Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision in global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE and at ECE's exchanges and clearing houses around the world. And now welcome Inside the ICE House.
Pete Asch:
What modern invention had the biggest impact on the world's economic growth. It's a simple question with dozens of possible answers, but for me, it's the air conditioner. Studies by the International Labor Office show productivity decreases by 50% when temperatures reach 91 degrees Fahrenheit, and continues to diminish as the temperature increases. Before 1902, there was virtually no way to lower indoor temperature. That changed when Willis Carrier had enough of the Brooklyn summer heat and invented a way to cool the air, remove moisture, and produce a more productive environment for both man and machine alike. He later went on to form Carrier Global Corporation, that's NYSE ticker, CARR. The air conditioner has allowed humans to densely settle parts of the globe that were previously uninhabitable, and as the effects of climate change increase, more communities will depend on cooling to keep their economies humming. For regions with seasonal swings, like where I am in this Northeastern part of the United States, an equally important part was pairing the air conditioner with heating and ventilation to provide everything needed to create ideal internal environment to allow human activities continued unimpeded by the weather.
Pete Asch:
Now that I mention it, if the air conditioner is the greatest modern invention, the HVAC system was the slowest modern invention. It was about a million years ago that prehistoric man discovered fire, making it possible to heat a space and survive the cold, but it wasn't until the current New York Stock Exchange trading floor opened that the first HVAC system was installed. With the opening of the New York Stock Exchange building in 1903, the era of office comfort had arrived, and it was front page news, with one article announcing quote, "In order to keep the atmosphere of the boardroom as bullish as possible, the fresh air pumped into the building will not only be cooled in the summer, but it's moisture dried out, reaching a thousand gallons of water per hour, when the temperature and humidity stand at 85 degrees."
Pete Asch:
Indoor atmosphere technology has changed a bit since that first 1902 Johnson Control thermostat kicked on that original air conditioning unit. Now, how offices are circulating their air is once again front page news. This brings us to our guest today. Aircuity CEO Dan Diehl, a recognized leader in air quality ventilation and smart buildings who coincidentally began his career with Johnson Control, and that's NYC ticker JCI. Our conversation with Dan Diehl, CEO of Aircuity, on smart building technology, ventilation, and COVID 19, and creating the perfect indoor environment. That's right after this.
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Pete Asch:
Our guest today, Dan Diehl, is the CEO and president of Aircuity. Prior to his current role, he led business development at Lutron Electronics, was a partner for six years with Synergy, and spent 11 years with Johnson Control. Dan, welcome Inside the ICE House.
Dan Diehl:
Thanks for having me. Really appreciate being on and love the intro topic. I learned a little bit there even though I'm from the industry, so that was cool.
Pete Asch:
Glad to help. You don't really think about the actual building as part of the innovation of the New York Stock Exchange. But back in February, the New York Stock Exchange, like most offices, began doing regular deep cleaning in response to COVID 19. At home I remember I was wiping down every grocery before I put it in my pantry. When did you first realize that maybe we were all focusing on the wrong aspect and there would be an airborne part of transmission that we really needed to be thinking about?
Dan Diehl:
Well, I hate to say immediately, because I, like many other people, didn't know how COVID, the actual virus was spread. However, having worked in critical environments, laboratories, and operating rooms for better part of my career over that... Which you have mentioned really started in 1990 in the space. Those spaces, what we call critical environments, we've always known that infections and viruses transmit via airborne transmission. And typically they attach themselves to small particles and they can bypass the human defense systems and really get deep into your lungs.
Dan Diehl:
So whether it's on an operating table operating room table, or the way harmful gasses like volatile organic compound spread in a laboratory, the transmission via airborne and the ventilation system in buildings, I have personally always known to be hugely important in health, wellness, safety. So it was immediately apparent to us that this was an important factor in the transmission, not the only factor, but in a very, very important one. It is since, obviously, WHO and other organizations have come out and I would say finally acknowledge the fact that this was a primary and a critical means of transmission for this particular virus, COVID 19.
Pete Asch:
I mean, what is the difference between the hermetically sealed office building Manhattan and being able to just open the window and let some fresh air in.
Dan Diehl:
It's got a lot of variables. The primary variables you want to think about, though, are traditionally the big building automation companies, one of which I worked for, really were working on really... I mean, I jokingly say this, but they were really good at controlling temperature, as you mentioned earlier. And I jokingly say 72 degrees and sunny inside. But ideally that's what they were really... That was they were trying to do, was really maintain a comfortable environment. Air quality, indoor air quality has gone through cycles. And early days when you had buildings and it was nice outside and you could open the windows and really get that fresh air feeling and get great ventilation. As building envelopes got tighter and tighter and tighter, and if you were remember in the 70s, with the efficiency craze, they were boarding up outside air intakes and shutting buildings down from having ventilation at all, because it was so expensive to run.
Dan Diehl:
And now we're coming out of that and Building Movement and Reset and other industry organizations are really driving towards more of the health and wellness and productivity of the occupants. So where Lead, if you're familiar with Lead, and many people are, was around the sustainability of the building itself, the Well movement has really been focused on the environment of the employees, the workers, and the users of buildings, and making sure that they have a safe, healthy productive environment. What we do is really support those bigger companies, the Johnsons, the Tranes, the Siemens of the world by integrating our platform into their control systems and helping manage ventilation in buildings, all sorts of types of buildings, which we'll also talk about further. Because this goes from K through 12 to higher education to life science companies to commercial office spaces to government agencies. It's a very, very large, diverse... The commercial built market is a very big market.
Pete Asch:
How did the technology behind it change? I mentioned that early electric thermostat, going back to 1883, when professor Warren Johnson of Johnson Control invented it. From that, for lack of a term, dumb on off switch that reacted to a temperature, how has the technology that allows a company like yours to go in evolved?
Dan Diehl:
Aircuity does is we look at the five primary air quality concerns. Those are particulates, really small particulates, which is what we call respiratory grade particulates, relative humidity, volatile organic compounds, more commonly known as harmful gases, carbon monoxide, and carbon dioxide. So those environmental conditions are monitored with different technology, and in order to do that accurately over time over the life of the building, there needed to be some innovation, which is what our founder Gordon Sharp founded in 2000, and which we then brought to market. But the bigger companies typically, or other companies try to do that with discrete sensors. So a you end up trying to flood a building with these discrete sensors in every single room, and it becomes very complex to calibrate, maintain, and to have them work over time. It also becomes very difficult to integrate them into a building automation system.
Dan Diehl:
So we try to innovate in all those areas. So accurate measurement for the five key healthy building parameters, really simple integration to building control systems, and then obviously we basically report out the information on a mobile platform and then other other means to a variety of constituents. Because the one thing that's interesting about air quality is that it's... Whereas facilities and temperature control has really been left to facilities operators, air quality actually is interested a lot of people. So you have environmental health and safety of infectious control. Now you have, it's a C-suite concern. This is a business imperative, that people get their workers back into a healthy environment. Selling healthy buildings is now a tenant attraction, a tenant retention strategy. If you're an owner operator of buildings, and your Apple, or in Apple's world headquarters, Cupertino, you have three million square feet. You want your employees to be productive and as healthy as possible because that's going to make them more efficient, more effective, and be working more days of the year. It's now an awareness of the world that healthy buildings really matter.
Pete Asch:
I'm not sure if you've ever been to the trading floor of the New York Stock Exchange, but we actually had to install not the most attractive, but basically large piping and HVAC ducts in the late 70s to augment 1902 HVAC unit, which you can really see today. Does the Aircuity technology, does that just fit within what exists or do you need to provide additional structure and support to provide the mechanism to not only read, but also navigate all that data?
Dan Diehl:
Yeah, that's a great question. So we work in new buildings like I just mentioned, at Apple or Google's headquarters or et cetera. So new construction projects. Most of what we do, because 90% of the commercial building market is existing infrastructure. So we retrofit into existing buildings all the time. But I think you ask a really great question, which is you are affecting existing systems. So sometimes those systems need to be modified and improved upon. So a lot of what we're working on today with customers is in increasing their filtration levels. So maybe going from a MERV 8 to a MERV 13. We're improving or changing out their sequence of operations to bring in more ventilation where and when needed. And we're integrating our measure parameters into their control systems to affect ventilation. So we integrate all the time with existing systems. You don't need to install anything new, but you might make some sequence changes, you might make some filter improvements, and even consider newer technologies that are coming out, which are air cleaning technologies. And we become that platform that validates how well they're working and proves out their effectiveness in their implementation.
Pete Asch:
So you mentioned, you're talking a lot more C-suites, trying to get safe in the building and get that tension between, we need to do everything we can to get employees back in the building, but there's still real costs. So when you're thinking about 2020, what is the your first, most important change or investment that every commercial building should be making right now, even if they're not quite ready yet to go for a full install?
Dan Diehl:
It would start with, and most of them already are thinking about this, is improving their filtration effectiveness. And then also their ventilation rates. So those are simple in concept to do. They're difficult to do well and to control well over time. Buildings, outside of environmental conditions, change so much. So imagine in New York Stock Exchange, it goes down to zero outside. You're to be able to open all your windows or... Or if it's a closed building or open your outside air dampers wide open and flood the building with air, because the system isn't designed to handle it, number one, and you just can't bring in that much ventilation to a building. So you really want to try to do this intelligently, and you want to try to manage it over time.
Dan Diehl:
So I think to answer a very simple question, you got to look at filtration effectiveness, you got to look at your ventilation management, and those two things are going to get you 90% of the way there. 80/20 rule or 90/10 rule. And from there, you really can look at if you have the information feedback, you can look at where you may still have problems and what other strategies you may want to implement. And that's what we try to do for all of our customers in terms of giving them the guidance as to how well they're doing today, create a baseline, and then help them understand how to continue to improve it and manage it over time.
Dan Diehl:
The cost, as you mentioned, just one thing, is our whole entire background comes from energy efficiency. So we are always doing this with a sustainability or a hard return on investment. Managing ventilation is very expensive. I mentioned the ventilation rates in these other buildings before. A CFM is like a KW, if you think about it, like a kilowatt. So when you see the ventilation in buildings, it's very expensive to heat, cool, and move that air around buildings with fans. So the more ventilation you bring into the building, your costs go up significantly. So it's very, very important, especially in places like New York, more than any place in the country we work with, is there's huge grid implications, and basically peak power problems, et cetera.
Dan Diehl:
So managing ventilation becomes a critical strategy on the sustainability or efficiency side to consider when operating buildings. And I would literally say no more place in New York, because we work for Memorial Sloan Kettering, Mount Sinai, Bank of America Tower. You go down the list of all the customers we have in New York City, and a lot of those projects are driven by energy efficiency concerns first and foremost maybe two years ago. Now it's that dual value proposition of energy efficiency and basically health and wellness and good indoor air quality, and balancing the two of those.
Pete Asch:
Do you have a sense for if your clients are struggling to get the energy they need off the grid?
Dan Diehl:
Well, as people come back and buildings get occupied, reoccupied, even to levels of 15 to 75%, at the current guidance, in the pandemic guidance operating mode of bring as much ventilation as you possibly can, they're going to see huge energy increases, because of the way they're being told to operate the building safely. And again, I'm just going to say we know this. We've done all the Memorial Sloan Kettering spaces up in New York City. They're 100% outside air buildings, meaning they're labs and they bring in 100% outside air, heat it, move it, cool it, and then it blows right out the roof. And they do that for safety reasons in laboratories.
Dan Diehl:
When you start thinking about doing that in commercial office buildings, yours costs are going to go through the roof. So it's imperative, actually, that we balance these two things. You manage good indoor air quality, but you do it as efficiently as you possibly can. And yes, there's no doubt they're not seeing it right now today because buildings aren't being occupied. But when people start coming back in, it all is going to depend on how they operate them. And if you operate them to the current ASHRAE guidelines of full open, it's not sustainable.
Pete Asch:
And recently your company rolled out a new service, and I have to say... So over the course of about 215 episodes of this podcast, I thought I had heard every single as a service model, but new one from Aircuity, which is air quality as a service, and you're going to have to pronounce AQaaS for me. And also how does that product work, and is that a direct response to COVID or was that already in the pipeline?
Dan Diehl:
It was already in the pipeline. It was already in a pipeline. It's just basically an easier means to help customers primarily in two markets, higher education and commercial real estate, more easily adopt air quality as a solution, if you will. So very often the projects can be capital... If it is capital intensive, and somebody has to go through a capital budgeting process, and it just takes longer and it limits the amount of work that somebody can do. When you do it in this means you can sign up as a five year service. It is really just air quality as a service. We don't pronounce AQaaS. And we were really thinking about it as healthy buildings as a service. we haven't thought about the marketing side of it, but it's primarily just an easier way to allow people to implement improvements in air quality.
Dan Diehl:
And that's not just Aircuity. It's implementing Aircuity, but it's also making those changes in your sequence of operations, maybe improving your filtration effectiveness, maybe layering in other technologies like bipolar ionization, and other strategies you may do to just provide health and awareness. We just did SOM's world headquarters 7 World Trade, and we did, I think it was like seven or eight floors of their world headquarters. They're one of the largest architect firms in the world. And they actually have a dashboard where when you walk into their office, they're going to have all the air quality displayed for their employees. And I think that's going to be a trend you're going to also see going forward is, like I said to you earlier about temperature, people are going to want to be aware of the space they're working in and is it green, is it safe, is it good, or is there something that's really elevated?
Dan Diehl:
What we've had a lot in California with the fires, as you can imagine, is you're bringing the particle levels and the dust levels... Forest fires are horrific in terms of breathing that smoke and that dust in. So you can imagine we're seeing huge elevated particle levels outside. And then we're working with our customers to help them see how well their filtration's working and what the rise in particle levels is happening inside the building. So in some cases they might not want to bring people into work for a period of time because the conditions are that bad. So really just understanding air quality... That goes back to my point earlier about a diverse group of people wanting to know air quality. It's not just a facilities issue. There's a lot of people that want to understand what the air quality in their space is. What environment they're in.
Pete Asch:
Is there an education element to not just explaining why this is important, but how can the average office worker understand what those numbers mean to them?
Dan Diehl:
That's an awareness issue. There's been a lot written and published on that. We have a lot on our website, if every somebody ever wanted to care to search there, but I also think the organizations I mentioned earlier, the Well Building Institute, which is really layered as part of the International Well Building Institute, so IWBI. So Well has a lot of information on there if you look them up. Reset, which really started in China and they were way ahead... Not way ahead of us, but they were pretty far ahead of us in terms of air quality. And it's very common if you've seen the pictures or you see them wearing masks much longer ago than we were. They care a lot about outdoor air quality and indoor air quality in Southeast Asia. Both of those organizations have a lot online, as well as Aircuity.
Dan Diehl:
And that can get to what's the difference between 1,000 parts per million of CO2 versus 1,250, and which one's better or worse, and is it okay if I'm in a space in 1,500 parts per million of CO2, or am I going to start falling asleep, and when does it become unhealthy? At what levels? Where there's a lot of innovation still needed is really on the small particle levels because the small particles are very hard to measure, as you can imagine, and we breathe a lot of these in every day. So I think that's where we are focused, as Aircuity, of really making the biggest impact act, is really doing that well and trying to help people manage and control that intelligently. So really keeping down the level of particulates in any given space, through filtration and through ventilation. That's really key.
Dan Diehl:
It's actually key for COVID 19 more than anything, because that's a huge ability for that virus to particularly spread it latches on to those small particles, they stay airborne for a very long period of time if they're not in a properly ventilated space, and then you or I, if you're in that space, they're going to breathe those in. And they go actually deep into your lungs, so you might not even... They pass the defense systems. You might not know you're sick for a while. So when people are exposed to high volumes of that, they can obviously get really sick and it can take hold in your body before your body has a chance to really fight it off.
Dan Diehl:
We've been doing this for 20 years, we've been doing it in those types of spaces, so I'm very confident... I think the message I would leave to you is I'm very confident it can be done, and we do it in these other spaces like labs and ORs. We just need to figure out how to adopt it cost effectively and systematically in all these other types of environments. And to me it's just about choice. It's just about focus and prioritizing air quality over some other things like a nice lobby. You want to prioritize the air that you're breathing over maybe a couple of other decisions that you might make.
Pete Asch:
And when you're thinking about choice prioritization, I was looking at some of the rates and it seems to be that currently the highest rates of transmission are still restaurants, which you think of as smaller, standalone buildings, religious organizations, nonprofits. I mean, is this technology, I guess, scalable down yet to that level where you could be looking to put a ventilation system that is reasonable and has the technology that you provide in every elementary school or in every restaurant in the country, or we just not there yet.
Dan Diehl:
We're not there yet. We're thinking about it for restaurants. We do a lot of K through 12 work, so I think, I think we're better prepared. We've got hundreds of K through 12 schools. So that's a very important market for us. When it comes to restaurants, what you find is that they have typically air handling unit systems, et cetera, on the roof that are focused on conditioning the space. What they tend to lack is good air change rates and proper ventilation, really, exhaust side. So getting air flowing and moving through that restaurant. And that's why those spaces, churches, restaurants, and some of those smaller spaces, they haven't been designed for that kind of air movement, air exchange. So as much as it's an Aircuity issue, it's also just a general HVAC and systems question in terms of how they've designed those historically and what the primary concern was. Intent. Design intent.
Pete Asch:
You mentioned working a lot of K through 12. How long does it take? Are you seeing places like schools having significant changes in a short term, or is this a very long term process?
Dan Diehl:
No, I think it's what I would call reasonable term. Depends on your level of short, but it's very reasonable. I mean, we can look at this... A technology like Aircuity can be installed in buildings and two to three months. So overlaid on top of that, you could adjust the filtration very quickly and you can layer in other cleaning strategies as you need to very efficient, time efficient. So I think this is, relatively speaking, it can be done very quickly. And I think understanding... What we remind people, and what I think is important takeaways, maybe somebody listening to this, is if you're a building manager, owner, operator, what you don't want is you don't want your HVAC system to contribute to the spread of an unhealthy building or the pandemic.
Dan Diehl:
We work in labs all the time. There's never perfect safety. Stuff happens. Labs can be dangerous places. But what you want to do is have the ventilation system support the core mission of the business. You don't want it to contribute to unhealthy or unproductive. High CO2 levels are just plain unproductive. People get less productive, to your earlier example, you started the show with, in temperature over 91 degrees. At CO2 levels at above of 1,250 or something in that range, people get less productive. So in schools, we often measure these parameters and see very high levels, over 2,000 parts per million. Well, that's not going to be a very effective learning or teaching environment for the people that are occupying that building.
Dan Diehl:
So understanding what you're doing, and then can improve and say, "Okay, we need more ventilation in this building. How are we going to go do that?" It's a process, but it certainly starts with an understanding and knowledge of how it's currently working. And again, to get back to that comment, that cycle can happen very quickly in terms of installing a technology and making these improvements, and then rapid learning and deployment. We see it, we live it every day.
Pete Asch:
After the break, Dan Diehl, CEO of Aircuity, and I will talk about the future environmental monitoring and how his company will continue to help make the world a cleaner place in the post COVID world. That's right after this.
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Pete Asch:
Welcome back. Before the break, Dan Diehl, CEO of Aircuity, and I were discussing how his company's helping provide safer environments in response to COVID 19 and just general health. One thing I skipped over the first half. We mentioned you got your start with Johnson Control, but where does an interest in air quality and HVAC come from?
Dan Diehl:
If it's for me and for the company in general, I think... Because I can speak a little bit about Gordon, the inventor of our technology. So people like us, Gordon and I, that have been in this space for a while, it's two things. It's always been a shortcoming of the industry to really measure air quality effectively over the life of a building. So that's always been overcoming the industry that's been known and it's a problem that needed to be tackled. Gordon's an MIT grad. He created another company that eventually got solved to Honeywell. So this was his next invention of a problem that he wanted to solve. For me, myself, starting at Johnson Controls and being an entrepreneur in the energy efficiency space, ventilation was the obvious next big opportunity in efficiency and sustainability.
Dan Diehl:
Lighting, if you know, got more efficient, more efficient, more efficient all the way down to LEDs. And it's both an energy and an operational cost benefit. Well ventilation was the exact same analogy. It needs to go through that whole entire improvement life cycle, if you will. Ventilation, air quality, couple the two together for buildings. So for me, it was an obvious, "Okay, this is the next thing that really has got to get tackled." And I just saw it from working in the industry, and I knew Gordon from a previous life at Johnson Controls, actually. So really couldn't pass up the opportunity to work with him, to bring this technology to market. And we started that in 2007. Late 2007. So the company was founded in 2000, so we're actually celebrating our 20th anniversary, albeit very differently than we thought. However, the 20 years have been all... It's all been focused on improving air quality in the built environment.
Pete Asch:
And when you think about that, is this innovation, is this a testament to the realization that this was going to rise in importance, or is there a technology aspect to it? So thinking back, air testing's always been a industrial hygiene side of the business, but it was never fully integrated in the day to day operation. You would call in the industrial hygienist if you needed to. So is the innovation bringing them together, or was it that we were waiting on the technology to bring them together?
Dan Diehl:
The latter. It's a great point that you're making, so air quality actually, in our first seven years, had a portable monitoring device, and we put it into a building and it gathered air quality data and it provided the customer and expert report. Well, you can imagine that customers were getting this and there was saying, "Okay, that's great. You just told me what my air quality was for three days or a week of time. Well, that's not what it's going to be next week and it's not going to be what it's going to be the next week after that. And you're also then giving me this feedback and I've got to go do a whole bunch of things to do it, and then I have to hire you to come back and measure it again." So it became this vicious cycle, if you will.
Dan Diehl:
So customers were saying, "We want an installed system. We want it to monitor 24/7. We want it to actively control our spaces. And we want it to report out, again, tell us what's wrong and what is really of concern for us." And this goes to, again, a little bit more starting in critical environments, but it actually applies to healthcare, it applies to operating rooms, it applies to commercial office spaces where you're really seeing really poorly ventilated areas of buildings. You can highlight those very easily and have somebody go and correct those. So it absolutely was born out of the shortcomings, the way that the industry currently did it. I'll give you a very quick example, like controlling relative humidity in this industry has always been a huge challenge. Those sensors need a lot of calibration and maintenance. They need a lot of replacement. It's a very difficult thing to do. So people kind of give up on it over time.
Dan Diehl:
So we set out to do that very accurately. So we use a much higher grade industrial device over a much larger footprint of the building so we can give really, really good, accurate information to the building automation system about what's happening in the spaces. So the technology, the latter point you made, the technology breakthrough has enabled us to scale and to be brought to the built environment. And it's also why we're agnostic. We work with all the building automation companies, so Distech, Automated Logic, Honeywell, Siemens, Johnson. There's so many of them out there, and we work with all of them. We integrate easily with all of them and we want to be very narrow and deep in what we do. We want to be air quality measurement and reporting experts, and we want to let them do what they do really well.
Dan Diehl:
So I think that's how it was born and why we've been passionate about it. And we get to work on really, really cool projects with really, really great customers. So what's kept it very exciting over over the time horizon in which we've grown. We're installed in 17 countries around on the world. We just got a contract for the Grand Mosque in Mecca, so it's part of like a $5 billion construction project. So we get to work all these crazy cool projects and improve buildings. It's like a win, win, win. It's good for the customers, it's sustainable and energy efficient, and it's it's a good growing business for us. So it checks all the boxes, at least for me personally, and for our board and for the company, as we really feel good about what we're doing in the world,
Pete Asch:
Do you work with any of the government airports, railroad stations? It's great to be sitting in office building safe all day, but if everyone has to go through Penn Station to get there, do you have any experience with those facilities?
Dan Diehl:
We started to look at airports and some of these other... Because it's been more recent, to be very candid with you, because of COVID, and I think that's more of an air quality awareness and response. And we're doing a huge transit... We're doing 10 transit facilities over in Israel right now. So we have looked at these spaces, they do matter and they are important, to your point. Again, I think we're not the only strategy. I think people are going to probably travel to and from wearing mask, or if you're outdoors, you're much safer and it's quite it's been documented. And I feel comfortable outside not wearing a mask, but if I'm going to be in those types of spaces, certainly I'm going to be wearing a mask. But I still want to be in a properly ventilated and having good air filtration in those spaces.
Dan Diehl:
So I hope that comes out of this, more for the general public health and wellness, that the government and other agencies that operate and maintain those type types of spaces are held to a higher standard or more concerned or more aware of what they're doing, could, because we probably all know this, those have tended to be at the low end of environmental conditions or certainly some of the hardest to keep up because of the amount of public that goes through them, et cetera. But again, we can't solve all the world's problems, but I think one of the main things we want to do is when we get back to work in a building office, like I'm in here, that people feel free knowing that they're in a comfortable environment and that it's not... You can almost tell a lot of times you're in a building. It's not stale, it doesn't have really poor ventilation, doesn't have poor air quality, and it's not contributing to their sickness or their chance or likelihood that they're going to get sick in that building.
Dan Diehl:
And I think that's a big part. We're going to see less occupied buildings, certainly over the next year. We're not going to go back to full occupancy. Although some other places in the world, overseas, in some of our projects, I know China and some other places, they're at 90 plus percent occupancy to where they were pre-COVID. So they're largely back to normal. So I think we'll all be surprised a year from now of maybe how much we get back to that. Everybody's saying the world's going to change dramatically, and I'm not sure of that just yet.
Dan Diehl:
I think a lot of the tech companies and the big banks that we work want their employees to come back to work, a lot of the employees want to come back to work. This whole education, it's in the news every day, kids need to get back to school, teachers need to get back to work, everything. So I think there is a normalcy to what we were doing that I think needs to return, and we need to be comfortable and safe going back to better buildings. And like I said before, it's achievable. It's very achievable.
Pete Asch:
And if you think about it, there are these moments that make idea coalesce. Your company's been in operation for 20 years. I was thinking about, I spent many years in Portland, Oregon, where I've came across the first Lead building. Probably didn't see one on the east coast till another 10 years later. But today green building's about an $81 billion market. What is the potential for the Well building market? I know you got your start with green buildings. Do you see Well buildings being equally large of an opportunity?
Dan Diehl:
IWBI and Well is that... It's actually run by some of the previous leadership of Lead, and Lead was worldwide adopted on a huge adoption scale. Well is ahead of Lead, and this is only going to make it adopt that much more rapidly. And whether or not somebody fully adopts Well, they're certainly going to do... They're going to adopt the practices of well. So whether or not somebody goes for Lead certification or Well certification's different than... They're going to take all of the learning and the education and at least try to implement as much as they cost effectively can into their operations to provide healthier, better, productive, safer environments. All the above as air quality effects. In five years it will be ubiquitous in the built environment. It'll be like temperature. You'll walk into a building and you should have an idea of what the air quality in that building is today, and what kind of space you're walking into. As occupiers of buildings, I think people are going to want and demand that.
Dan Diehl:
The younger generation, very sustainably focused, really health conscious, really wants to make sure that they're in office. They care about this stuff. They want to go to work and they want to know that they're in a good environment. So it's going to be demanded of the generations coming up. And you mentioned Oregon. We do a ton of business in California and Seattle on the west coast, so it's always been very green, sustainably conscious in certain parts of the country more so than others. And it's funny, in other places, like in New York where you are, it's being driven by the energy infrastructure and the need and the requirement to get more efficient.
Dan Diehl:
But now you've got these conflicting goals of being really energy efficient. You don't want to go back to the 70s where you're boarding up the building, and now you're going to want to flood it more with air, so how do you balance these two things? And I just think that's a huge takeaway for listeners is that you do need to balance them because both are important, and sustainability and energy efficiency is more with global climate change and everything else. Soon as COVID vaccine comes and we all go back to thinking we're normal again, now we're going to be right back focused to energy efficiency and sustainability. But you can have both of these things. You just have to balance them
Pete Asch:
Just to back up your point, the Harvard School of Public Health, actually the director of that said that direct quote from Joseph Allen, the plexiglass will go away, but the attention to air quality, water quality, lighting, and acoustics will stay.
Dan Diehl:
Dr. Allen's very well known to us, and he's a pioneer in healthy buildings, and he has a book, a healthy buildings book that you can get a lot of information from. You asked that question earlier about learning, and that's a great book to read that. And a lot of that was early on about demand controlled ventilation and CO2 in buildings, and just what the impact is in health and productivity. But now with this, this is... I think Dr. Allen also said, he's like, your building facilities operator's going to become more important to your health and wellness than your doctor.
Pete Asch:
And when you think about health and wellness today, your phone also is almost as important to you as your doctor, because it can take your at rate and tell you how far you've walked and all that. Have you considered that idea? And even with COVID, in New Jersey, where I live, there's a app that helps you let you know if you come into anywhere near contact to someone who's been reported positive. Do you see, as the the whole society begins to embrace this more and more, that it comes to a point where when you walk into the building, your phone will connect with that system to let you know there is an issue or there isn't an issue going on?
Dan Diehl:
Yeah, we've had a demo for a long time, but we're launching in December our first mobile application. So we'll have it on our phone as well. I can click on the Aircuity logo and I can see, I can pick the rooms that I'm going to occupy that day, and I can get the air quality of information. Now that has to be shared by your building owner operator. So that that's going to be a process. I think air quality data and the transmission of it, we're seeing this a lot in commercial real estate. If I'm the landlord, to use an antiquated word, if you will, and I have a tenant, my role as a landlord is to make sure that I'm providing clean air to that space. But I don't know what's happening in that space. So I really care about what's being supplied in that space.
Dan Diehl:
If I'm the tenant, I care about what I'm getting. So I'm going to maybe say to a landlord, "Hey, I want to monitor the air that's coming to my space." It's going to be important that you have reliable data sets on both sides of that equation, or else it's really going to cause conflict. So I think... I've always described this. I think you're seeing offensive and defensive plays. So as landlords, you're seeing very defensively saying, "I've got to know what my air quality is because I got to protect my myself." And then you're going to see some take it from a very offensive perspective and say, "I want to really provide a good environment and I want to use it as marketing and a tenant attraction, tenant retention tool."
Dan Diehl:
So I think you'll see people, like always, fall on both sides of those camps. And it really depends a lot on, again, is it 100% unoccupied building? Is it a multitenant with a lot of diverse tenants in there, very broken up building? You're going to see different types of implementations of that over time. Air quality, though, no matter which side you're on there, is going to become important, I think, for both of those constituent groups.
Pete Asch:
What are some of the projects that maybe we haven't touched on today that you think a listener really can learn, not just what your company offers, but the value of being concerned with these air quality issues?
Dan Diehl:
Well, I mean, just to stick close to home in New York where we're right now implementing a project for Bloomberg's headquarters. They were an Aircuity customer that was doing demand controlled ventilation, and they were implementing demand based CO2 ventilation control, and we're upgrading their system to include all those other healthy building parameters. So small particles, volatile organic compounds, CO, and humidity. And we're integrating that also into the building control system to provide more ventilation where and when needed. So that's a really good, again, case study of an owner occupier, somebody that wants to improve their system in their environment for the benefit of their employees. That's just a really good example of commercial office space.
Dan Diehl:
We're working with Bristol Myers Squibb, Takeda, Eli Lilly in the life sciences space. One thing that I think that's interesting out of this, and you're going to see a lot of this in New York City, is we work with a lot of the REITs, real estate investment trust. So Alexandria, Wexford, and Biomed Realty, these are big companies that develop critical environment research space. There's a shortage of research space, and you can imagine coming out of this, I see a big uptick in life sciences industry, and you see a very large shortage of critical environment space in the world. So you're going to see a lot of laboratory research space being developed. There's huge amounts of square feet being added in New York City, just as an example.
Dan Diehl:
And there's already been tech centers of Boston and San Diego, and maybe a little bit in the San Francisco area where you have these big heavy research... Northern New Jersey, heavy research spaces. So I think that's going to be a big offshoot of this over the next 10 years as well, you're going to see more research space being done. And luckily for us, that's a cornerstone or a core element of who we are in our business. So we continue to work with higher education, commercial real estate, a lot of the large lab real estate development firms. And as it goes down to K through 12 and government facilities, et cetera. Some of those are going to take a little bit more time because the public's involved, so we're tending to focus more on the people that are ready to go and really want to get people back in the office, et cetera.
Dan Diehl:
But we're lucky, like I said earlier. We're really lucky to work with really good customers who value all the things we've spoken about on this talk, whereas they value the human capital side, they understand this sustainability impact, and they've tried other means over the years of operating their portfolios and they lean on us because eventually they figure out this is the way you do it effectively over the life of a building. Probably the thing I'm most personally proud of is who we work with. It's definitely a who's who list of customers, and we're talking to a lot more every day. So certainly been really busy over the last year. Definitely COVID has brought an awareness that I... It's taken into hyperdrive in terms of air quality in the built environment.
Pete Asch:
Well, I imagine it takes away the need for you to explain the value of what you're providing. And it's now just down to the nuts and bolts of how you do it. Thank you so much, Dan, for joining us Inside the ICE House.
Dan Diehl:
Yeah. Thank you so much for having me. I really enjoyed the conversation and I'm glad that the world is awakening to this. It's an important topic and it impacts us all. And I hope we as a company can continue to really help our customers and everybody get back to whatever the new normal is, but just a better normal, healthier buildings, healthier environments, in a more sustainable future.
Pete Asch:
That's our conversation for this week. Our guest was Dan Diehl, CEO of Aircuity. If you like what you heard, please rate us on iTunes so other folks know where to find us. Got a question or comment you'd like one of our experts to tackle on a future show? Email us [email protected] or tweet at us @ICEHousepodcast. Our show is produced by Ken Awalt, production assistance from Sam Citarella and Ian Wolf. I'm Pete Asch, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.
