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. Last Updated: 07/27/2016

Office Space Gets Increasingly 'Smart'

For MT"Smart" buildings offer savings of 60 percent on insurance and 25 percent on energy.
With high-end office space in Moscow set to triple in the next five years, smart buildings are going to the head of the class, developers and property owners say. Some 1.3 million square meters of class A and B office space should by constructed in Moscow by 2005 and another 2.9 million square meters is planned.

"Demand for new construction is not growing that significantly, so buildings will have to discriminate themselves to get a premium," said Sergei Riabokobylko, partner at Stiles & Riabokobylko. "Developers should be asking themselves, 'What should we do so that in five years our building is as competitive as it is now?'"

The construction boom will intensify competition and could lower rental rates, but new technologies could tip the balance in developers' favor, Riabokobylko said at a seminar marking the launch of Hewlett-Packard's integrated intelligent building management systems in Russia.

Christopher Pike, a Paris-based corporate services consultant to Cushman & Wakefield Healey & Baker, of which Stiles & Riabokobylko is an affiliate, said smart buildings in London and Paris generate a premium in rents.

In Paris, where class A buildings fetch between 620 euros ($696) and 675 euros per square meter per year, smart buildings rent at 700 euros to 725 euros.

They also allow for more efficient management and lighting of bigger offices, which many multinationals need after a spate of mergers and acquisitions.

"People understand that they want to have viable, long-term, satisfied users," Pike said. "That's a very big jump and can make a big difference for investors."

Several multinationals have already made great strides in developing smart buildings. Honeywell and Siemens are leading the movement, while Cisco Systems is currently working on the Country Park office development in Khimki, between the city of Moscow and Sheremetyevo Airport.

Karoly Kantor, Hewlett-Packard's director of smart building services for Central Europe, the Mideast and Africa, said the technology should prove good value for money in Russia, where most office buildings are large and can benefit from economies of scale.

He said the technology made sense for more than just corporate clients. Hungary, for example, has used Hewlett Packard's systems in state universities.

"The driving force was to reduce the cost of running the buildings," Kantor said. "The government never has enough money and government institutions want to spend as little money on buildings as possible so that they can achieve more by spending less taxpayers' money."

Smart buildings allow management companies and owners to offer clients addition services, Kantor said. Hewlett-Packard provides software solutions that integrate financial monitoring and design software into the building monitoring and control systems, he said.

"Most of our competitors are coming from the equipment area," he said.

Smart buildings can pay off faster by offering savings of up to 60 percent on insurance costs and 10 percent to 25 percent on energy, Riabokobylko said. They also require fewer staff.

Siemens estimated the costs of designing and installing the information technology part of the system of a smart building at 0.5 percent to 1 percent of the total building construction cost.

"The level of savings can be about 30 percent and it takes about 10 years to recover the investment in smart building technology," a Siemens representative said. "Heat and electric energy savings cost is about 20 percent, with the investment taking about three years to recover depending on the price of energy."

Moscow-based Ecoprog sells smart buildings management systems for $7 to $15 per square meter of a modern building. The systems pay for themselves in less than a year, general director Vitaly Ginzburg said.

He said that in addition to lower insurance and energy costs, water savings can reach 15 percent and lighting systems will last twice as long. In addition, the buildings provide a more comfortable environment, boosting the labor productivity of the office workers.

The size of the market is still unclear, although Honeywell claims more than half, which it estimated to be worth about $40 million to $50 million.