Why Big Data and Cabling Distribution Is Improving Commercial Office Building NOI

Commercial real estate (CRE) is property used exclusively for business-related purposes or to provide a workspace rather than as a living space.   Investopedia, Real Estate Investing

CRE, or leased space, includes office space, hotels and resorts, strip malls, restaurants and healthcare facilities, among others. After the setbacks of 2020, many businesses and commercial property owners have returned to the drawing board and have begun envisioning environments with a more creative eye.

Despite rapid changes in workplace structuring, it could be argued that CRE is experiencing a period of growth. This new period of adaptivity in how leased space is being portioned, and an uptick in Internet of Things (IoT) amenities has led to increased competition among landlords. CRE investors are looking for ways to improve their returns as well.

As an investment, CRE provides rental income and capital appreciation potential. Commercial buildings are very complex systems, and understanding their behavior requires a deep knowledge of network technology and data management.

The good news is that IoT technology is helping commercial property owners collect the correct data about their buildings and, as a result, increasing commercial office building Net Operating Income (NOI) for commercial real estate owners.

What is Net Operating Income?

Net operating income is an important metric used by commercial real estate investors to measure the profitability of a building or property. You can calculate it by subtracting maintenance expenses from revenue.

In addition, it includes all costs associated with owning a building, such as taxes, insurance, utilities, and other expenses.

How Does NOI Work?

One of the first tasks will be to calculate NOI when investing in commercial real estate. An investor would then compare this figure to other properties in their portfolio to see how well it performs. NOI is also useful when preparing to sell a property because it can help determine the asking price.

There are two other factors to consider when calculating NOI. These include:

  • Maintenance expenses including janitorial services, pest control, heating/cooling, security, etc. These are usually paid monthly and added to the rent.
  • Revenue is generated through leasing office space and paying tenants.

There are many ways to calculate NOI. For example, some people use the gross rent multiplier method, which multiplies the base rent times the number of square feet leased. Others prefer to use the net rent multiplier method, which considers the cost of goods sold.

The most common way to calculate NOI is to take the total revenues less than the total expenses. However, if you have multiple tenants, each tenant may pay a different rent. In these cases, you would need to allocate the expense based on the percentage of rent each tenant pays.

For example, let’s say you lease out 5,000 sq ft of office space at $10 per square foot. Your landlord charges $1,500 per month in maintenance fees. You get 50% of the rent from tenant A, 25% from B, 20% from C, and 15% from D. If you multiply the base rent times by 1.50, you get $7,500. If you add up the total expenses, you get $9,750. The difference between the two numbers is $750. Thus, your NOI.

How IoT Factors into The NOI Process

The reason commercial real estate is growing so fast is the Internet of Things. The use of sensors to gather real-time data is cutting expenses while increasing efficiency. Sensors report temperature, humidity, air quality, light levels, CO2 levels, noise levels, and more. These sensors provide valuable insights into how well your building is performing. They allow you to make adjustments to ensure it stays healthy and comfortable.

Since it’s linked to the internet, the sensors allow you to monitor various aspects of your buildings 24 hours a day, seven days a week. It makes it easier to understand your commercial office’s operations and make improvements. As a result, you can improve your operations and increase your commercial office building NOI.

Using IoT, you can:

  • Reduce energy consumption
  • Improve indoor air quality
  • Identify potential safety hazards
  • Lower heating and cooling bills
  • Save water
  • Prevent leaks
  • Increase security
  • Monitor equipment performance.

These benefits add up to higher NOIs. With IoT, you can get detailed information about your building’s systems. You can even see which parts of the building are most affected when something goes wrong.

By monitoring a building’s health, facilities teams can avoid costly repairs and downtime. This lowers costs, while also improving customer satisfaction because this efficiency is reflected in how a building runs. Tenants know that their building is functioning well and generally stay longer.

Monitoring systems, lighting and the full range of capabilities are supported by distributed cabling infrastructure. New build and retrofit projects in 2022 and beyond will focus on technology readiness to keep pace with savvy tenants. 

What is Cabling Distribution?

Cabling distribution refers to installing cables that communicate data and deliver power in an office or business building. It involves flexible access throughout the building to connect all the devices that require connectivity. These include computers, phones, printers, copiers, servers, cameras, projectors, and more.

Besides connecting the devices, cabling distribution also provides power to them. It does this by routing electricity through the same cable as the communication lines.

Doing so allows you to run both types of lines together. When installing cabling distribution, you must consider several factors. These include:

  • How much wiring needed
  • Where the wires go
  • What type of connectors you should use
  • Whether you need to cut any walls or floors
  • If you use a conduit instead of wire
  • Whether you want to keep your existing electrical system intact
  • If the location of your building has obstructions like fire hydrants or other utilities
  • When there are any special requirements for your building

The answers to these questions will help you determine what ‌ cabling distribution you need.

Cabling Distribution

The right cabling distribution strategy will help investors maximize building efficiency and keep down expenses. That’s where flexibility comes in. Adaptivity allows both business tenants and property owners to evolve as business priorities change. 

How Cabling Distribution Is Improving Commercial Office Building NOI

Big data is showing property owners where tenants are receiving the greatest value within the setting of a commercial space. Flexible cabling distribution allows stakeholders to adapt to the current needs and move technology when things change. 

Together, these features are helping CREs stay competitive, become more cost effective while serving the needs of the tenants.

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