Going up! Smart elevators and real estate value

As mentioned in my first blog post regarding Smart Buildings, and in our Smart Building Strategy, Principal Real Estate Investors uses a very deliberate and thorough evaluation process to identify and deploy proven smart building technologies in our real estate assets. We incorporate feedback from industry experts, as well as our own knowledge of local market dynamics and preferences, and strategically incorporate new features that will add value not just for our tenants, but also our investors. Interestingly enough, a technology that already revolutionized architecture and the urban environment in the mid-1800’s is again turning heads in real estate, with the potential to once more change how we design, operate, and market our buildings. I’m referring to elevators.

Today, we are seeing rapid innovation in elevator technologies – “smart elevators” – that can optimize passenger travel, reduce wait times, transport passengers more efficiently, reduce space requirements, allow construction of taller buildings, and improve energy efficiency. It’s a market poised for explosive growth. Globally, with 70% of the world’s population projected to live in cities by 2050, efficient elevator travel is an increasingly critical component of daily life, and the industry is already thriving. According to Transparency Market Research, the global smart elevator market is expected to grow from $9.54 billion in 2015 to $26.69 billion by 2022.

You probably have already encountered one smart elevator technology – Destination Dispatch. Elevators equipped with Destination Dispatch require you to type in your destination floor, rather than just pressing an “up” or “down” arrow. The system then utilizes algorithms to group passengers by destination, optimizing travel time to provide the shortest trip. Destination Dispatch systems can also be used to enhance security by customizing travel permissions in specific elevators, which limits visitors’ ability to reach unauthorized destinations. This technology has already been applied across a number of our managed properties, and is increasingly being viewed as a “Class A” office amenity.

Twin system” elevators, in development by Thyssenkrupp, places two elevator cabs on a single shaft, allowing for 30%-40% more passenger travel between floors. Cable-free elevators, also known as Permanent Magnet Motor (PMM) elevators, utilize the same electromagnetic and technological concepts as high-speed trains. PMM elevators are not only more energy efficient than traditional elevators, they do not require machine rooms for equipment or shaft space for cables and counterweights. Using fewer mechanical components and eliminating the machine room allows architects greater design (and aesthetic) flexibility and increases rentable space, eliminates the HVAC and energy needs for conditioning machine room spaces, and results in elevators that are safer than their predecessors. Taking the concept even further, Thyssenkrupp has recently started testing a cable-free elevator system that would use magnetic fields to move not just vertically, but horizontally through a building!

Elevators can also be used to generate energy if equipped with regenerative drives. These drives capture the excess energy that results from elevator use, especially during the braking process. This energy can then be used within the building, sent back to the grid, or even stored for demand-response efforts during periods of peak demand. Further innovation is being driven by the proliferation of sensors that are small, cheap, and portable. These sensors have led to advancements in data and analytics that enable leading manufacturers like Schindler to monitor equipment performance and predict maintenance challenges before they happen, thus enabling proactive repairs that minimize downtime and improve customer service for building occupants. Schindler is not alone in this market however, as industry powers such as Otis, Kone, and others are also pairing up with software giants to collect and analyze data through cloud-based platforms.

The implications for real estate investing are compelling. Smart elevators hold the promise for improved tenant amenities and satisfaction, lower maintenance costs, improved security, reduced energy costs, and even increased rentable space. At Principal Real Estate Investors, we are actively researching the best applications for smart elevators in our buildings and taking a strategic and practical approach on applying these innovations in a manner consistent with the property’s competitive positioning and underlying investment strategy. In doing so, we hope to find even greater ways to enhance the value of our real estate, and meet the financial objectives of our clients and investors.

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