Smart buildings: Shifting from technology trends to strategic processes

Smart building insights

• Smart buildings are best realized not as a collection of technologies, but as a process-driven approach that aligns all stakeholders to long-term operational goals and user needs. 
• New roles like digital building consultants, master system planners and master system integrators help bridge coordination gaps and ensure the successful integration of smart building technologies. 

In an era where innovation reshapes every facet of our lives, understanding the true essence of smart buildings—not merely as a collection of trendy technologies, but as a strategic process — is imperative for all stakeholders in the architecture, engineering and construction (AEC) industries. 

The goal of this article is to explore the landscape of smart buildings. Not as a series of products that combine make a smart building, but a process that facilitates building ​​smart, including market factors driving changes, the people involved, the value chain of the built environment as it stands in late 2024 and how to improve outcomes for everyone involved. 

Before going into the specifics, it is important to take a step back and look at what is driving the demand for smart buildings. Innovations in the last 20 years have resulted in evolving industries worldwide, increased efficiency and radically redesigned operations and processes to account for all new technology. While these changes are evident in daily lives, the AEC industry has remained relatively unchanged. 

Productivity issues in the AEC industry

A study from the University of Chicago commissioned by the National Bureau of Economic Research found that ​​​​the design and construction industry has lost productivity by an average of 1% every year since 1970. While it’s impossible to identify a single reason for this loss, it’s not unrealistic to consider that the radical changes in technology, building systems and the information technology (IT) landscape have contributed, due to the added complexity and need for extensive cross-discipline coordination. More specifically, the industry’s inability to effectively adapt, adopt, implement and utilize technology efficiently has been a contributing factor. A process exists that will deliver resilient, more efficient and “smart” buildings that realize the promises of recent innovations while reducing construction costs and timelines when managed correctly. 

Figure 1: Understanding how different roles work together will help foster a holistic approach to smart building design. Courtesy: Smith Seckman Reid, Inc.

Real estate has always been about keeping up with the competition. When developers across sectors establish a differentiator, be it concierge services, keyless entry, fault detection or diagnostics, others are quick to adopt these features as well. Smart buildings are no different. The difference in smart buildings is that there is no single-point solution; they aren’t an app or an analytics platform. They are simply the connected infrastructure, systems and applications a developer needs to achieve specific goals. Those goals can be simple and single-use, or complex and multifaceted depending on their asset class or a developer’s strategy.  

Who contributes to creating a smart building?

To better understand how this impacts design, it is necessary to understand how each person along the value chain is involved and impacted. Starting with the developer. There are two primary types of developments; build and hold or build and flip. Build and flip developers are focused on building an asset, getting tenants to lease the space and selling it to a real estate investment trust. They tend to be short-term focused, which leads them to be less concerned with the full lifecycle of an asset’s performance. Build and hold developers, on the other hand, are committed to owning an asset for the long term. These developers are ultimately finance-focused and non-technical. They often do not know what the options for a building are or how they impact things in both the short or long term. 

On the design side, the primary stakeholders are architects, engineers and specialty consultants. Architects usually lead the process, often bringing in engineers as part of their teams. Consultants cover a broad range of scopes, including sustainability and smart building systems. These stakeholders are often under pressure to propose competitive fees to clients who may not fully understand what is needed to achieve their lofty goals. ​​Design fees typically correlate to the perceived amount of effort and labor required, sometimes leading design professionals to complete their work quickly rather than delivering the best set of drawings. 

Figure 2: A diagrammatic comparison of traditional building system silos and integrated operational technology networks. Courtesy: Smith Seckman Reid, Inc.

Architects and engineers value creativity and innovation but are often hampered by financial constraints imposed by the developer. In most cases, unless the owner is specifically invested in innovation, the focus shifts to value engineering; the practice of minimizing costs while maintaining the overall function of the project. This approach can discourage risk-taking, as architects and engineers prioritize reducing rework and staying within budget over exploring new, potentially transformative ideas. Specialty consultants, such as those focused on sustainability or smart building systems, occupy a slightly different role. They are typically brought in either directly by the owner or through the architect to help the project achieve specific goals. However, when these consultants are not fully integrated with the design team, their ideas seldom are included in the final construction drawings and specifications. The lack of integration can hinder the overall effectiveness of the smart building solutions being proposed. 

The general contractor’s focus is to finish a job under budget. This is often done through procurement. As most specifications are “performance” based, a general contractor will shop the market until they find the minimum viable product. These are systems that fit the letter of the requirements but may miss the intention and functionality of the design, particularly when integration is central to the design. When this becomes an issue during construction, the general contractor will point out that it meets specifications, the engineer is blamed, and the developer is then responsible for paying a change order. These issues are all too common but could be mitigated with proper processes that fill the gap. 

Integrating smart building technology

One of the things holding back the smart building movement is a lack of agreement or understanding of the terminology being used. The most common complaint is that there is no standard definition for what makes a building “smart.” There are some groups, such as WiredScore or UL, who are trying to set standards for this through certifications. While this makes sense for some applications it would be more beneficial if mindsets were shifted from viewing smart buildings as a “product” to seeing them as a “process.” After all, a building is only smart if it meets the needs of its specific users.  

The list below has some terms for which certain definitions are more commonly (although not entirely) accepted by the industry: 

• Single pane of glass: An integrated control platform that allows all building systems to be viewed and controlled from a single application. 

• Operational Technology (OT) – All networkable technologies that serve the operations of a building i.e., BAS, access control, lighting, etc. 

• Internet of Things (IoT): Devices with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the internet or other communication networks. 

• Converged infrastructure network: A centralized backbone that acts as a core network for all systems versus each sub-system running its own network.  

• Independent data layer: A software solution that serves as a central systems integration hub that can connect different OT devices to each other and other IT or software solutions. 

• Digital twin: A representation of an asset as either raw data or an image rendering. A digital twin can be used to model hypothetical changes to the system based on different variables. 

• Fault detection and diagnostics: An application that leverages the connected infrastructure devices and systems to proactively identify prospective failures in a system.  

State of smart buildings today

The promise of smart or intelligent buildings has been around for decades, dating back to the first electronic control systems in the 20th century. Over time, new innovations such as digital direct controls, the internet and machine learning have entered the market, each promising to revolutionize how we manage and interact with buildings. Most recently, the advent of the IoT and artificial intelligence has generated significant buzz around the potential for smart buildings to be more efficient, sustainable and user-friendly than ever before. Combined with the rapid advances in consumer technology, expectations are higher than ever for building systems to be smarter. Every developer working on a new project wants to be able to market the “building of the future” that will support them for decades to come. 

Figure 3: New roles in design and construction for smart buildings help create the highest quality outcome for all involved. Courtesy: Smith Seckman Reid, Inc.

Despite these high expectations, reality has often fallen short. Rather than seeing a new era of buildings that seamlessly integrate these technologies, we are faced with many of the same challenges that have plagued the industry for years. Vendor lock-in, where building owners are tied to specific vendors due to proprietary systems, is one of the most significant issues. This lack of standardization and open platforms results in increased costs and inefficiencies as owners are forced to rely on a single provider for upgrades, maintenance and support. Additionally, concerns about cybersecurity, data management and the shrinking pool of skilled labor capable of managing these systems have made the deployment of smart buildings more challenging than anticipated. Adding more solutions, vendors and consultants on top of a broken system will not fix it. A more holistic look at the building design process is the only way to truly achieve smart buildings. 

When it comes to smart buildings, it’s important to understand the relevant stakeholders that are involved and how they make money, this determines how they create value and what metrics are important to them regarding Smart Buildings. At the start of the value chain is the developer. The developer is ultimately a speculator who believes they can lease/sell a property for less than it buys, builds, operationalizes and finances it for. Developers are usually from the finance space and thus look at the world through the lens of what is called a proforma. ​A​ proforma is a financial model that quantifies every aspect of a project from inception to operationalization and onward into lifetime value creation. For the sake of our needs, a proforma only has metrics we can impact or be concerned with, including​ ​construction costs, net operating income, capitalization rate and asset value. Construction cost is simply the combination of all costs to build an asset. Net operating income is the total revenue of a property minus the expenses. The capitalization rate is the rate at which an investment generates. A return and asset value is what the property is worth.  

Within the construction industry, we are all too familiar with the constant drive to reduce construction costs. While saving money is important, when we put it in the context of a pro forma we can shift the mindset around cost-cutting and value engineering. Engineers must know how to shift the conversation away from the simple cost of one system or another to focus instead on the holistic value a system may bring. A prime example would be something like the power of Ethernet lighting systems. While the system may have a 20% premium versus a traditional system, the process of deploying that system does not require an electrician, is significantly faster and can be remotely commissioned. This saves on labor costs and construction timelines that far exceed the materials premium. It also reduces the overall load required for the overall projects. Communicating how a system holistically impacts a project in terms contractors, developers and building owners understand is instrumental to getting their buy-in. 

As mentioned earlier, engineers have been incentivized by the existing value chain to not take risks or change the way they design building systems ​​to minimize the time spent on each project. This often results in a copy and paste of performance specifications and general notes instead of making sure owners are getting the newest and best technologies in their buildings. A prime example of this would be controls. Control vendors, with a lack of pressure from the specifying engineers and owners to use open protocol platforms, install systems that only the controls company can service, so they can lock in long-term maintenance agreements. They see this as necessary to recoup the money they often lose on the installation to win the bid. Operating expenses, like service agreements, are often handled by different departments than the capital expenses in construction, so there is rarely someone involved in the construction process to advocate for the net savings of open-platform control systems.  

IoT vendors are in a similar position, often requiring that their own proprietary gateways be used in order for their devices to function, so while an owner may have expected to purchase a system, they are instead locked into a software subscription to keep the gateways operational. The design team currently has little incentive to address these kinds of issues since there is a greater level of coordination needed to do so, but few owners are willing to pay for it simply because they don’t understand the whole picture. 

A major contributor to this situation is that as the industry has changed, some scope gaps have been created or expanded that need to be better addressed, specifically around integration and controls. Starting at the beginning of the project lifecycle, there is a clear need to develop actual use cases for a project that will in turn dictate the technology or integrations. Developers, architects and engineers may attempt to fill this scope, but if a champion isn’t assigned to flesh out and track these use cases throughout design and construction, they are not likely to make it into the final product. At a more technical level, someone must be responsible for specifying the integrations, controls and other technology that will be used to satisfy the use cases. Engineers cover some of this scope, but few have the technical expertise or understanding of control systems and networks to fully address this gap. Instead, many rely on controls vendors or other solution providers to cover it during construction. Finally, the best-laid plans mean nothing if the contractor cannot implement them. Someone must be able to coordinate between all of the trades for the integration of their systems and few general contractors have the technical expertise needed.  

Figure 4: A responsibility diagram of potential roles on smart building projects. Courtesy: Smith Seckman Reid, Inc.

For too long the answer when a client wanted a smart build was to recommend a phone application or double down on controls, and while those certainly can be components of a smart building, they are ultimately just point solutions. To deliver a smart building is not simply a matter of adding technology, it’s updating the project delivery process. The breadth and depth of technology have expanded so much and so rapidly that it stretches the capacity of any existing stakeholder, most of whom are already responsible for a bevy of other deliverables. That is why engineers need to update our delivery process and include personnel who are solely responsible for the experiential, technological and connected solutions that are central to a modern building.  

New players in the smart building space

Three key roles that fills the gaps in the value chain and clarifies responsibilities are:  

• The digital building consultant (DBC): This role is responsible for the development or use cases and their technological enablement requirements. They act as champions for the owner’s building technology program. They work closely with the client and other stakeholders to shepherd them through the process of defining their vision for a building, its operations and the way people experience it. This process results in a basis of design that stipulates the precise outcomes required and the systems needed to deliver it. While there are many opinions on what the title of this role should be (“smart” vs “digital”), DBC is gaining momentum as it carries less baggage and is a more accurate descriptor. 

• The master system planner: This role is part of the design team and works across all the relevant technology groups (mechanical, electrical and plumbing; IT; network; access control; fire and life safety; software, automation, etc.) to ensure proper system specification, integration requirements and prescriptive outcomes. The result is a complete set of construction documents with integration requirements down to the method of integration, communication protocol, data transfer requirements and intervals. 

• The master system integrator: This role works as part of the construction team overseeing the specific technology implementations relevant to the different trades. They act as a technical resource for installation teams and ensure the proper systems are procured. This helps to mitigate change orders and maximize system functionality. The final output of their work is a fully commissioned smart building that executes the use cases defined by the smart building consultant and designed by the master system planner. 

These roles and responsibilities are not set in stone. It is important on every project to review the responsibility matrix and make sure that each one is assigned to the party best equipped to handle it. Engineers should leverage their technical aptitude and project management skills to take on as much as they can. Helping owners develop use cases for the smart technology available is consulting work that typically comes with higher margins and is great for building a reputation as a trusted adviser. By adding controls and integration experts to their teams, engineers are the ideal candidates to serve as master system planners, giving them more control over their designs. By covering this scope and issuing a division 25 specification that covers the integrated controls they are positioned to oversee the work of the master system integrating, making them invaluable to the client.  

This extra coordination is also likely to result in fewer requests for information or ​​revisions related to building systems and technology, which lowers effort during the construction phase. Regardless of how much responsibility a firm wants to take for the smart building outcomes, they should be closely examining all of the scope to plan coordination efforts and identify gaps. Being able to clearly articulate these scopes and explain the effort and value being delivered to the owner is the first step in securing higher fees and greater profitability on smart building projects. This journey will look different for firms of different sizes and focuses, but it is not an area that can be ignored. 

In conclusion, the path to realizing true smart buildings requires a fundamental shift from viewing them as a collection of disconnected technologies and stakeholders to embracing a holistic, process-driven approach. The complexity of modern buildings, combined with rapidly advancing technology, demands a reevaluation of traditional roles and workflows. Smart building success hinges on collaboration across disciplines, with new roles such as smart building consultants, master system planners and master system integrators filling the gaps in coordination, specification and implementation. These roles ensure that the goals of developers, designers and solution providers are aligned and that buildings are designed with long-term operational efficiency, flexibility and user experience in mind. A comprehensive approach that integrates all stakeholders, from initial design through final commissioning, will allow engineers to overcome the barriers of conflicting incentives, fragmented solutions and legacy processes that have slowed the industry’s evolution. Smart buildings are not just about technology. They represent a broader cultural and procedural transformation within the built environment that ultimately benefits all involved, from developers to end-users, through improved outcomes, reduced costs and enhanced functionality. Let’s stop trying to build smart buildings and instead build ​​smarter. 

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