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Building Intelligence: What’s the IQ of Chicago’s UBS Tower?
Published on 4/2/2008 at www.MidwestBusiness.com where you always read REAL perspectives
Carlini’s Comments, MidwestBusiness.com’s oldest column, runs every Wednesday. Its mission is to offer the common man’s view on business and technology issues while questioning the leadership and visions of “pseudo” experts.
CHICAGO – Within the commercial real estate markets, those commercial buildings that lack IQ will lose tenants and overall value over the next five years.
Did the Houston-based Hines real estate firm do proper due diligence when it purchased the UBS Tower in Chicago? If they did, they would have looked at the building’s IQ. They would have asked: “How smart is the building we’re buying? How good is the network infrastructure of the building?” Did they even evaluate the network infrastructure of the building? I don’t know.
What’s the IQ of UBS Tower?
According to Crain’s: “A fund managed by Hines Interests closed on the $540 million purchase of UBS Tower in what could be the largest sale of a downtown office building in 2008.” With this big a purchase, if Hines didn’t look at the technology and network infrastructure that supported the building they may have overspent for a building that scores a low IQ. That would translate into buying a potential maintenance nightmare.
If we’re sinking into a commercial real estate slump as an aftershock from the financial missteps in the residential markets, the need for intelligent amenities to prop up leases and core building values becomes more important than it has been in the last 20 years. There have been some discussions on what attracts and maintains first-class tenants within commercial space and one of those intelligent amenities is bandwidth connectivity.
I’m not talking about DSL or T-1 lines. I’m talking about multi-gigabit capabilities that aren’t readily available everywhere. Network infrastructure is a critical need today. I stated this in my recently published white paper “Intelligent Business Campuses: Keys to Future Economic Development,” which is featured in the newly released International Engineering Consortium’s 60th annual review of communications.
As the white paper states: “Economic development equals broadband connectivity and broadband connectivity equal jobs.” Broadband connectivity – with network speeds of 1 gigabit or more – should be viewed as another layer of critical infrastructure that’s required in planning and developing commercial real estate and regional economic centers. This applies to existing buildings already leased up as well.
While it wasn’t even on the list 10 years ago, broadband connectivity is considered to be one of the top three site selection criteria today. Those buildings that don’t provide this capability will simply be passed over by corporate site selection committees that already use broadband connectivity as a criteria that’s expected in order to locate new corporate facilities.
The same applies to residential developments. If you have a new development that doesn’t have broadband capabilities built in from the get go, you have just created an obsolete development. That sounds harsh, but in today’s residential market, projects that were on the books to be initiated have already been halted. Until the dust clears in the residential markets, these projects have been put on hold or in some cases totally abandoned.
If those projects didn’t include high-speed connectivity as a featured amenity, those developers taking up the planning again will have a rare second chance to get it right. If they don’t plan for broadband connectivity, they will be stuck with houses that will be considered lacking in a wanted feature.
How Do You Calculate Building IQ?
How do you compare commercial buildings to find out which is a better fit for your company? You compare the systems and capabilities of one building to another within a geographic area. The need for available intelligent amenities like broadband connectivity is becoming more common as tenant companies get more selective on commercial space.
This concept isn’t new. It has been around for more than two decades and was pioneered in Chicago as a way to help a property management firms market office space in Seattle.
The pioneering yardstick to measure differences in commercial building amenities has been the “Carlini building intelligence test,” which originated more than 22 years ago as a way to compare downtown office buildings. The focus was that simple yardsticks must be used as they tend to take out the mysticism of technology, network design and infrastructure implementation for people looking at leasing space.
There should be easy rules of thumb and simple formulas to take out the mysticism of planning, design and development of building and campus network infrastructure. This has always been a coveted secret of the telecoms like Col. Sanders’ 11 secret ingredients.
When purchasing a commercial building, the need to understand what’s actually supporting the tenants from a technology perspective is imperative. In another case with a developer buying an older headquarters building in Kansas City years ago, by doing an assessment of the network infrastructure of the building we uncovered many problems and hidden damages to the infrastructure.
So How Far Has the Market Really Come?
Those real estate “traditionalists” in both commercial and residential who still think having broadband connectivity isn’t an intelligent amenity to worry about are those whose strategies consist of lowering the price until a building sells or leases up in the markets they think they control. Their approach to due diligence is also flawed.
To those, I pose this question: “Would you sell a building or commercial space without air conditioning?” While eventually someone might buy or lease, you definitely won’t be targeting the majority of the market let alone the premium-paying candidates of the market.
I stated the following in several building IQ articles in 1985 and 1986 including one in the fall edition of Real Estate Review: “As more of the real estate industry becomes more comfortable with the idea, sophisticated marketing approaches will be created and refined. The question of ‘how smart a building do you need?’ will become as common as ‘how much space do you want to lease?”
Evidently many in the real estate industry have to catch up to what has been evolving for more than two decades.
Measuring a building’s IQ and then marketing the building’s IQ in competitive markets is critical. I hope the purchase of the UBS Tower in Chicago included a full due diligence of reviewing the technology and network infrastructure within the building, but knowing how most firms buy commercial buildings today, that part of the due diligence might not have been done.
Editor’s note: The text proverb-like “Carlinism” that would normally follow and end this column has now been transformed into a video segment from Carlini, which you can watch below.
Carlinism
See James Carlini interviewed by the Strassman Report out of California. The 30-minute video discusses the need for planning gigabit network infrastructure today in order to be globally competitive tomorrow.
Check out Carlini’s blog at CarlinisComments.com.
James Carlini is an adjunct professor at Northwestern University. He is also president of Carlini & Associates. Carlini can be reached at james.carlini@sbcglobal.net or 773-370-1888. Click here for Carlini’s full biography.
Copyright 2008 Jim Carlini
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