At major conferences on real-estate developments in Russia, many precious moments — keynote speeches, slide presentations and engineering sketches — are dedicated to so-called "intellectual buildings," the latest trend in office and residential real estate whose life-sustenance systems are handled by electronic gadgets.

Many experts, however, have noted that the booming activity in the intellectual real estate segment of the market is largely limited to these brainstorming occasions, while real development of these intellectual properties has yet to kick off — at least in a proportion similar to those existing in former Soviet bloc countries in Central and Eastern Europe (CEE).

Speaking on the issue at a real-estate awards ceremony in Moscow earlier this year, a top manager at a Moscow realty firm, which manages huge assets in Russia and other CEE countries, reiterated the same view, saying that written articles and other published materials dedicated to intelligent buildings are more prevalent than the number of such buildings in Russia. Worse still, only a few investors have realized that smart buildings are not just a matter of following fashion.

Searching for a universally accepted definition

One major reason for this state of affairs, according to real-estate experts, stems from the absence of a generally accepted definition of so-called intellectual, or smart, buildings in Russia, citing the lack of an accurate translation of the English phrase into its Russian equivalent. This, they argue, leads to different experts’ definitions and other linguistic discrepancies that have come to characterize the term in the local real-estate industry.

"Consequently, each expert gives his own definition and view on the subject," said Vladimir Yershov, director of technical department of EkoProg Design Co. "For instance, security experts see intellectual buildings as any building with integrated security system, while air-conditioning experts believe such buildings to be those with automatic systems for controlling the microclimate."

MTU Inform General Director Said Alimbekov sees ideal intellectual buildings as projects with comprehensive automatic security and air-conditioning and heating systems that are managed from a unified center. "Practical experience, however, modifies this definition. Consequently, some buildings with a single automated system can qualify as intellectual building in certain circumstances. A lot depends on clients’ requirements, fantasies and the depth of their wallet."

Other experts do not see intellectual buildings as a new trend on the real-estate market. Speaking on the issue in an interview with TRJ earlier year, Maxim Kunin, head of the Moscow office of London-based Fleming Family & Partners, an international real estate investor, noted that the "Intellectual building is more of a marketing tool" than a new trend in real-estate developments. "I am afraid this term is more of a marketing tool. Every local player is already developing Class A buildings, and in order to stand out from the crowd, the next level is a smart or intelligent building," he said. "Developers will start calling their buildings environment and high-tech friendly once the potential of this marketing resource has been exhausted."

Intellectual properties taking roots despite lack of clarity

The lack of a clear definition and direction notwithstanding, the demand for intelligent building is on the rise, at least, on the Moscow office market. Globally, experts put this segment’s annual turnover at about $3 billion, about 3 percent of which in Russia, while associated services, such as costs of automatic systems and other intelligent gadgets, as well as costs of their installation, maintenance and other management expenditures, average another $600-700 million per year.

On the whole, however, the Russian market for intellectual real-estate properties is still in the early formation stage, making the new services in smart offices accessible only to residents of big cities such as Moscow and St. Petersburg.

Such buildings include Mobile TeleSystems, Gazprom, Yukos, Tsarev Sad Business Center and Railways Corporation’s headquarters in Moscow. Other intelligent buildings include most five-star hotels such as the Marriott, Sheraton Palace, Metropol, National and Batschug Kempinski.

A unique feature of intellectual buildings is that their life-sustenance systems are integrated into single networks which are connected to computers that automatically monitor several parameters at the same time. These include temperature and humidity control, heat and water consumption, free parking space, location of employees, thanks to individual magnetic cards and video cameras, as well as all engineering and security systems in such facilities. Alternative energy sources are on standby in case of a sudden power failure.

According to experts, having the features of intellectual buildings is a must for five-star hotels, especially for those run by international chains, because their clients are used to such services in other locations. Consequently, local hoteliers have to comply with the international requirements. "A normal five-star hotel fully computerizes its processes, from room booking to accommodation of clients, from all forms of services and to payments of bills when leaving the hotels," said Maxim Pukhov, financial controller at the Sheraton Palace. "Intellectual buildings help drastically reduce management expenses in the short term, and lead to a hundredfold increase in revenues in the long term."

Residential real estate lags behind

Intellectual buildings have yet to make a noticeable impact in the residential segment, the exception being palatial residences of the nation’s political, social and business elite along the plush Rublyovo-Uspenskoye Shosse in Moscow’s western outskirts, where cottages loaded with intellectual gadgets are on sale for $2.5 million-$10 million per property.

Realtors say this practice is in line with global trends, where clients and owners of smart residential buildings are usually super-rich, CEOs of large transnational firms and IT companies, or successful stocks and assets managers. For these people, intellectual buildings are not just a toy for the super rich, but a vital instrument in their daily business, or more appropriately, a way of life. The only Russian specificity is that top government officials, not business moguls as in foreign countries, own most of these highly expensive buildings, they added.

Smart buildings’ competitive advantages

According to mechanical and structural engineering experts, smart buildings beat ordinary buildings in all aspects except for initial building costs, which are a lot higher. For instance, intellectual buildings "are capable of remaining in active service" for 50-55 years without any capital repair, while ordinary buildings require a major facelift after a maximum of 30 years.

In terms of electrical-energy consumption, intellectual buildings are in a class of their own, especially when considering the high concentration of electrical and electronic gadgets in modern buildings and the rising electricity bills. Intellectually managed buildings, experts say, are capable of reducing these huge bills by 30-40 percent because of their efficient use of electricity and the ability to automatically switch off equipment which is not in use. Another huge advantage of smart buildings is the relatively low premium for insuring such buildings against unforeseen cataclysms. Property owners usually spend a lot of more on real-estate modifications and insurance against fire, damage and other phenomena that could destroy the building. Due to the high level of computerized systems in intellectual buildings, capable of monitoring and preventing these risks, the insurance costs are several times lower than the cost of insuring ordinary buildings. This leads to tangible gains in real figures.

Russian specificities

These highly competitive features notwithstanding, experts say that less than 10 percent of Moscow office buildings can be rightly classified as intellectual buildings, about 90 percent of which were specially built by large local corporations for private use, leaving very little or no intellectual buildings for rent on the market. Experts have attributed this to thriftiness, or an unjustified striving of Russian business managers to economize when the situation demands otherwise.

As an example of unnecessary thriftiness, a realtor cited a bank which had called a tender to install a pneumatic post — a system that helps automatically deliver documents to and from different departments of the bank — but later cancelled the plan when it learned that the project would cost $100,000, including the cost of equipment and installation. The result was that the bank lost clients because its Soviet-era courier failed to facilitate quick delivery of documents, leading to delays in signing agreements and contracts. On the other hand, the stinginess of Russian office building owners can be understood, as installation of these intellectual gadgets usually boosts the overall cost of building such offices or upgrading older ones by 40-50 percent, a huge capital outlay currently seen by most developers as an unjustified expenditure.

Experts also noted that the time when a client used to say, "I want everything installed in my office," has become a thing of the past. Alexander Lasy, director of the department of automatization of engineering systems at Krok, says at times, ordinary office buildings are fitted with intellectual gadgets in a move to turn them into smart buildings. "However, these buildings are not intellectually packaged and are therefore incapable of automatic self-adjustment."

Another way is installation of top-quality systems for controlling security, microclimate and energy consumption in such buildings. But most old buildings do not have space for installing these gadgets, requiring huge capital for redesigning of rooms, halls and other areas to house the equipment. Consequently, experts said, the extra cost of upgrading such "ordinary office buildings" to "intellectual standards" is about 30-60 percent higher than the cost of building intellectual offices from scratch. "This means, the earlier a property investor decides that he wants an intellectual building, the cheaper the cost of its development," said Yulia Maksimova, EkoProg’s marketing director.

On the other hand, some developers who have "supplied their buildings with the latest electronic gadgets" do not see the need to integrate these different intellectual systems into a unified management center. These developers call such integration unnecessary, and at times even accuse building engineers of looking for ways to strip them of more money, as such integration accounts for about 30 percent of the total cost of installation of intellectual systems.

But the absence of such integration, according to real-estate experts, poses a potent danger for buildings — as a unified "brain center" allows property managers to monitor and see everything going on in the building simultaneously, reduces so-called human factors that at times lead to huge catastrophes, and allows for immediate action when necessary, to quickly remedy any emergency that could lead to greater harm if not controlled.