Building 5.0: The peek into the future of buildings

Building 5.0

The Peek Into The Future Of Buildings

©2024, Sudhi Ranjan Sinha

All rights reserved. This book or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review.

ISBN: 979-8-35097-844-5

ISBN eBook: 979-8-35097-845-2

Dedicated to My mother Mrs. Keya Sinha, who I remember every day and who continues to inspire from a far away world;

My father Mr. Sukumar Ranjan Sinha, who encourages me to learn, and write;

And my wife Ms. Sohini Sengupta, who motivates me, supports me and helps me become a better person

Acknowledgment

I am fascinated by the buildings industry and have been an ardent student of it for the past 15+ years. This book is an effort to synthesize and reflect upon these learnings and postulate about the future of this industry. Along the way, many people have been very generous with their knowledge, experiences, and theories.

I start with my very close friend and colleague Mr. Subrata Bhattacharya, Vice President at Johnson Controls, and my industry mentor Mr. Don Albinger, retired Vice President and General Manager of Building Management Systems at Johnson Controls. They taught me how the industry works, what makes the industry work the way it does, and everything about the technological side of the industry. Mr. Bill Jackson, President of Chicago Associates, and ex-President of the Buildings business of Johnson Controls has been a huge influence on my life, he inculcated thinking in terms of strategic frameworks and inspired us to think about the future. Dr. Youngchoon Park has not only been my friend but also my teacher of everything digital. We have collaborated over the years in developing many of the digital thinking and capabilities for the buildings industry that I share here in this book. My colleagues Ryan Piaskowski and Kaushik Velingkar have been very instrumental with review, research, and challenging some of my hypotheses. Darrin Conlon and Ms. Chiara Clemente of UL Solutions, thank you so much for helping with the review process as well. My friends Mr. Vikram Chowdhari, Mr. Mandar Agaskar, Mr. Sujit Vishwakarma, Mr. Jigar Vasani, Mr. Sujith Ebenezer, and Dr Youngchoon Park, who has always been so generous with their creative inputs and coaching, and without whose support none of my book projects would have been successful. My sincerest thanks to Mr. Dave Hopping, CEO of Siemens Smart Infrastructure Solutions and Services business, Mr. Rajan Luthra, Vice President at Reliance Industries, Mr. Rajaramana Macha, Executive Vice President and CTO of Eaton, Mr. Silvio Napoli, Chairman and CEO of Schindler, and countless other industry colleagues for helping me think this topic through. And finally, I want to thank my UL Solutions mentors and motivators Mr. Weifang Zhou, President of Testing, Inspection and Certification, and Mr. Alberto Uggetti, Chief Commercial Officer who have been so supportive and encouraging in this journey.

Table of Contents

1: Introduction to the Future

2: Evolution of Buildings

3: Sustainability and ESG

4: Artificial Intelligence

5: Building Operating System

6: Data and Information Governance

7: Metaverse and Buildings

8: Digital Twins

9: Cybersecurity

10: Connectivity

11: Sensors, Convergence, and Disruptors

12: Use Cases

13: Business Case for Smart Buildings

14: Building Certifications and Ratings

15: Smart Buildings to Smart Cities

EndNotes

1: Introduction to the Future

Why do buildings matter?

For more than 5,000 years (and some may argue 10,000+ years back to when some civilizational roots have been traced), buildings have been a critical manifestation of human aspiration and civilization. The transformation of homo sapiens into humans and the beginning of civilization also marked the creation of spaces where our ancestors could feel safe, find sustenance, and conduct their business. The evolution of such spaces has been a curious capture of the progress of human civilization over several millennia.

Today, the building industry has come to represent a significant economic engine for the world, to the tune of over $7 trillion, and a big contributor to the global GDP. While every industry goes through its growth cycles, the building construction and maintenance industry has been stable and continued to grow over the decades. As per a recent research report1 by The Business Research Company, the building construction market will grow from $7.265 trillion in 2023 to $7.593 trillion in 2024 and over $9 trillion in the next 5 years. Urbanization, increasing aspirations of people, and expanding economic activity have contributed to the growth of this industry. In the past 100+ years, whenever governments around the world tried to lift their countries from a dire economic cycle, they have most often relied on investments in the construction sector as it always has a cascading impact on other industries as well as is a big employment contributor. Since the recent COVID-19 pandemic, this industry has been presented with many workforce and supply chain challenges.

Not only at a macroeconomic level but even at an individual level, buildings matter to us a lot. Most of us spend 80% of our lives inside a built environment. Our health, happiness, and productivity are greatly influenced by these environments. The recent pandemic has increased the focus on buildings, reshaping how we think about the usage of space and technology to improve occupant wellness and productivity, operational effectiveness, and competitive advantage.

Unique characteristics of the building industry

The building industry is a fascinating one with some unique nuances unseen in most other sectors, such as:

High fragmentation

The complexity of constructing and supporting the lifecycle of a building has inefficiently evolved along with how solutions are delivered to the market. Lots of highly siloed. high tech systems maneuvering for dominance has driven the need for more specialization This is also compounded with the ever-increasing building performance expectations contrasted against the risk and uncertainty in the processes of delivering smart solutions. Throughout its lifecycle, there are multiple participants in the building ecosystem, often with misaligned incentives and inefficient hand-offs. For example, the traditional construction model includes architects, design/consulting engineers, specifiers, general contractors, a range of contractors from different disciplines working under the general contractor, lots of material and systems suppliers, system integrators, commissioning agents, verifiers, inspectors, multiple procurement personnel at multiple organizations, application providers, and the list goes on. Each has different motivations, economic models, priorities, and ways of engaging with other members of the ecosystem. The owner’s outcome objectives and budget for the building get differently interpreted and diluted through the lifecycle flow across all these constituents, and we lose track of the various compromises made along the way. By the time one gets the full picture, it is already too late and too expensive to modify. These fragmented layers have a strong incentive to protect their turf and such goals get translated into the form of perceived risk management and increased complexity.

Domination of a few

While the industry at large is fragmented, in any of the specific areas, major portions of the market are dominated by very few players. For example, there are only a handful of large global manufacturers for any specific type of building system – be it lighting, HVAC, Controls, Security, elevators, or anything else. Other functions that require less capital-intensive investments to provide their services such as the architects, consulting engineers, contractors, or integrators, also have only a few dominant players by each region or locality. There has always been a space for innovators, but very few of them have ever achieved meaningful scale in the past 100+ years and made a major dent in the market to move it in a specific way. For example, the building automation and control space has been dominated by Honeywell, Siemens, Schneider, and Johnson Controls for more than 100 years. Their share in different markets may have shifted over time due to the execution of different business strategies, but the overall market makeup did not go through major changes. The one big difference was when Tridium, a 1995 start-up came up with the Niagara Framework for open integration and very flexible programming that allowed a variety of smaller contractors and integrators to participate in the building automation space. Since 2005, Tridium has been part of Honeywell. Recently there have been some interesting disruptors who have emerged such as Passive Logic, SIBCA Connect, and a few others, but they are yet to make any meaningful market impact due to their recency effect.

Change resistance

This industry has been very resistant to change. There are many contributors to such resistance:

Highly distributed decision making

The need for every component and every decision to support the long asset life goals and the extraordinary expenses required to make changes after the fact

Lack of appropriate communication, full appreciation of each other’s roles and boundaries, transparency, and trust between various stakeholder communities

Inherent market structure characteristics described in the paragraphs above

Less injection of fresh blood into the workforce who can bring and/or implement new ideas

Low technology penetration because technology generally facilitates faster change management

Slow-moving codes and standards with limited requirements for performance

A contractual process that supports a hands-off approach once the work obligation is deemed complete. There is little contractual cross-liability connecting smart tech in a building. Most of it falls to the responsibilities of the integrator which creates a lot of finger-pointing and mistrust in the process.

The financial and reputation consequences of installing over-budget or low-performing tech in a building are high. So, the industry has continually evolved with a risk aversion mindset. Also, the contractual process lends itself to litigation which drives contracts to be highly determinant and thus do no more than specified which encourages risk aversion and cross-cooperation to the final solution.

Significant productivity improvement opportunities

As per a McKinsey study2 of the construction industry that also covers buildings, there is an estimated 15-18% productivity inefficiency, and it has been going up for quite some time. Some of the conversations we have had so far in this chapter explain the drivers behind this inefficiency. This also makes the industry target reach for disruption.

Changing business models for building technologies

Influenced by the role of software and subscription-based models in different industries as well as motivated by the need to address some of the building industry challenges many building technology manufacturers have been slowly shifting their economic engine from a value capture model dependent on hardware to software and the role of outcome-based services. However, the pace of such a shift has been galactically slow compared to other industries. Turnkey use-case or advanced application developers that deliver specific occupant functionality like smartphone integration to elevators, access control, conference room reservation, work orders, etc. are slowly penetrating the industry.

Trends impacting the building industry

Similar to many other industries, several trends are impacting the building industry:

Urbanization

While urban areas have existed for more than 5,000 years, the trend of urbanization was first triggered by the Industrial Revolution in the 18th and 19th centuries picking up pace in the following two centuries. However, the total low-density rural population always remained higher than the high-density urban population. As per UN estimates3 , that equation changed in 2007 with the urban population superseding the rural population. It is estimated that by 2050, nearly 7 billion people, i.e., two-thirds of the world population will live in urban areas. In countries like the US, that share of urban population will be more than 90%.

This timeline is not that long from a building infrastructure lifecycle perspective. This rapid urbanization is providing a massive boost to the construction industry because the current building stock has to double in the next 25 years. As per an Oxford Economics study on Global Cities 2030, urban construction is expected to grow 35 percent. At this same time of unprecedented growth, the industry has to deal with the triple pressures of environmental sustainability, huge retrofit requirements in the already large existing building stock, and a rapidly changing technology landscape.

ESG

Climate change has been a concern for many decades, and the intensity of that has increased significantly in the last few years with strong global political consensus and impactful economic interventions. Buildings are a big vector of this concern. Buildings have a long lifespan, often lasting for several decades and even for centuries, making their impact on the environment and society substantial and long-lasting. For instance, buildings are responsible for approximately 40% of global energy consumption and one-third of all global greenhouse gas emissions. They also consume vast amounts of water, generate substantial waste, and can have adverse effects on air quality. Moreover, buildings have a lasting impact on the occupants and surrounding communities. The quality of indoor environments, including air quality, lighting, and acoustic comfort, directly affects the health, well-being, and productivity of occupants. Additionally, buildings can have broader social impacts, such as promoting inclusivity, community engagement, and economic development.

We have a whole chapter dedicated to the topic of ESG.

With ESG reporting compliance becoming a requirement across most major economies within the next few years, the ESG dimensions of buildings are getting renewed attention as this is one of the biggest deficits and highly disorganized areas for achieving climate goals.

Decarbonization of energy and mobility

Future steady access to fossil fuels, their harmful impact on the environment, and the dynamics of the energy market economics have created a strong push for decarbonization of energy sources and mobility. This trend impacts the building industry in a big way. Historically buildings were designed to operate in a steady energy profile but with a more dynamic and diverse source of energy, building systems are being required to react differently. Energy was cheap. Buildings were operated more as a necessary expense to the operation versus an asset that protects the business. The growing population of electric vehicles is adding another dynamic source of energy usage to the built environment that requires careful demand-supply harmonization.

For several years now, there has been a global effort towards reaching a Net Zero target by 2050 to mitigate the climate challenges. In such a scenario, the International Energy Agency (IEA) has projected4 the following source mix of energy until 2050:

Figure 1: Energy Source Mix for 2050 Net Zero Target

In the following chart, IEA breaks down the energy demand by different sectors to support the Net Zero goals:

Figure 2: Energy Demand by Sector for 2050 Net Zero Target

These charts indicate two very important requirements:

The total energy usage in the world has to go down, and

Even though the number of buildings is expected to double in the next 20-30 years, the total energy consumed by all of the buildings has to go down.

Given that today buildings consume nearly 38-39% of global energy already, this shift is huge. This means that how we design and operate buildings must dramatically change over the next 20 years, but that journey must start very soon. Similarly, the design and operations of major energy-consuming systems in buildings such as the HVAC have to be completely reimagined. Looking at the state of current R&D efforts and innovation in the industry or even the collective awareness of the industry of these mega-challenges, it is hard to be convinced about our ability to meet these requirements.

Aging building stock

As per Stuart Feldstein of SMR Research Corporation, in the US, the present average age of commercial buildings is about 54 years5 , a value that has continued to grow consistently over the past 5 years. That number is nearly 40 years for single-family homes, 37 years for condos and apartments, 32 years for airports, 70 years for museums, and 70-82 years for mixed-use buildings. In the US, there are currently more than 9 million commercial buildings and more than 140 million homes. Similar statistics can be found across most developed economies. The large number of very old buildings are prime for a major overhaul and nearing their useful life without such an effort.

Workforce shortage

Even though the building industry has a tremendous amount of growth opportunities, the building industry is faced with unprecedented labor shortages. US-based, national construction industry trade association Associated Builders and Contractors (ABC), in its Feb 2023 publication reported that the construction industry needs an additional 546,000 professionals in the construction industry to meet the needs of the industry this year alone on top of its normal hiring practices. Similar statistics have been observed in many mature economies around the world. A big portion of this shortage is in the building industry.

This has been a chronic problem for the industry for many years, something that was flagged more than a decade back, and predicted long before that. A rapidly retiring baby boomer generation – the bulk of the current workforce in the building industry coupled with disinterest from the millennials and later generations in joining this industry due to its perceived lack of appeal despite competitive compensation have been the big contributors to this problem. Since the industry and the various disciplines involved are so fragmented, there has not been sufficient collective effort in workforce development.

Changing workplace demographics and occupant expectations

Workplace demographics have always changed over the history of modern buildings. However, in this century we have experienced an unprecedented pace of acceleration of digital technologies in our personal lives, and the experience expectations from there have transitioned to the workplace. For example, in less than 15 years, we are now managing our entire lives out of our mobile devices that originally were meant for only taking to another human. But when it comes to many workplace experiences, especially related to buildings, we must go back to what seems like a near-analog world.

The rise of the gig economy and persisting post-COVID-19 return-to-work challenges are changing the nature of how we use and interact with the workplace as well. Also, employees are likely to change their employment if they are dissatisfied with their workplace and work practices.

Rise of pervasive use of AI and digital technologies

Many new digital technologies are impacting buildings – IoT, cloud computing, graph databases, new communication methodologies like 5G and NB IoT, distributed ledger authentication, mixed-reality immersive experience systems, multi-agent systems, AI including its various branches – Machine Learning, (ML), Natural Language Processing (NLP), image processing, robotics, and others that are fast impacting how building sensors and systems work. As a collective, they define the new world of digital technologies with very transformative capabilities. As the digital footprint increases in buildings, it also raises concerns and defensive posture around cybersecurity and privacy. Many large industries were born digital or could transform themselves significantly in the digital age, but the building industry finds this transition very challenging, primarily for 3 reasons:

A very large base of legacy technologies – buildings are old, and the vast majority were not contracted with technology in mind.

General infrastructure deficiencies due to decades of deferred maintenance – consistent operation budgetary challenges with low priority compared to the needs of the business that create boom and bust periods of affordable improvements.

Extreme fragmentation of the industry with very few if any players able to influence the complete lifecycle of buildings.

Given the enormity, complexity, and severity of the challenges this industry is facing, there is no other option but to use digital as a way to reimagine this sector.

Increasing complexity and cost of building technologies and operations

This topic was also covered in the chapter related to buildings in my earlier book Reimagining Business with AI and I am reproducing some of the content here. Today, there is a tremendous amount of technology and complexity involved in managing the built environment. Let us take an example of an average building of about 10,000 square meters or about 100,000 square feet. This building is likely to have about 100 meters and sensors. If designed well to optimally use the most available technology, this building is likely to have between 30-50 sub-systems. There will be more than 100 variations of the data that are captured by these systems because markets differ, usages of buildings differ, technologies used in those sub-systems differ, the way they are designed and installed differently, and so on. Between these various sub-systems, in this building, close to half a million sample data points are captured every day; annually which leads to more than 10 gigabytes of data. However, there is a problem with the data. On average at least 5% of the data collected is unreliable; this happens because of network communication issues, sensor accuracy, or other reasons.

The equipment and systems in buildings may have a life of 10-15 years compared to double the time the average building survives without major reconstruction. Deferred maintenance in many cases has stretched this lifespan by 70-80%. Diversity of usage, occupancy, the evolution of technology, and changing external factors (such as weather) means that customer expectations are always evolving. With occupants and running businesses, complete shutdown and repair/replacement is a rare event. There is always a mix of systems, suppliers, and protocols in buildings. A single building may have systems from 30+ suppliers communicating over 10+ protocols. So, service and upgrades are rarely isolated and immune to the cascading impact.

People managing buildings have a very challenging job. They have many different stakeholders to satisfy. Occupants want comfort and safety. If something goes wrong, the occupants want the issues to be responded to very quickly. They also do not want to be impacted by any building improvement projects. The service team has to address all the complaints from occupants, ensure all the equipment and systems in the building are working fine, find capable people to maintain the people, and do all these on limited budgets. The executive team, on the other hand, is looking at how best to extend the asset life and the value of the property. They are also looking at reducing the operating cost of the building, which includes the energy costs. These sometimes require initiating improvement initiatives that the facility service team does not have the bandwidth to deal with and occupants do not have the time to be interrupted with. The suppliers and the contractors, on the one hand, struggle to keep up with spare parts and maintenance activities, on the other hand, try to keep up with finding qualified resources to support the building manager.

Managing many service subs is a real burden to the operation. It takes valuable time to process and direct external service contractors to fix problems efficiently. Year over year, service budget stress exacerbates operational problems and creates a paradox of deferring the problem to another budget cycle or quarter, while never obtaining a condition where the available service budget gets ahead of ever-arising operational challenges. Finding talent and building operations career-oriented service personnel is a real challenge. Few trade or tech schools offer degree or certificate programs, so most of the talent needs to flow through the trades or other service industries. Finding talent that has some experience in higher-tech digital equipment and wants to work in a building service environment is especially tough. It is expensive both financially and operationally to train new personnel to be effective in the role especially if the strains of working in limited staff and medium pay environments cause considerable attrition.

On top of the stakeholder management challenge, the siloed nature of the various departments and functions within the same enterprise that is involved with building operations and maintenance makes things complicated.

There are many models of how building systems and equipment have been maintained historically. These usually revolve around ensuring the equipment and systems keep up their expected performance. All of these models are generally human-intensive. Given the multitude of systems and interdependencies involved, maintenance becomes very complex. The way we maintain building systems today has several limitations. Isolated equipment optimization does not necessarily provide system-wide benefits. The inability to correlate tons of historic data with real-time/near real-time data meant that corrective actions may not be the most accurate. Changes in building usage (e.g.: warehouse vs. commercial office) meant that existing systems had to be almost fully redesigned or replaced. Changing government regulations usually drives stop-gap corrective actions rather than top-down system-level optimization.

The diagram below is an interesting example depicting this complexity.

Figure 3: Complexity of the Building Ecosystem

The significance of the building industry in our future is undeniable – whether we consider the economic reasons, the environmental reasons, or any of the other reasons enumerated above.

Businesses and institutions are defined by their mission, strategy, operating model, and people. Each business and institution has a mission that is enabled, augmented, and executed by its workforce, operating in its workspaces, through its workflows. They all come together in a building. Therefore, the digital transformation of buildings becomes a critical component of the digital transformation agenda of any organization. In the past 15 years, to promote a culture of innovation and make it more attractive for the next generation workforce, companies have frequently used workspace design as a strategic tool. The design, technologies, and services implemented in these spaces for companies like Google, Apple, Microsoft, 3M, and others are legendary stories of workspace transformation with linkage to employee engagement and productivity. In the post-COVID world, smart workspaces are gaining greater traction to attract people back to work as well as reduce operating costs considering lower occupancies.

Technology has been used in building for many decades now. It started with pneumatic controls about a century back. Modern-day buildings are rich ecosystems of sensors, systems, and data. Buildings are being reimagined with the use of digital technologies and artificial intelligence. Smart buildings using cutting-edge technology are often Net Zero, can adapt to changing environments and usage patterns, and anticipate and react to the occupants’ needs. Modern warehouses and factories run large facilities with minimal human intervention. State-of-the-art hospitals adapt the clinical environment to best aid the patient’s recovery.

By its very definition and design, evolution is a slow process. However, every once in a while, evolution is known to change pace, resulting in rapid strides that suddenly leave the standard way of life redundant and usher in a new era. This happens because our aspirations and available resources or capabilities reach an inflection point for dramatic improvements in how we live and work. The Industrial Revolution was one such example centuries back, and the internet and subsequent information economy is a more recent example. Today, we are ushering in the new digital era.

Similarly, the building industry has also slowly evolved.

The early versions of smart buildings were largely driven through automation. But building owners, operators, and most importantly occupants are not satisfied with the benefits of automation – they want more. There is a demand for buildings now to be enabled with pervasive digital technologies and leverage data emanating from them to change outcomes and experiences for the various stakeholder groups. Digital buildings are integrated ecosystems of architecture, design, systems, and operations that deliver tangible value and aspirations of the occupants, operators, and owners.

Smart technologies will be key to the future of buildings – how they are designed, operated, and maintained. While the term smart buildings has been around for more than a decade now, it carries different meanings for different people and at different points in time. One of the best definitions of smart buildings comes from the SPIRETM Smart Building Assessment program developed by UL Solutions and TIA. As per this definition, a smart building is a future-ready, digitally capable built environment (adapted to the type: office, industrial, medical, retail, educational, hospitality, or multi-tenant residential that is capable of producing smart outcomes such as better asset value, optimized operations, healthier and more productive environments, sustainable practices, cybersecurity, reduced risks and enabling the building to better align with the mission of the business it houses. As per a report, published by Fortune6 , the smart building market is expected to reach over $109 billion, making it a significant driver for economic growth.

This book is an attempt to understand and unravel the future of buildings.

The purpose of this book is to initiate a dialogue about the problems, opportunities, and ways to address them for the building industry; build a common understanding and vocabulary for the future technologies that will shape this industry; and discuss various frameworks that can be leveraged to shape the future.

Structure of the book

This book is organized into 15 chapters:

Introduction to the future. Our current chapter starts with a discussion of the significance of this industry, what makes it so special, and what is driving the need for change. This chapter intends to set the context.

Evolution of buildings. This chapter deals with the history of buildings over the past 135 years across split into 5 different eras. For each era, we describe the defining characteristics, driving factors, and major shifts that happened during that time.

Sustainability and ESG. While climate change has been a concern for the past couple of decades, in recent years we have felt the impact more frequently, and there has been greater political alignment. In addition to climate, other influences now collectively referred to as ESG with its increasing financial overtone, will have some profound interest in the building industry. In this chapter, we shall get into the details of the influences, impact, and required actions.

Artificial Intelligence. Starting with this chapter, the next 7 will be dedicated to technology discussions that will disrupt the building industry. In this chapter, we will discuss how AI will transform the built environment, reshaping the argument we started in Chapter 8 of the book Reimagining Businesses with AI published in 2020 by Wiley.

Building Operating System. In this chapter, we shall describe the underlying technology and data foundation that will be employed to manage buildings in the future. Here we shall outline a unified data and information highway with its various processing components that will offer a simpler and more effective infrastructure for managing buildings of the future.

Data and information governance. With so much emphasis on data and information in the management of critical infrastructure such as buildings, we need new paradigms to govern this