
- Volunteers grow vegetables and donate the harvest to the Richmond Food Bank, meeting a community need while giving volunteers an outlet for outdoor activity.
- Organic waste is placed in a worm farm where it’s converted to a natural fertilizer
- Water use is minimized by capturing rainwater drainage in a cistern.
- The garden is pollinated by bees from hives donated by the property manager, addressing the issue of declining bee populations.
- Honey produced by the bees will be eventually sold, with the proceeds going to charity.
Buildings are living assets that have a meaningful impact—positive or negative—on their communities. By mitigating building obsolescence risk through energy, water, and waste management strategies, and by validating performance through green certifications, owners and managers can ensure that the neighborhood impact is positive, while creating sustainable long-term value. That’s a winning scenario for everyone concerned.
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Spotlighting innovations in urban sustainability and connected technology
When the idea of smart cities was born, some ten to fifteen years ago, engineers, including me, saw it primarily as a control system problem with the goal of improving efficiency, specifically the sustainability of the city. Indeed, the source of much of the early technology was the process industry, which was a pioneer in applying intelligent control to chemical plants, oil refineries, and power stations. Such plants superficially resemble cities: spatial scales from meters to kilometers, temporal scales from seconds to days, similar scales of energy and material inputs, and thousands of sensing and control points.
So it seemed quite natural to extend such sophisticated control systems to the management of cities. The ability to collect vast amounts of data – even in those pre-smart phone days – about what goes on in cities and to apply analytics to past, present, and future states of the city seemed to offer significant opportunities for improving efficiency and resilience. Moreover, unlike tightly-integrated process plants, cities seemed to decompose naturally into relatively independent sub-systems: transportation, building management, water supply, electricity supply, waste management, and so forth. Smart meters for electricity, gas, and water were being installed. GPS devices were being imbedded in vehicles and mobile telephones. Building controls were gaining intelligence. Cities were a major source for Big Data. With all this information available, what could go wrong?
If you want a healthier community, you don’t just treat illness. You prevent it. And you don’t prevent it by telling people to quit smoking, eat right and exercise. You help them find jobs and places to live and engaging schools so they can pass all that good on, so they can build solid futures and healthy neighborhoods and communities filled with hope.