TCO, or Total Cost of Ownership, indicates the full cost of your building: from maintenance costs to repairs, upgrades, and replacement costs.
What strategies have you implemented to optimise your TCO? It is essential to control the total cost, especially in the property sector, to have a comprehensive overview of your assets. The aim? Taking the overall life cycle of your building into account when thinking about your property. This is a long-term investment involving many levels of expenditure that need to be accurately assessed. Here's how it works.
How to calculate your TCO
APPA (formerly the Association of Physical Plant Administrators) has developed a methodology for calculating TCO based on three funding needs. Each one of them has a defined rate of occurrence:
- Non-recurring needs: creation and growth requirements for the launch of a project (e.g. construction costs of a building).
- Periodic needs: capital requirements for recapitalising existing assets (e.g. upgrading or refurbishment costs).
- Recurring needs: operating requirements, including equipment maintenance (e.g. building maintenance costs).
A comprehensive approach to costs needs to cover these three types of requirements in order to identify optimisation opportunities.
How much does it cost to run a commercial building?
Here's a figure worth knowing: according to a study conducted by Costmodelling released in January 2023, the cost of a building comprising average elemental unit quantities and rates for elements typically included in most common buildings is around £2,290/m2.
Unsurprisingly, the main expense is the maintenance of technical equipment (lifts, fire safety systems, escalators, automatic doors, etc.), followed by management and reception services.
For a comprehensive estimate of expenses, another factor to consider is the TCO of your buildings' equipment. Maintenance also represents a significant cost in this area, and there is definitely room for optimisation.
Calculating the total operating cost
This is a complex calculation requiring input from several parties: one team is in charge of maintenance, one is responsible for construction work, another one for the design of the sensors, etc. An overview of all these factors is crucial for estimating the total cost.
6 ways to optimise maintenance costs
A preventive approach is the first step towards optimising equipment maintenance costs. Foresight is optimisation, and this principle should guide every decision you make!
Avoid replacing equipment too often by taking steps to ensure that it lasts for as long as possible. At any given moment, each piece of equipment has:
- an investment value that starts at the project design stage and extends to installation, in addition to the purchase itself;
- an accumulation of failure costs;
- an accumulation of operating costs, i.e. maintenance, workforce (cleaning, security) and energy bills (water, electricity, heating).
However, average overall running costs tend to decrease over time. You can take advantage of this depreciation if you use high-quality monitoring, which allows you to extend your equipment’s lifespan.
Ensuring effective monitoring
How can you optimise monitoring? Although the durability issue is addressed at the design stage of buildings and equipment, it’s still subject to appropriate maintenance. It’s important to know how your equipment is used in order to better assess the degree of wear and tear.
A service engineer who knows your equipment inside and out – including its parts and lifespan – is the best qualified to monitor its operation.
Your efforts will pay off if you:
- carry out regular maintenance;
- spend enough time on your facilities to fine-tune and nurture them;
- use the data collected on your equipment to target the parts that are used the most.
Knowing how to manage your equipment without pushing it to the limit is financially advantageous. Through doing so, you can guarantee the life expectancy predicted during your project’s design stage.
Making use of technology
Technological innovations can help you optimise your TCO. For example, connected sensor technology like IoT (“Internet of Things”) allows you to keep track of equipment and better control costs through regular monitoring:
- When used on a lift, this tool identifies any abnormal patterns in the equipment, which enables you to take action before the breakdown worsens.
- Since it knows the lifespan of certain parts, it can predict their failure: this allows you to anticipate their replacement.
- The device provides service engineers with additional technical information, enabling them to target troubleshooting more efficiently.
Example of a connected IoT device's sensor technology on lifts
An IoT (Internet of Things) device links digital data with data collected on-site by connecting a fleet of lifts. It provides information on the environment around every lift, whatever the make or model.
Replacing equipment at the right time
TCO isn't solely used for deciding whether to invest in a project. It's also a valuable methodology for asset managers when determining whether or not to extend the lifespan of a piece of equipment.
After several decades of use, you'll inevitably have to replace HVAC systems, lifts, escalators, doors and fire safety systems. But it's crucial to know when to do it! Due to a lack of relevant data or a lack of time for comprehensive analysis, this is often a difficult decision to make. This is why people tend to delay it, sometimes to the point of system failure. This process is known as "run-to-fail," a pitfall that drives up TCO from 10% to 20%.
So the solution is to anticipate. And to get the full picture, ask yourself the right questions about the existing system:
- Is the existing system the best option?
- Is it easy for the service provider to maintain and repair it?
- Is it the most energy-efficient?
- How long does it take to acquire the necessary material?
Also think about the new equipment:
- How much does it cost?
- What is its maintenance cost?
- What is its lifespan?
The best course of action is to collect data regularly and keep a permanent inventory: this will help you avoid a costly emergency down the line. Use the right tools provided by proptech (technology for the property industry) to facilitate data-driven decision-making.
Focusing on preventive maintenance
Emergency repairs put you at risk and force you to act without having time to think things through. Preventive maintenance allows you to take a step back before incurring expenses, so you can be clear about what needs to be done and better control costs. A preventive (rather than reactive) approach means you can replace or repair equipment before it fails.
Specifically, preventive maintenance allows you to:
- extend your equipment’s lifespan;
- significantly reduce in-service failures;
- limit downtime in the event of a breakdown;
- limit costly corrective maintenance;
- rationalise energy and spare parts consumption;
- reduce your maintenance budget.
[ You might also like: Everything you need for efficient lift maintenance ]
Choosing the right partner
With the right partner, you can identify malfunctions before they happen, saving up to 25% of your maintenance costs. But how do you find the ideal partner to implement an effective preventive strategy? It requires a team that works with experienced, responsive engineers who are fully equipped with the technology to process the correct data. In this collaborative working relationship, the service provider gives you access to the information they gather so you can make informed decisions.
The key to controlling your TCO is therefore understanding your buildings' equipment. Your service provider should be able to provide you with:
- an inventory of your facilities;
- advice on any work that needs to be carried out;
- a guarantee of their ability to complete the work within a given time and budget.
Choosing the right service providers, especially for maintenance, is essential to facilitate the management of CAPEX investment plans. With our connected engineers, technology and data access, WeMaintain helps you to plan and reduce your operating costs.