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June 10, 2005 

DePaul University

 Q&A: Op2mize Founder Geoffrey Kasselman on Analog, Smart Buildings 6/7/2005
The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO – In 2004, Geoffrey Kasselman founded Op2mize, a real estate services firm that bundles facility modeling and computer simulation with corporate services and governmental incentives consulting.

He previously worked at Studley where he founded the firm’s national industrial services group and its local governmental incentives consulting practice. During his 17-year career, Kasselman has completed more than 600 transactions totaling more than $500 million.

He is currently the president of the Association of Industrial Real Estate Brokers (AIRE) and the speaker elect for SIOR. He is also the immediate past president of the Chicago chapter of SIOR.

International expert Michael Muth sat down with Kasselman for part one of a three-part Q&A on analog buildings versus smart buildings.

Michael Muth: How do you convert existing “analog” space to digital “smart” space?
Geoffrey Kasselman: The conversion process has a wide array of variables. This makes it different for everyone. Analog space is everything that has been built to date (not in terms of brick and mortar but in terms of independent systems supporting HVAC, gas, water, electricity, security, telecom, Internet and all other non-integrated systems).

Every single building that was built prior to today (the 2000s) will need to be converted to first preserve and then enhance their value.

There are two perspectives relevant here: from the landlord and the tenant. Landlords want to maximize the value of their property. They have this saying: “A smart building is one that is fully leased.” From the tenant’s perspective, you want the best bang for your buck (in terms of amenities).

They both crave a better experience. The recent convergence of computing power, connectivity, mobility and affordability are the enablers. When all buildings are built this way in the future, the owner of the older “analog” building will have an inferior value proposition. This will ultimately be reflected in its price.

You need to build in flexibility and sustainability in terms of infrastructure. Major transitions are already occurring at new and existing airports, convention centers, government buildings, educational institutions and hospitals. Over the next 10 years or so, you’ll see a steady march in the conversion process.

Free-agent and third-party consultants like us have the advantage of not being tied to any particular vendor or property.

MM commentary: Yes, smart buildings are coming, but not until people are willing to pay for them.

MM: With which telecom, data center and wireless clients have you worked?
GK: There are several we track. Most would prefer to remain anonymous. Inner Wireless (IW) is one I can mention. They are taking mainstream buildings such as Time Warner Center in New York City, which is a mixed-use live, work and play kind of building. IW created and executed the connectivity strategy for that property.

Any cell service will work anywhere in the building (including the elevators). Digital buildings have many different components. You create real estate value by adding a tech overlay. It could be integrated digital signage, biometric security, building automation, energy efficiency or any other combination.

Retrofits will become a big part of this digital world. There is a bleeding-edge world of service providers that are quickly moving to address this. They include Cisco, Google, Equity Office REIT and Microsoft. The transition will be subtle if not transparent. You might not see it at first and it can’t be done all in one year.

In effect, we’re in the bottom of the first inning. It’s all driven by data standards. Wi-Fi struggled until a worldwide standard emerged. Now we can’t live without wireless. WiMax and UWB are coming. They need universally agreeable standards, too. Everything is a product of budgets and standards and they’re evolving at different rates.

MM: What technologies do you utilize in factory optimization?
GK: We do facility modeling. Using engineering protocols, we build a status quo model of existing operations. We change out variables and run simulations of the model. We score them mathematically against the status quo over the client’s time horizon.

This process allows us to see what their operations will do and how to optimize their layouts to better utilize their real estate. It’s all off-the-shelf software. Still, the licensing cost is prohibitive (between $15,000 and $45, 000 per seat) and training is expensive. They’re better off hiring a consultant rather than doing it themselves.

Some of the tools we use are “static” modeling. This involves quantifiable analyses and matrices without motion. We also use “dynamic” or repetitive motion modeling where we study, analyze and show results to our customers using graphics and related imagery. Some want one or the other or both.

Specific software used includes Factory Plan, Factory Flow, Autocad, 3D Studio Vis and Active Plan.

We’re also experimenting with a 3D modeling product (though it doesn’t change the results or recommendations of the model). It’s a graphical interface that allows people to better get their hands around the output. Our niche is that we have bundled these 21st century analytics together with the real estate services required to implement the recommended solutions.

MM: How progressive is real estate at implementing new tech in Chicago, the Midwest and the U.S.?
GK: Commercial real estate and medical services are both among the last big American industries to fully embrace the broad adoption of new technologies. The Midwest is no different than any other place. There are all kinds of communities that aren’t like villages or towns but rather critical masses of users who are demanding this.

There weren’t people saying: “If only I had the Internet, I could work so much better.” The Internet gained appeal quickly as users became aware of its enormous potential. Digitized real estate is the same.

Few people realize what it could do for them as tenants or owners. Some are starting with flat-panel displays in lobbies. Some are putting wireless networks in for their tenants. Some are providing high-speed Internet like a fourth utility. Still, no one has installed a truly complete and ubiquitous environment, which we see coming in the next five to 10 years.

MM commentary: My impression is that real estate (especially residential) is one of the most locally oriented industries around. More foreign investors are putting money into local Chicago properties. Domestic and foreign individuals can invest in real estate investment trusts (REITs). Though architects work worldwide, I don’t see many contractors working much outside their local markets.

MM: To be clear, what’s a smart building?
GK: One that is fully leased! Relative to technology, some components are obvious and some aren’t as obvious.

Obvious things are hyper connectivity, building systems automation and life-safety elements such as biometric security. Though most users will never see the building operations center (BOC), it’s also an important component. While they also won’t see environmental sensitivity, the real estate world is beginning to see what that means to the construction and operation of the property.

The recently introduced LEED rating system evaluates energy efficiency on a platinum, gold, silver and bronze basis for new and existing buildings. To achieve these levels, building owners need to adhere to strict standards. We see these standards becoming government mandated in the next three to five years.

Most new buildings will have a LEED rating associated with them. It’s a matter of value preservation rather than value enhancement.

MM: What’s intelligent-building technology?
GK: It varies from property to property and amounts to the digitized components that go into a smart building.

MM: Who plans intelligent communities?
GK: There’s a plethora of people playing in that field. In Asia, it’s the government. Its mission is to master plan those communities. In the U.S., some economic development agencies show interest and execution in this area.

DCEO in Illinois and its counterparts in Texas and Michigan are traditionally active agencies that are now offering tax credits and incentives for high-tech firms for that type of investment. There are a whole lot of people putting “tech parks” on the map, too. Though they tend to cater to high-tech firms, they have nothing to do with technology implemented in the buildings.

They’re essentially analog buildings. Their amenities are high-speed Internet and perhaps a redundant energy source. They don’t have the components we consider to be pivotal in smart buildings.

The world of ubiquitous computing isn’t that far away when you can do anything anywhere so you won’t need to go to an office to do work. We believe in mixed-use communities where you can live, work and play. Trump Tower is going to be the last of the horse buggies. It is condos, a hotel, retail and not much else. Trump Tower is just an interim play.

MM commentary: I wouldn’t look for any official American governmental organizations planning any communities of large scope any time soon.

MM: What inspired you to organize your trips to Asia?
GK: It was through the Realcomm real estate conference series, which focuses on the convergence between real estate and technology. We came back from our initial visit so overwhelmed by what we saw that we were trying to figure out how to get the word out and to educate others about what’s going on.

The digital aptitude we saw goes way beyond commercial real estate. We came back with a global perspective on the appetite for digital existence and why the “digital divide” is getting worse. There are reasons other places have embraced the digital world more than we have. Other places aren’t as bogged down with wired infrastructure and they have gone straight to wireless.

Many places we visited are mountainous where 85 percent of the population lives on 15 percent of the land area, which drives a high-rise mixed-use development. This makes it easier and more cost effective to wire buildings. The last mile connectivity is not the issue. It’s largely an American phenomenon.

Through budgeting and funding, many Asian governments have adopted the position that they need to innovate and digitize at a greater rate to be competitive over the long haul. Korea realizes they don’t have the manpower or resources to compete with China. They desire to become the IT capitol of the world.

While we were there, Motorola opened its first R&D center outside the U.S. In Seoul, everyone is using digital tools. It manifests itself across all of society.

MM commentary: Realcomm is sponsoring one of its few U.S. conferences at the end of this month.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muth’s full biography.

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