Jones Lang: Smart-Grid Cities Perform Better

By Sharon Simonson

A new study of 10 cities that have adopted smart-grid technologies to better manage their electricity use shows that collectively their economies are outgrowing the nation and have a greater employment rate.

Dan Probst

Taken together the cities are expanding nearly 30 percent faster than the nation at large and, at an average of 7.3 percent, they have an unemployment rate that is 12.5 percent lower than the national average, according to the Jones Lang LaSalle report.

In addition, at 14.8 percent, the 10 cities have an average class A office vacancy rate that is more than 14 percent below the national average, indicating that talent and companies are gravitating to those locations.

“In general, the implications of the study are that companies benefit from being in smart-grid cities, and that has implications for building owners and users,” said Christian Beaudoin, director of Americas corporate solutions research for Jones Lang. “Many of our clients are large commercial property owners or developers that are considering where to build their next building.”

The global commercial real estate services company released the full report Oct. 8 at the fall CoreNet Global Summit in Orlando, Fla. The event is expected to draw more than 1,500 corporate real estate professionals and executives for three days focused on business reinvention and renewal.

Jones Lang completed its study in the third quarter concluding that a correlation exists between municipal investment and application of smart-grid technologies and an improvement in three economic indicators that reflect commercial real estate health: economic growth rates, employment rates and office occupancy rates.

The Jones Lang LaSalle report relied on a list of smart-grid cities primarily in the United States created by U.S. News & World Report. They are Austin, Texas; Boulder, Colo.; Fort Collins, Colo.; Maui, Hawaii; Sacramento; San Diego; Tempe, Arizona; Toronto, Canada; Washington, D.C.; and Worcester, Mass.

“Cities were evaluated based on a combination of regulation, financial commitments, time-of-use tariffs, reverse billing options and smart metering,” according to JLL.

Noticeably absent from the cities singled out by U.S. News are any Bay Area representatives or cities located in the country’s coastal metropolitan regions, which have dominated among large and institutional real estate investors.

In addition, the list includes several cities—Sacramento, San Diego and Tempe come to mind—that have office vacancy rates or unemployment rates well above national averages.

“Many of the cities on the smart-grid list are smaller cities that are aggressively investing,” Beaudoin said.

In nearly all cases, the cities have mobilized large-scale deployments of smart meters that allow consumers to monitor electricity use, according to U.S. News. Boulder, Colo., has more than 16,000 smart meters connected to its system, for instance. The Municipal Utility District in Sacramento has smart-grid technology for approximately 600,000 homes, according to U.S. News.

Jones Lang undertook the study now because it has seen a convergence of interest from cities and companies in the smart grid, connected buildings and connected cities as they relate to environmental and energy performance at the building and the city levels, said Dan Probst, chairman of energy and sustainability services for JLL.

At the same time, the company believes that while the topics of smart cities and smart grids are of wide interest, they are poorly defined and not clearly understood.

To achieve full power, a smart grid commands cooperation and investment from the public sector, the private sector and utilities. It requires energy meters and building automation systems to maximize individual building efficiency. “Most of the electricity grid out there is dumb and things flow one way. Power comes from the utility company to your house, and there is not much of associated information flow,” Probst said. “The notion of the smart grid is that a layer on top of the flow of electricity is a flow of information, and that flow can go both directions and so can the electricity.”

Smart grids, like high-speed data connection rates, are one component of a connected city, said Beaudoin.

Citing a new CoreNet study, Jones Lang notes that by 2020, buildings are expected to be energy producers as well as consumers. The same CoreNet study predicts the rise of “eco-districts” and “micro-grids,” and energy production becomes widely distributed rather than flowing out from central plants, and building owners band together to share and produce electricity.

The Jones Lang study does not establish a cause and effect between smart grids and greater economic vitality. Rather it highlights an increasingly known relationship: Talent is being attracted by cities seen as environmentally progressive and that talent is attracting the companies.

“Cities that are being progressive on this front have also been progressive from an overall technological standpoint,” Probst said. “In my practice, we are seeing more and more of a trend of companies when they look at cities to locate in, they are going to cities that are investing in technologies to make them greener.”

West Coast Commercial Real Estate News