Commercial real estate rarely looks like a zero-sum game. Nothing prevents a Class A office on one side of the street and a Class A office on the other side of the street from being successful and making big profits, if the demand is there. If there could be only one big winner per market, who would shell out the hundreds of millions needed to develop big projects?
Often the competition for new products is zero-sum: one party wins and the other loses. Think VHS vs. Betamax, video streaming vs. rental stores, or iPod vs. Zune. There is also the example of Blu-ray versus HD DVD, which ultimately led to Sony’s success with Blu-ray, and Toshiba’s loss of around $ 1 billion as it tried to pass the HD DVD.
Commercial real estate is rarely the same. Nothing prevents a new office across the street and a new office across the street from being successful and making big profits, if the demand is there.
While most real estate companies don’t have to deal with such life and death situations when investing in a new building, the ecosystems they invest in sometimes face this concern. Tying too much of the wrong proprietary systems can lead to problems for homeowners. More than individual technologies, however, certifications that assess and score the achievement of properties in various categories also face this risk.
Right now we are in a dynamic time for real estate certifications. The biggest ones, like LEED and BREEAM on the sustainability side, keep on growing. Meanwhile, the two broad categories of sustainability and wellness certifications are seeing more and more new certifications entering the market.
At the same time, we have also witnessed the arrival of a new type of certification: the smart building certification, aimed at assessing the efficiency of technology, connectivity and networked systems within commercial properties. . As we discuss in our last report, which focuses exclusively on these certifications, one of the biggest advantages of smart building certifications is their ability to serve as a goal for homeowners to achieve with their own technology investments. Few homeowners are also a true expert in building technology. For these homeowners, technical building certifications can be a worthwhile and quick investment in ensuring they are on the right track.
All of this growth and changes in the world of qualifications are exciting, but they come with risks. There are currently a wide variety of certifications and there is no guarantee that all available today will be tomorrow. It would not be a problem if it was easy to transfer obtaining one certification to fulfilling the requirements of another. But while some certifications award points to properties that achieve other certifications, like SPIRE Smart Building with LEED and others, it is never an individual relationship.
Real estate companies that embark on some type of certification, only to then see that certification go out of business and disappear, will be faced with a difficult situation. Not only will all the costs of the initial certification be forfeited, but they will also have to pay for any subsequent certification that they also pursue, or face the disappointment of losing certified status altogether.
Even though the costs of recertification are low, property owners will have an even bigger problem to face. If the first certification pursued required specific investments in certain technologies or policies that would not have been pursued otherwise, and replacement certification does not require those same investments, or worse yet, requires entirely new ones, the overall bill of certification will continue to increase.
Make no mistake, this is not a widespread problemâ¦ yet. We don’t see many certifiers going bankrupt yet, but with multiple players in each certification vertical, some of which have huge first-come advantages, it’s probably only a matter of time.
This doesn’t mean that homeowners should ignore certification of their properties for sustainability, well-being, or technology. But it does mean that homeowners should consider a back-up plan when investing time and money into a certification, especially one that’s smaller. Whatever the field of intervention, thinking of an emergency âescape routeâ certification will not be a poorly spent effort. If tech certifications give homeowners the peace of mind that they’re on the right path to sustainability, well-being, and technology, why not be thorough?
Consolidation, or at least some closures, in the area of ââcertification wouldn’t exactly be a curb of the business. But like commercial real estate itself, the area of ââcertifications doesn’t have to be a zero-sum game either. If, as I said earlier, one of the greatest values ââof certifications is their ability to guide owners to solid levels of achievement in sustainability, well-being, and technology, maybe owners should take the plunge and pursue several different certifications from day one. would prepare owners for possible disruptions among their certifiers, while helping to establish broader competencies in the field and, therefore, better properties at the end of the day. Certifications should not be considered binary, certified or not. They should be seen as tools on the path to continuous performance improvement.