Smart Building Market Gathers Pace in Europe

New Forecast Expects Sales of Smart Systems to Triple by 2022

CCS Insight recently published its forecast of smart buildings in Europe. In this article, we offer a summary of the main findings.

Smart buildings are a major area of the Internet of things with obvious potential to become a large market. When we talk about smart buildings, we refer to systems that are part of the infrastructure of a building, rather than systems involved in the way the building is used. They include heating, ventilation and air conditioning, lighting, utility usage, access control, security, surveillance, safety systems, elevators and so on, but exclude smart meters, smart locks and door bells, for example. In deciding what makes a system smart, we’ve taken the view that a smart system produces data that allows decisions and actions to be taken, either within the system itself, or by sharing the data between systems.

The smart building market is still young and shaping. It initially looked as if building owners would tend to invest in a single integrated platform serving all the systems in their building. However, apart from brand new buildings, we’ve moved away from this assumption, since the market is developing in a much more fragmented fashion. Buyers are more likely to adopt separate smart systems at different moments of time, and those systems will often neither work together nor link to a common platform. For example, a building may have smart heating and smart lighting systems, but they’ll operate independently of each other.

This has a positive effect on the number of individual systems sold. In the key nine European countries in our forecast — France, Germany, Italy, the Nordics (Denmark, Norway, Sweden and Finland), Spain and the UK — the total number of smart systems sold will nearly triple between 2018 and 2022, jumping from 2.9 million to 8.1 million. Germany will remain the largest market in 2022, followed by France.

The speed of adoption varies by country. In Germany and the Nordic region, growth in adoption of smart systems is expected to pick up as early as 2018.

France will see acceleration in demand during 2019, the UK a year later, and Spain and Italy further in the future.

Adoption of smartness can happen at different stages of the life of a building. Although it makes sense to build smartness into a newly constructed building, refurbishment drives the most demand in absolute terms, mainly because there’s a higher level of refurbishment activity than new construction.

We’re also now more upbeat about the opportunity for retrofitting smart systems, especially for residential buildings, largely because there’s wide availability of smart thermostats from the likes of Hive, Nest, tado and others. Consumers are now much more aware of smart systems for their homes, thanks to a rise in adoption of smart speakers like Amazon Echo and Google Home in the past year. Amazon in particular has done a good job of building the ecosystem for its speaker, and recently announced that there are 4,000 other products on the market that are compatible with its voice assistant, Alexa. These developments will boost the market for smart systems in family homes and multi-tenant residential buildings.

Nevertheless, commercial buildings lead the way in smart buildings, despite the general conservatism and limited knowledge and understanding of smart systems technology among building managers. This is because of the larger potential of cost savings and efficiency thanks to economies of scale, when compared with family or multi-tenant buildings.

Heating, ventilation and air conditioning will be the most common smart system in the near future, as it has the potential to offer a high level of cost savings. Lighting and surveillance will gain significance over the next five years, led by the commercial market where cost efficiency, economies of scale and the availability of data will become increasingly important.

Our latest smart buildings forecast for Europe shows a higher level of sales and quicker adoption than before. We now expect adoption to be based more on point solutions for individual systems without much integration between them. Although at one level this allows the market to expand more quickly, it also makes the visionary view of smart buildings and their potential to contribute to smart cities slip further into the distance.

The chart below offers a snapshot of our forecast.

Stock of smart buildings by country, 2015-2022

Source: CCS Insight Market Forecast: Smart Buildings, Europe, 2018-2022

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