5 Ways Overregulation is Slowing Smart Building Innovation and Increasing Costs

Key Takeaways:

• Standards fragmentation complicates integration.
• High compliance costs discourage retrofitting.
• Delays in smart tech adoption due to regulatory uncertainty.
• Investment risk aversion stalls market growth.
• Innovation stagnation in smart tech development.

Adhering to new regulations for power and water usage is often heralded as the main driver behind the adoption of smart building technologies. But in many ways, overregulation often stifles speed and true innovation. While many city, state, and federal laws helped to kickstart the smart building technology industry, they may be an inhibiter to the natural progression that is now taking place.

Here are five ways that overregulation is creating roadblocks in the smart building technology market.

1. Standards Fragmentation

Local, state, and federal regulations and compliance requirements can differ dramatically from one building to the next. This lack of standards, protocols, and volition uniformity complicates the planning, design, and integration of smart building systems. If a building owner owns properties in New York and California, their smart building technologies and strategies will differ wildly as regulation requirements differ significantly. This creates a situation where the building operators waste time and effort on purchasing, installing—­and most importantly—operating vastly different systems.

2. High Compliance Costs

In some situations, the cost of meeting regulatory standards and compliance certifications is prohibitive, which results in reduced competition for older buildings and escalating rent rates. Because older buildings require significant retrofitting, they are often sold at lower prices or are demolished in favor of new structures. This creates a situation where energy and environmental regulations become counterintuitive.

3. Delayed Implementations

In some cases, building owners may delay or selectively choose smart and energy-efficient upgrades in the hopes that more lenient requirements will be rolled out. The added cost of certification, penalties, and other factors building owners are required to achieve for compliance could be spent on smart building tech.

4. Investment Risk Aversion

Despite many energy and environmental standards being in place for years, new requirements have been flooding the commercial building space. This creates a situation where building investors become skittish around the uncertainty of increasing new building construction costs and the need to continuously upgrade or make complex additions to existing smart building technologies, stifling growth and competition in the market.

5. Innovation Stagnation

Technology vendors often become laser-focused on creating solutions that meet, yet often don’t exceed, the most popular regulatory standards. This leads to a stagnation of innovation and a loss of cutting-edge technology concepts on the market.

Balance and Uniformity Are Needed

While government regulations have played a key role in pushing the smart building adoption movement, fragmented regulation and overregulation may be required. The increasing costs, loss of innovation, and market uncertainty are beginning to impact true innovation that can lead to more efficient technologies, encouraging further investment in both properties and the innovative building solutions within them.

If you look at other technology-forward markets, such as consumer electronics and automotive industries, which have less strict standards compared to the commercial property market, you can see how less regulation can lead to more rapid innovation and faster adoption rates at a cost that is easier to swallow. If building owners and operators looked at smart building technologies more from a cost-savings and occupant experience lens, perhaps the smart building technology market would grow faster than it is today.

Lastly, local, state, and government standards need to harmonize to lower the operational cost for building owners who manage properties in different locations. An overarching federal initiative that sets minimum standards, a unified framework, and common measurement metrics would significantly reduce overhead costs and reignite innovation.

Next Steps for Building Owners & Operators:

1. Advocate for regulatory harmonization. Support initiatives calling for a unified federal framework that establishes consistent smart building standards.
2. Optimize smart building investments based on cost savings and experience. Prioritize smart building upgrades that enhance operational efficiency and occupant comfort, rather than focusing solely on compliance.
3. Leverage scalable, future-proof smart technologies. Invest in modular or adaptable smart building solutions that can accommodate potential regulatory changes without significant overhauls.
4. Work with vendors who go beyond minimum standards. Choose technology providers focused on innovation rather than just meeting baseline regulations.
5. Explore public-private partnerships to offset costs. Look for financial incentives, rebates, and grants that can help mitigate compliance expenses while still advancing smart building initiatives.
6. Push for more flexible compliance pathways. Engage with policymakers and industry groups to advocate for regulations that encourage innovation without stifling investment.