November 2020 Newsletter

Letter from the Editor

Hello to all! We hope you are doing well and staying healthy as the seasons change and the days get shorter (for our readers in the Northern Hemisphere, at least).

We're now on a monthly cadence, and there is much to report since our last issue in early October. So, here is the wrap up of all things smart buildings. In addition to this digest, Aamidor Consulting remains hard at work on a range of interesting projects and continues to have great conversations with industry leaders and entrepreneurs. 

 If you are trying to get through the newsletter quickly, here are a few high level takeaways:

1. More fundraising activity, with Augury, Passive Logic, Budderfly, and Redaptive all raising more capital. A few new proptech funds, too. (Plus two SPACs.)
2. A lot of technologies being launched around health/wellness, or just better communication with tenants - but there still are not that many people coming back to the office (especially in the US, and also UK it seems). We have a roundup of all this news below.
3. In the 'Covid-19 related' section, a new report on the true cost of making a building Covid-safe, and a paper from Taylor Engineering about indoor air quality. 
4. Sustainability continues to be high priority for big banks, with a few more committing capital to support a greening of the economy.
5. Like last month, the newsletter is organized around a few key trends, especially in the last section on 'Articles, Reports and News": returning to the office, Covid, and the continued focus on sustainability, along with our typical coverage of product launches.  

We didn't publish any new articles over the past few weeks, but Joe Aamidor did speak on a couple of webinars: a panel at the CRE/Tech Sustainability Conference, a presentation on healthy building technology last week at Realcomm, a discussion with Joanna Frank of the Center for Active Design and expert on fitwel, and, as shown below, a discussion about smart buildings sponsored by the Alliance to Save Energy. And there are some good authored articles to highlight, thought nothing recent: a few months ago, we wrote this article on returning to the office and the impact on smart building tech. And, never worry about reaching out to have a chat or talk about a potential project - busy or not, we'd be happy to talk!




Other points for discussion:

• The "back to the office" question probably won't be solved for months, which will make return to work harder (it will be less of a routine for occupants) but may also become more urgent (what if firms realize that remote work has a lot of downsides?). Also, we're here in Northern California, where there is probably much less returning to the office than elsewhere - please reach out if you have thoughts or observations! 
• It's hard to track this month-over-month, but there were a number of big funding announcements in the past few weeks - both the size, but also the range of firms raising money. This may just be due to a lighter news cycle in late summer, though we wouldn't be surprised to see continued momentum to close out the year and kickoff 2021.

We're keeping our finger on the pulse of the market. And we always are happy to have a conversation. Please reach out if you want to chat.

As always, we look forward to hearing from you about how we might help with your product and market strategy needs. We also hope you enjoy this edition of Smart Building Insight. 

Investment News

• New funding rounds and investments:
  • Redaptive raised a monster $150M round. The energy efficiency as a service model should become more compelling as buildings seek to cut costs and potentially worry more about significant capital outlays. This looks to be equity funding, but some of it could be project finance (which is fairly common for firms that have this business model). 
  • Budderfly, a peer to Redaptive which focuses on smaller commercial buildings (retail, restaurant, etc), also raised more money (almost $9M). 
  • Passive Logic, which makes a smart control solution that seems particularly well suited for small buildings that do not already have a building automation system (BAS), raised $16M from AO Proptech and Keyframe Capital, which also funded Aquicore recently. 
  • Augury, which has a equipment health sensing solution, raised another $55M. They work with major buildings players like Johnson Controls. 
  • Airly is a new air quality solution that raised $2M.
  • Fifth Wall announced a European fund, with participation from BNP Paribas Real Estate. This article also highlights the new fund, which is expected to be about $120M. 
  • Camber Creek has a new, oversubscribed fund ($155M, they had planned on $120M). 
  • E.On, a major German utility, launched Future Energy Ventures, which has a 250M Euro fund.
• Acquisitions:
  • Generac, which acquired Neurio in early 2019, is buying Enbala, which makes it an increasingly significant player in grid operations and flexibility. 
  • There are a few new relevant SPACs: 
    • Spring Valley Acquisition, with an energy focus. 
    • Tishman Speyer is launching a proptech-focused SPAC.
  • A wee bit outside our scope, but it looks like Newmark rebuffed a takeover bit from Cushman and Wakefield. The integrated FM services firms are fairly low margin, so more scale is likely attractive. 
• New partnerships:
  • Hitachi is partnering with SpaceOS, which makes tenant and operator focused smart building solutions. The partnership is focused on the Japanese market.
  • KPMG is offering carbon management and ESG-related services with Nantum (Prescriptive Data). 

Noteworthy Articles, Reports and News

• We write a fair bit about the training and workforce development needs in facilities, including in our article about a smart building stimulus. This report in Axios appears to indicate that Covid is having a negative impact on many of these 'jobs of the future'. Covid was supposed to increase automation, but this does not appear to be happening - yet. 
• Return to the office: We imagine that there will be a lot of news around returning to the office, or moving to a different model, over the coming months. At the same time, there is a fair bit of uncertainty - when is a vaccine coming, how comfortable will employees be to return, where are employees living when the offices reopen, among other factors. It's hard to predict, of course, and our view is that offices will remain vital to productivity and innovation. But every firm will have different needs and find different models that work well. We'll continue to share the news we see, with some feedback on how we interpret it. Moreover, to the extent that there is a clear or probable impact on smart building technology, we will share that too.
  • First, the NY Times proclaimed that "July is the new January", as returns to the office have been pushed back.
  • Bloomberg covered a survey from Cisco noting that half of the companies it polled plan to reduce their office footprint. We don't disagree with the survey itself, but we do think surveys might be aspirational (not the first time we've said this!). and the prevailing wisdom is fluid and sure to change. 
  • Microsoft made an announcement about what its future work remotely plans look like. MS has been very active on the smart building front, partnering with a number of firms who host their technologies on Azure, in addition to MS deploying these technologies in its offices. There isn't an indication that smart buildings play a role in these decisions, but below the headlines there are some interesting points: 50 percent home work is ok, if your manager approves. But, for the other 50 percent, employees will need to be near an Microsoft office. 
  • Overall this Gartner technology roadmap is not so relevant, but it does include 'workplace analytics' as high potential and low risk.
  • Interesting: KPMG found that enterprises spent $15B more a week on technology, which may bode well for smart building adoption. However, SAP's recent earnings announcement might throw some cold water on the "enterprises are spending much more on IT" story. 
• COVID-19 Related: 
  • Investing in renovations and building upgrades continue to be a cornerstone of the EU recovery plan, as this Bloomberg article shows. The phrase "renovation wave" is being used. 
  • Deloitte published a report about the financial services sector post-Covid, and this article summarized the PropTech related findings. In short, overall funding is expected to dip in 2020 to 2016 levels, before starting to rebound in 2021. The headline might be troubling, but given the uncertainty and increased due diligence that many investors might undertake, this also could be a sign of delays in funding, rather than companies no longer being able to raise money. We have seen an uptick over the past few months when looking at word of mouth and general momentum around funding (of course, this is not empirical, but March, April and May were quite slow). And, this month saw a lot of funding going into smart building tech, as noted above. The actual report from Deloitte is available here. It also has some interesting thoughts about office owners/tenants, in addition to commercial real estate loan portfolios. Deloitte forecasts an incremental increase of $19.40 per square foot due to Covid, for new staff (nurses, cleaners) and upgrades like redesigns. $12.10 per square foot is expected to be annually recurring.
  • Lord Norman Foster notes that Covid-19 won't actually change our cities, other than a potentially raised interest in sustainable buildings, more urban farming, among others. This is a forecast, of course, but it's good to read the thinking behind such a claim. We generally think that office and city life is more likely to normalize back (though it may take time, and some things likely will be different). 
  • Duke University launched a risk assessment tool for classrooms to calculate the likelihood of airborne transmission of Covid. Perhaps this could be adapted to other building types?
  • For HVAC-focused individuals, this Taylor Engineering paper is a must read. It's very well researched and makes strong arguments. It's also contrary to some of what ASHRAE has said. It's hard for us to make a call on who is right, and some in our network has said that both Taylor and ASHRAE make valid points - but it is probably worth your time to have a read. 
• For anyone focused on energy efficiency, this report from the DOE's Smart Energy Analytics campaign is a must read. It looked at energy management technologies across many buildings, finding that energy management software saved a median of 3 percent energy, while fault detection (FDD) software saved a median of 9 percent. These numbers do line up with what we've seen, and they do justify the higher cost of FDD products. One downside - it did find that the savings were fairly inconsistent: some sites save a lot, some sites save nothing. Consistency will be important for increased scale.
• Here in California, Gov. Newsom signed a bill around air quality in schools - initially it included putting a CO2 sensor in every school to avoid drowsiness. It still does, but now the focus is tracking ventilation for Covid and drowsiness. The bill is more broad than just this, too.
• Here's a good article on Brainbox.AI's growth in Europe. With the green stimulus, this makes sense, though there are a host of other firms based in Europe that have fairly strong capabilities. And, Brainbox is growing in Australia, too.
• Here is a good post on healthy buildings. We generally agree, though we are not yet sure it's clear that there will be a huge relaxation of being in the office - it's quite uncertain now, as we don't want to go to the office with a pandemic. But, as we get back to normal, a lot of companies, we think, will realize in-person collaboration will be important. We might look back in 20 years and refer to this as "that odd time when we thought we could work remotely, exclusively using video conferences and chat." Very interesting space to follow. 
• Sustainability in focus, which remains an important and relevant topic, especially within real estate circles and financial markets:
  • Blackstone, which was in the newsletter last month for its formation of ClearGen, is now announcing that it will reduce emissions by 15 percent from sources where they control usage.  
  • BlackRock has been very pro-climate recently, though it was in the news as the votes from shareholders supporting climate friendly policies dropped. 
  • A profile of an office building in Norway, which generates 2x the energy it consumes. A hopeful article, with some good ideas: the roof has 3,000 ft of solar panels (this isn't always possible in dense urban areas) and it uses water from the local fjord for heating and cooling. (And, Trondheim is very far north, about where Juneau AK is.) 
  • Like some of its peers, HSBC is committing $1T for clients to transition away from environmental unfriendly practices and to hit climate goals. 
  • Similarly, JP Morgan is committing to help clients meet the guidelines of the Paris Climate Accords. And, the article cited here lists some actions by other banks, too.
• Product launches:
  • Density, which makes indoor space sensing technology, launched "Open Area", which focuses on open spaces in offices. Previously, the firm's technology was focused on counting people moving through doorways. 
  • HqO launched 'Headquarters' which doesn't seem all that groundbreaking - but these tenant amenity apps are becoming much more "must have" in an age of Covid and increased awareness of health/safety and communication. We have seen a number of campaigns from HqO, they do seem to see this opportunity, too.
  • Edge Technologies, the team behind the Edge in Amsterdam, the Edge Olympic, and other smart buildings, has launched Edge Next, which looks to be a software solution. While it makes sense to sell software rather than design and engineering services from a profitability and scalability point of view, it may not quite align with what building owners and operators really want (solutions, not data and systems).
  • This is not that surprising, but Knotel is going after the suburban "spokes" for major office tenants.
  • Still a bit under wraps, but it looks like Amazon's AWS is getting into industrial IOT with its Thor platform.
  • A bit outside our scope, but still interesting: This startup, Kettle, provides AI-powered reinsurance and believes it can predict wildfires more accurately than others. There must be more applications for this technology.
• Our friends at Hatch Data published another good article about energy use in commercial buildings, with a range of valuable insights. A number of software firms in the energy management space have been publishing good articles about impacts on office and commercial building operations, and we will continue to share them. 
• In case you are interested, the US GSA's Proving Ground launched an RFI for healthy building technologies. The DOE also announced $65M toward 'connected communities,' which focuses on using buildings to transform the grid. Please reach out to us if you are interesting but are looking for a team - we might have some ideas. 
• Harris Williams published its new review of the utility software space. These reports always are well-worth the time to read.
• Kode Labs announced its participation and deployment in a new development in Austin. Seems to be right in line with our understanding of the firm's capabilities.