January 2021 Newsletter

Letter from the Editor

Happy New Year! We look forward to greener pastures in 2021. And we hope you are doing well and staying healthy, as always.

There is a lot of news to report - December was a very busy month. Here is the wrap up of all things smart buildings. In addition to this digest, Aamidor Consulting continues to be hard at work on a range of products, serving large enterprises, startups, investors and acquirers. There's a lot of interest in this industry. 

We also continue to have great conversations with industry leaders and entrepreneurs. In fact, we're quite optimistic on all things smart buildings in 2021. 

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

1. November was a bit slow, but there were numerous announcements of fundraising activity in December. Same with acquisition activity.
2. SPAC attack? A lot of cleantech and proptech activity. Both SPACs being launched and finding targets to combine with.
3. Continued analysis and discussion of key tangential themes in smart buildings: We've organized the last section of the newsletter around a few key trends - returning to the office, the continued focus on sustainability, along with our typical coverage of product launches. There is a lot happening in the return to the office debate, as you will see below, and less about covid mitigation directly. We're not sure if this is directly due to vaccine rollout, continued strong coverage of remote work, or just a lack of new topics to discuss. But, the return to the office debate is sure to get even more attention, as we will see more companies launch to help get employees back in the office. But, we're really not that certain about what 2021 and beyond look like for offices. Will they continue to be important - yes. Will they be as in demand and as occupied - not sure.

We didn't publish any new articles over the past few weeks, but Joe Aamidor is planning to author a few pieces early in the year. They'll be included in the newsletter when they are published. 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! 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 issue of Smart Building Insight.

Investment News

• New funding rounds and investments:
  • FDD software leaders KGS Buildings has rebranded as Clockworks Analytics and raised a series D round of $8M. 
  • UK-based Infogrid is a new name to us in the building IOT space, and they just raised a $15M series A. Good list of investors, too.
  • OhmConnect, a behavioral demand response player in California focused on the residential market, raised $100M from Sidewalk Infrastructure Partners (which spun off from Google's Sidewalk Labs recently).
  • Codi is a newer startup focused on helping people turn their homes into shared workplaces - the firm raised $7M, This is similar to a concept in Sweden, where some remote workers opened their doors to others. It wasn't a company, more of a crowd-sourced organization/initiative.
  • From Spain, startup 011h raised 10M euro to build wooden 'smart buildings'. 
  • We remember the first round of carbon accounting software, over ten years ago. ClearTrace, a new entrant here, raised $4M. 
  • Swell raised $450M in project finance for solar+storage virtual power plants. 
  • Fifth Wall, a real estate VC, is raising a new $200M climate and sustainability focused fund.

• Acquisitions:
  • PE firm Thoma Bravo acquired RealPage for $10.2B. RealPage has been a fairly prolific acquirer of real estate tech firms over the years.  
  • Spacewell, which has been active in the smart building space, acquired Dexma, which is a Spain-based energy management software firm. Dexma has a strong product but it never really entered the US market. Their focus has been more on Europe and other geographies. 
  • 7AC, a desiccant-focused HVAC startup, was acquired by Emerson. 
  • Dude Solutions, a CMMS provider, announced that it acquired Confirm from Precisely. This appears to be a bit of a smart cities play, with Dude already providing facility software solutions to many public sector clients.  
  • Honeywell acquired Sine Group, an Australia-based mobile software developer that specializes in visitor management, workplace and supply chain solutions. It looks like this will be integrated into Forge, Honeywell's multi-industrial IOT and analytics platform. And, this fits into the general growth of tenant amenity apps, and more broadly, bringing building operations and experiences to mobile devices. 
  • As we've shared over the past few months, here are some updates around relevant SPACs: 
    • Fresh of their acquisition of Porch (home services), Proptech Investment Corp. launched its second SPAC. 
    • CBRE has lowered the valuation of its SPAC from $400M to $350M. 
    • Stem, a battery storage player, is going public via a SPAC run by Star Peak. 
    • EVBox is going public via a TPG-backed SPAC.
    • View Glass is going public at a $1.6M valuation via a SPAC. Their last round, backed by Softbank, put them in unicorn status. 
    • Spring Valley Acquisition Corp, which is seeking a target that is focused on "sustainability, including clean energy and storage, smart grid/efficiency, environmental services and recycling, mobility, water and wastewater management, advanced materials and technology enabled services", had its IPO.  

• C3.ai, which has had offerings in energy management and IOT since its inception, went public.
• From Canada, this article notes that HVAC business is booming due to pandemic-related service and upgrades. We suspect the same may be happening in the US. 
• Cisco announced that it is pulling back from its smart cities initiatives.
• New partnerships:
  • Engie and Hannon Armstrong, which already had a partnership in place, announced that they are working on solar + storage projects too.
  • Johnson Controls and Microsoft announced a partnership around digital twins and Azure. 
  • Retrolux, a lighting project development and implementation software solution, and Rexel Energy Solutions have formed a partnership. 
  • Vigilent (critical environment HVAC optimization) announced that it is entering a partnership with BGIS, a facility management firm. 
  • This is from France, but SPIE Facilities, a facility management firm, is partnering with Energisme to incorporate energy efficiency into its offering. Again, we are seeing more 'mashups' between traditional facility management offerings and energy/IOT management. We expect this to continue. 
  • Comfy (Siemens) and Liquidspace are partnering, with a focus on bringing the Comfy solution to Liquidspace locations and, also making the office space marketplace available in Comfy's app. This makes a lot of sense, providing independent workers with some enterprise-scale capabilities in a short term workspace, while also helping larger companies provide a consistent experience across a range of distributed office locations. This is probably not the last time we'll hear about something like this. 
  • Amazon and Realogy (large residential RE brokerage) have ended their turnkey partnership. This was well intentioned but launched in mid-2019 and probably got hurt by the pandemic. As it was designed, potential homebuyers could find a realtor via Amazon (this one always seemed like a stretch to us) and then Amazon would provide a credit and at-home installation of smart home devices (which, in particular, will be hard during a pandemic). Amazon is making a lot of bets on smart home, and they won't all work out, Realogy is focused on being more tech enabled (in reality and in positioning) to compete with Compass. Good idea, but this might not be just the right approach for smart home devices.

Noteworthy Articles, Reports and News

• Return to the office: There continues to be a lot of news here, which is tangentially relevant to smart buildings. We're including some of the key articles we've read. Generally, we believe that there likely will be some return to normal around office use (maybe not every day for every employee though) and the value prop for smart building technology will become stronger. But it's a 'shades of grey' issue, so we aren't sure yet if covid and the current 'forced remote work' circumstances are a substantial accelerant or just another nudge to increase adoption.
  • Let's start with some data: The Wall St. Journal provides a look at where office occupancy stands - but also notes that things are back to some level of normalcy in Australia and Asia. 
  • We recently covered Microsoft's announcement about returning to the office, and now Google has provided more clarity to its employees. While they are delaying the return until September 2021, they generally are moving forward with a 3-days-in/2-days-remote plan. It appears that those three days will be in a Google office. This may not be so different than pre-pandemic, since many workers probably spent some time working from home anyway. And, those who believe that employees have all the power in deciding where they work (see next item) should also consider that Google provides substantial benefits to its employees (compensation, reputation of working there, the in-office amenities, etc.). And, note that Google is describing this as a test, so the plans could change!
  • From Not Boring, we thought hard after reading this piece on returning to the office. The conclusion of this article is that we won't go back to offices as they exist today. And, that employees generally will want to work form home, which will force employers to accommodate. We're not sure that this is how things actually play out, though we do believe some of the points here are plausible. It's still early in the 'future of work' discussion. While it is easy to think about all the ways that work, and the world, will change post-pandemic, it's also possible that things go back to the way they were (and in all likelihood, the truth lies somewhere in the middle)
  • On this same note, Microsoft is in some hot water as they provided productivity data on individual employees using their enterprise software suite - hours using teams, hours of calls with camera on, etc. It's fair criticism, as this does seem like a lot of data to collect on individuals. But, how does fully, or largely remote work actually play out if you can't track individual performance? The end state likely is a balance, but it's a good reminder that, again, it still is early. 
  • And, one counterpoint to remote work is here - the item "the office will fight to win you back". Also, if a normal work day is 3 days a week instead of 5 in the office, but heavily focused on collaboration and team-based work, would the economics change much? If most employees are at home on Mondays and Fridays, then everyone is in the office the other days, which may limit the ability to downsize square footage or change certain operational patterns.
  • CBRE's CEO believes that office occupancy will return to 80 percent. This would be a good outcome for the firm, of course, but it may not actually be that wrong - though this probably will not be full 5 days occupancy. 
  • The Washington Post had a nuanced and informative write up on return to the office, with a specific focus on the CRE sector. We particularly enjoyed the coverage of those who DO dream of getting back to the office, in addition to those who may prefer working at home.
  • Here's a Wharton professor on Twitter summarizing a new paper about 'workplace knowledge flows', which compares salesperson performance for those that meet informally for lunch with colleagues against those who do not. The salespeople with informal meetings saw 24 percent increases in sales revenue. Other research has looked at impromptu in office 'collisions' and their positive impact on sales (collisions are good for sales!). Of course, sales productivity is a good measurement because it's already closely watched with generally accepted metrics. In addition to the sales benefits of in-person collaboration, airline executives are noting that business travel will return when firms lose deals to their competitors (who did take the time to meet in person). In addition to this sounding likely to us, firms will know rather quickly how a loss or gain of in-person customer interaction has on sales. These factors may be hard to recognize right now, but they do support a strong return of in-office and/or in-person work, even if it does look somewhat different.
  • Bloomberg covered the discussions had and decisions made by Redfin about relocating workers - pay cuts, hub cities, etc. It's particularly interesting since Redfin is at the center of the housing boom (major driver of cost of living) and has good data on just what is happening (where are people leaving, where are they moving, which cities are seeing the most appreciation?). And, it specifically dives into the question of pay cuts for employees that move to less expensive markets. Enjoyable and informative read.
  • We're big fans of Marketplace, and this episode from mid-December had a few different segments of offices and buildings, including Gensler on office design and also office occupancy. 

• A step in the right direction: The Dept. of Energy awarded $6M for job training programs focused on professionals working with new energy technologies. Great, but we think much more will be needed. 
• NYC has launched a pilot program for proptech firms, which looks like a good move - especially given the impacts of Covid. This is specifically focused on getting emerging technologies into City-owned buildings. 
• The other big discussion is repositioning of real estate assets. This already is in motion in retail, but this article highlights office space that has been converted into schools (and mentions a range of benefits). 
• This is a great summary from ACEEE about the various green economic stimulus plans around the world, showing clearly that buildings are getting a very significant chunk of the funding (and the single biggest category). 

• Sustainability in focus, as it relates to real estate:
  • Blackrock, which is a firm we cover regularly in this section, is making sustainability central to its 2021 investing strategy. 
  • One could make a fair argument that regardless of the outcome of the election, infrastructure and certain aspects of climate change would be part of our economic recovery. But, this PitchBook article includes some good detail on how climate startups are expected to fair under a Biden Administration. And, this one from Axios highlights some potential for smart cities initiatives that the new administration may pursue. 
  • Friend of the firm James Dice caught this one, which focuses on the last cleantech bust and some points on how to avoid another one.
  • An SBI reader sent this one over, which goes into detail on the UK's green stimulus plan. Not much on buildings, but mentions of hydrogen boilers and heat pumps. 
  • Remember Bloom boxes? This is a good piece on some of the challenges the company had, including the changing utility landscape.
  • We missed this when it first came out, but JCI released its annual Energy Efficiency Indicator, and as you'd expect, health and safety are rising in importance and awareness. 
  • CBRE announced that its GHG target was approved by the Science Based Targets initiative. 
  • Bloomberg covers some of the innovative measures Singapore has taken to adapt to climate change and the urban heat island effect, notably, foliage. 

• Product launches:
  • Great summary of a San Francisco-based retrofit funded by Gridium's new Alpha offering.
  • Qualcomm launches a smart cities offering which could have some implications for smart buildings too.
  • More IOT-related product launches from Amazon Web Services.
  • This is an interesting idea from Blackstone, which may sell data from acquisitions it completes as a new product offering. Given the amount of real estate Blackstone owns, this may (eventually) have an impact on that business too.
  • JLL has launched Jet, which is its take on a tenant amenity app. This follows CBRE, which has its own offering. And, JLL is no stranger to these solutions, as it is an investor in HqO. Pre-pandemic, tenant amenity apps saw good uptake but questionable ongoing use by tenants and occupants. Now they are much more of a central part of how workers will interact with their workspaces. (The theme here is similar to news above about Honeywell/Sine Group and Comfy/Liquid Space)
  • SkyFoundry, a leading fault detection and diagnostics (or FDD, which is a form of building analytics) platform, has launched a work order management solution. We believe this alignment between analytics and action has been due for some time - but SkyFoundry is not the first to put these two applications together. 

• Warehouses has been in very high demand from Blackstone and others. This piece provides some context as to what is driving this demand (e-commerce is a big part of it).
• This is a proptech market update from earlier in the year, but just came across our desks, GCA includes a great overview of the space, making a number of points about CRE building management and tenant engagement/experience both having a lot of promise. 
• We're a bit skeptical of these data, but Berg Insight published a new report on smart buildings in the US and Europe. It forecasts that 34 million connected buildings systems will be installed in North America and Europe by 2024. This only makes sense if homes are included too - there are about 6M commercial buildings in the US and the majority do not have any cloud-based operational systems. If we assume all of them adopt multiple different systems (cloud-based BAS AND a separate cloud-based energy monitoring solution) - which is very unlikely, we're not halfway there. Given the Europe is larger than the US and Canada, it's possible this estimate does assume that all commercial buildings have at least 2 systems, though that won't happen in the next few years. So, the estimates may include homes.
• And, related to the point above, the Department of Energy released some initial CBECS data, showing modest growth in the total number of commercial buildings over the past 6 years (2012 to 2018, the year of the new data). We've grown from about 5.6M commercial buildings to nearly 6M.  
• Nice digital twin customer story about Brookfield, from Microsoft and Willow. 
• Smart home related: the recent Google outage had some impact on Google Home-controlled smart home devices.