Introduction
As we enter another budgeting season, it’s helpful to reflect on the way things are done before diving in.
There has been a ton of progress in commercial real estate to digitize processes and monitor real-time data to tell owners and operators things they couldn’t otherwise know about.
It’s happened in the case of combining maintenance workflows with BMS alarms to have work orders created before tenants complain.
It’s happened in the case of monitoring equipment to identify optimal startup/shutdown times, scheduling efficiencies, and other energy-saving insights.
It’s happened in the case of using software over spreadsheets to perform tenant utility billing, and significantly increasing recovery rates simply by avoiding the human errors inherent in manual processes.
But when it comes to capital planning, things are still done as they have been for decades.
Nearly every portfolio still relies on spreadsheets, a mountain of PDFs and emails to document changes made and evaluations completed, and the institutional knowledge of those who know the building best.
Over the next few weeks, we’re going to explore how to fix the capital planning process to save time and money, make more informed decisions, set the portfolio up to actually hit lofty carbon reduction goals, and, ideally, demonstrably reduce risk to increase the sale price and disposition.
The first step is the most fundamental: getting the necessary information easily accessible to all parties involved. That can be done with asset tagging.
What do we own?
You may have seen our Enertiv Office Hours on The Power of Asset Tagging. In it, we cover the value of creating a digital equipment inventory that is available both through software and by scanning asset tags (QR code stickers) physically placed on equipment.
In the Office Hours, we also talk about how asset tagging sets up a portfolio for more advanced capabilities. Capital planning is a perfect example of that.
The hard truth is that most portfolios don’t have an accurate list of what’s on site in every one of their buildings. The portfolio is victim to the vagaries of the hand offs from previous owners, the organizational skills of on-site teams, and sheer memory.
Today, things work because there are a handful of people in each portfolio that do have the institutional knowledge to know where things are, who the manufacturer is, and how to shut things off when issues arise.
Unfortunately, these experienced operators are retiring at a rapid clip.
For everyone else, if they need to order a replacement part for a piece of equipment on the roof, they need to physically go up there, read the serial number and make/model, go back to the office computer, look it up and place the order.
Or if they need to respond to a tenant service request for an air handling unit, they have to pop up ceiling panels until they find it. An estimated 16% of a building operator’s time is spent “hunting;” figuring out where the thing they need is.
If we want to fix the process, we have to start there. We need to know what’s owned and where it is.
I’m sure we had a good reason…
How do capital plans get put together in the first place?
In most cases, a property condition assessment is performed. The asset manager gets back a 140-page document, skips to the few pages that contain the table of “long term cost opinion” and input that into a spreadsheet, ignoring the rest.
The problem is that each budgeting season, decisions are made that changes this original snapshot.
These changes may be recorded in the spreadsheet, but the why for those decisions are often lost to the wind.
Maybe a third party engineering firm came in to evaluate the system and determined that it didn’t need to be replaced for at least another few years.
Maybe a software has calculated the runtime hours of the equipment and it’s being run far less than assumed, pushing out the remaining useful life.
Regardless of the reason, if you have to dig through old emails to figure out why a decision to spend or not spend hundreds of thousands of dollars was made, there’s a problem.
When budgeting season comes up and someone asks why the decision was made, unfortunately the answer is often “I’m sure we had a good reason, but it was a while ago and I don’t remember.”
There’s just too much for humans to hold in their memory.
Digitization to the rescue
With modern software, both the problem of having an accurate equipment inventory and tracking capital planning decisions over time can be addressed with the same solution.
It’s a three step process that can be performed quickly across multiple simultaneously.
- Perform an on-site survey using a purpose-built “survey app” to capture images, nameplate information, and location of every piece of equipment. At the same time, deploy asset tags on the equipment and link it to the new digital inventory
- Process the information using a combination of computer vision and trained professionals, transform pictures of nameplates into digital information, map relevant documentation, and input vendor information
- Import existing capital plans into software so that going forward, all evaluations are stored in a central repository, decisions are recorded in the activity history, and we can begin enhancing the decision making process
Steps one and two could be performed by on-site teams, but as technology providers, we’ve found that it’s faster, easier and better to do the work on the landlord’s behalf.
The final point here is important. Remember, this is only the first step. While there is obvious value in reducing the amount of time spent searching for information, our goal is to significantly improve decision making.
That’s what we’ll cover next week when we explore how maintenance data can be integrated so that decisions can be made based on ongoing assessments, rather than a snapshot taken 3-5 years ago.
Want to fix your capital planning process? Get a tailored demo of the Enertiv Platform to see how it would apply to your portfolio.
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