How the Labor Shortage Could Be the Impetus Needed to Move the Industry Forward
It happens every day. Suddenly, a flurry of complaints come in from tenants demanding to know why their space won’t cool down … again! Fortunately, in most cases, there is a building engineer with decades of experience who can be counted on to find a solution.
The value in that experience cannot be overstated. Building operations is a complex undertaking, where dozens of systems work in tandem to create a healthy and comfortable indoor environment.
Each of these of systems, supply fans, boilers, chillers, elevators, pumps, etc., have electrical and mechanical components that can fail at any moment. Diagnosing the root cause of tenant complaints requires deep knowledge about how each piece of equipment works, and how these systems work together.
Some properties leverage a building management system (BMS) to enable engineers to precisely control equipment and automate when building systems turn on and off. However, utilizing this software, which hasn’t changed in the last three decades, isn’t easy and requires its own unique set of expertise.
A precarious position
This deep knowledge, while extremely valuable, is also perilously held in the minds of experienced engineers. Unfortunately, skilled professionals won't be around forever; 55% of engineering managers are over the age of 55, and 86% are over the age of 45.
Replacing retiring engineers with the younger generation doesn't solve the problem either. Gen Xers change jobs twice as much as baby boomers, and millennials move jobs four times as often. This translates to less time for developing the deep knowledge necessary for managing complexities of building operations. The effects of this are already being felt; 62% of firms report trouble filling technical positions.
Meanwhile, as the workforce gets younger, the building stock is getting older. A new report found that 50% of the commercial building stock was constructed before 1980, including 26% before 1960. Additionally, nearly 70% (4.6 billion square feet) of non-renovated U.S. office inventory is greater than 20 years old.
Old buildings not only have more wear and tear, data shows that, while 30% of buildings built since 2008 have a BMS, only 11% of buildings built before 1990 have these systems.
Not everyone is worried
In response to a drain of technical expertise internally, portfolios are increasingly outsourcing their operations and maintenance to real estate services companies. The boon is expected to be enormous; according to CBRE, by 2025 the global outsourced market for facilities management will be worth $1 trillion.
This enormous opportunity doesn't come without having demonstrated value. Studies have shown that while outsourcing operations and maintenance increases costs compared to in-house operators, they also tend to drive operating costs down enough to have a net positive impact.
However, this trend can be a double-edged sword. While real estate services companies have the scale and resources to attract top engineers, the nature of the business hampers development in another area: institutional knowledge.
Real estate services is one of the most competitive industries on the planet. Owners are constantly running competitive bidding processes and switching between providers. Likewise, the competition for the engineers themselves is fierce and retaining talent is a constant challenge for services companies.
When a new company and/or engineer comes into a building, they are starting from scratch. They may understand building systems and have experience using archaic BMS software, but they don’t know which equipment in the building are prone to failure or which tenants have specific requirements.
Passing the torch
Like it or not, the shrinking labor pool is forcing both owners and real estate services companies to find a way to do more with less. Fortunately, the explosion in technology has been developed to help bridge this gap.
Obviously, the responsibilities of an experienced technician cannot be augmented with a single technology. It takes a suite of different solutions to both streamline existing workflows and take advantage of new sources of data to improve on the limits of human senses.
For the day-to-day work, data captured with sensors can unlock powerful insights around maintenance and repairs. For example, engineers can save time by maintaining equipment based on its actual runtime hours instead of based on a calendar date. At the same time, the data can detect pre-failure conditions in equipment so that issues can be addressed in a proactive manner, saving time, money, and tenant frustration.
For the higher-level strategic operations, this data is being embedded within virtual environments, also known as "digital twins." This type of solution enables one highly experienced engineer to effectively manage and support lower-skilled operators remotely, again saving time and money.
Finally, to support capital investment decisions, the sensor data can reduce the time and increase the effectiveness of "property condition assessments." Instead of evaluating the conditions in person and guessing the remaining useful life of each piece of equipment, sensor data can continuously take performance readings, rollup the data and used an aggregated dataset to predict replacement needs more accurately.
The network effect
A network effect occurs when each new source of data adds more value to the overall network, which encourages more sources of data, leading to a virtuous cycle. Over the past 23 years, network effects have accounted for approximately 70% of the value creation of technology companies.
For the same reason that one phone on the network would be useless, sensor data would provide very limited value if confined to one building. However, now that data is being collected from thousands of buildings and millions of individual pieces of equipment, the network effect is starting to take effect.
As more buildings contribute their data (and the deep knowledge of their engineers), predictions becomes faster and more accurate. The value of the technology encourages more of the market to contribute their data, creating an exponential growth in value to each user.
So, while there is legitimate concern about the technical labor pool, it could be the impetus needed to move the industry forward.