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Global Tax Insights

Use “Smart” Buildings to Keep Up with the Times

July 21, 2016

Implementing “smart” technologies in your properties can help you not only optimize efficiency, but capitalize on market demand as well.

In today’s tough rental market, your properties can achieve a competitive advantage by implementing “smart” technologies, such as remote sensors, dashboard apps and wireless connections. Doing so allows tenants to optimize efficiency, comfort, safety and convenience. It also provides property owners and managers with enhanced abilities to collect and analyze data on how the space functions.

Until recently, the technology needed to automate building operations and data collection has been cost prohibitive. But now that smart devices and apps are more affordable and mainstream, it may be time to reconsider the virtues of smart buildings.

Meeting Market Demand

The demand for smart technologies is driven largely by tenants’ preferences — whether they’re “techies” who want state-of-the-art features or “environmentalists” who want to minimize their carbon footprints. Some tenants also want cost-effective safety and security monitoring features, such as wireless webcams and motion detectors. These features are especially popular in urban areas with high crime rates and for residential properties that cater to older adults who may be prone to health issues and accidents.

Connecting People and Technology

Smart technologies can allow tenants to control properties using mobile apps or voice-recognition technology. Tech-savvy tenants may envision other creative uses for smart technologies, such as wayfinding in complex spaces, ordering supplies, and scheduling meeting rooms or concierge services.

On the other hand, property managers primarily use these technologies to apply real-time data to help improve efficiency, monitor security and make day-to-day operating decisions. The data provides a “holistic” view of how the space functions. Some managers use it to, say, adjust lighting and temperature levels during off-peak hours or deploy cleaning and maintenance crews.

The data collected by smart buildings allows investors to compare properties and identify cost-saving opportunities. To illustrate, dashboard apps can provide a visual snapshot of which properties or individual units use an abnormal amount of resources or incur high maintenance costs that warrant immediate attention.

Additionally, owners can use smart technologies to help sell, customize or redesign their properties. For example, when blueprints are uploaded to software applications, it’s easy to experiment with build-outs and redecorating options. These apps also make it easier for realtors to show the property to prospective buyers.

Segregating Smart Costs to Lower Taxes

If you decide to integrate smart technologies into your current and future real estate development projects, there also may be tax benefits. These technologies typically have shorter useful lives than commercial buildings or residential apartment buildings, which are depreciated over 39 years and 27.5 years, respectively. We can help you perform a cost segregation study that would allow you to carve out and depreciate the cost of smart technologies faster than the buildings in which they’re installed, thereby lowering your tax obligations in the early years of a smart-enabled project. Contact our tax specialists for more information.

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