INTRODUCTION
STUDY GOALS AND OBJECTIVES
This report characterizes and quantifies the global market potential of building automation products. Historically, facilities managers have worked with distinct systems to manage properties. Buildings have become so large and the underlying technology so complex that overseeing all of the different components has been difficult. Facilities managers have been searching for more integrated approaches toward delivering services to tenants. Building automation technology ties all of the different elements (e.g., building management systems, HVAC, energy management, lighting, security) into a cohesive whole. The goal of this report is to provide an understanding of the market factors, state-of-the-art developments, and economic influences driving the building automation market. The study analyzes the different components, the influence of networking technology on building automation, and the impact of the different components in various world markets such as Europe, North America, Asia (including Australia), and the rest of the world.
The study contains information useful for planning production and targeting market efforts for delivery of building automation systems as well integration with other systems. Trends in building automation are investigated, particularly the increasing emphasis on energy management, the growing need for security systems, and the impact of computer technology on facilities management.
Attention is focused on markets for buildings larger than single-family homes. Projections are provided for the total building automation market through 2014, along with estimates of the market in terms of dollar revenue for each type (i.e., BMS, HVAC, energy management, lighting, and security) alone and the cumulative totals for the market overall. The forecast is provided to quantify the differences between revenues for the equipment (e.g., hardware, software, networks) and consulting services, which include such facets as design and consultation work, installation, training, commissioning, operations, and maintenance. Traditionally, the equipment portion of these sales was the largest opportunity; however, it has been dropping as suppliers have been focusing more on services, which provide ongoing revenue streams, as opposed to equipment sales, which represent one-time purchases.
REASONS FOR DOING THE STUDY
Several forces are driving trends toward increasing levels of automation of the systems that provide essential services in buildings, as well as the centralization of controls for these systems. Higher levels of automation are essential for maintaining the profitability of commercial buildings, controlling the operating costs of all buildings, and ensuring competitiveness in buildings in areas where tenants have other options for residence.
The development, proliferation, and flexibility of microprocessor-based controls, interface devices, distributed actuators, standardized network protocols, computerized interfaces, and wireless communications have presented an opportunity for highly automated centralized building control systems.
Building automation systems are usually installed at the onset in new buildings, and integration suites are becoming increasingly common in major renovations where new systems such as structured cabling are being put into place. The study explores national and international building codes and standards, the major manufacturers of building automation equipment and component systems, and the technologies involved in those systems.
Standardized network protocols, interfaces, personal computers (PCs), handheld wireless devices, and distributed touchpads are providing the primary human interface elements for building automation systems. The strength of the world building automation market relies on the health of local or regional construction markets. This, in turn, depends on world, regional, and national economies.
Consequently, sales of these products have been largely seen in the world’s more advanced business epicenters: Europe, the U.S., China, and Japan. This study analyzes the most prominent markets for these systems and breaks it down into four sections: Europe, North America, Asia (including Australia), and South America and Africa. The market’s economic potential is framed in the context of the construction market for each area examined and then consolidated to provide a complete picture of the market. The total market is segmented into four building types: office buildings, industrial, multitenant housing, and retail properties, including hotels.
Extensive investigations have also been carried out to quantify the size of the market in five areas: HVAC, Lighting, Energy Management, Security, and BMS. This was done to aid marketers, manufacturers, system integrators, contractors, and other parties involved in the building automation industry to better direct their efforts at presenting their products and services to the most promising markets.
SCOPE OF REPORT
The building of automation systems for commercial, office, institutional, and high-rise residential buildings controls a suite of component systems that include (in alphabetical order):
- BMS systems
- Environmental controls (HVAC)
- Energy management
- Lighting management
- Security and access control
This report examines technologies, markets, and factors influencing the markets for integrated control systems and systems that integrate the controls of various subsystems. Markets are forecast on the basis of historic activity and current opportunities, government initiatives and policies, and the status of the construction and renovation industries in specific nations.
The forecasts presented are for the total available markets. Some discussion is provided that compares actual revenues with market potential on various continents. Markets are broken down on a geographic basis and discussed within the context of the trends in construction activity, regulatory initiatives, and the revenue potential associated with building automation systems.
The bulk of the revenue comes from the world’s three largest markets: Europe, North America, and Asia. A detailed analysis of the building automation market potential in these geopolitical economic regions is used as a basis for estimating world markets for these products. Thorough analyses are carried out of construction industry practices in the target regions, along with trends toward the uptake of building automation products and costs, associated laws, regulations, and common practices.
Identification has also been made of the prime party in the project chain that makes the decision on which and to what extent a building automation configuration is selected for a building project. Geographic and environmental factors influencing requirements for the systems are examined, as are national and international responses to global environmental challenges.
INTENDED AUDIENCE
This report was prepared for individuals who are interested in the building management system market. Those individuals could include vendors involved in the research, development, manufacturing, or marketing of these products. The report will help those individuals evaluate market trends and respond to market changes so they can perform more effectively in their organizations. In addition, commercial facilities managers may find the report useful because they can use the information to determine which steps they need to take to ensure that their services remain competitive. Last, financial analysts can benefit from the report. They will be able to determine the market potential for various products and evaluate the performance of various vendors in this space.
INFORMATION SOURCES
This report was prepared based on information gleaned from a wide variety of sources, including interviews with manufacturer executives, inventors, engineers, and marketers; government legislators and regulators; construction industry representatives; purchasing officers; building management firm representatives; and real estate development company representatives. Much of the market research numbers came from company financial reports and interviews with suppliers who outlined various market trends and company initiatives. Extensive use was made of the Internet, industry trade publications, and print media. Digital and printed statistics were gathered to quantify and help verify trends in the level of activity in the various market sectors.
The approach taken to quantify the world markets for integrated business management systems involved several steps. Primary among these was delineating the technologies involved in building automation and the companies that produce them. Because the market is evolving, clear boundaries among various categories can be difficult to discern. Autonomous product categories have been shifting as suppliers have been trying to deliver a more cohesive and integrated approach to building management. In addition, vendors have been broadening their products, so many offer products in numerous categories. In some cases, they bundle these systems together to entice potential developers, so divvying up the revenue from different types of products can be difficult. Consultations with various companies and industry experts helped to break those categories down as finely as possible. Then, a quantitative understanding was developed of the characteristics of nonresidential construction industries in different regions of the world.
In addition, assessments were made of regulatory policies governing each region with respect to requirements for building automation systems. This was done with varying degrees of granularity, keeping in mind that special codes are enforced in different nations. The intrinsic goals of regulatory encouragement of such buildings are fourfold:
- Minimization of environmental demands of buildings
- Maximization of the productivity of persons using the buildings
- Cost control through labor reduction and energy efficient operation
- Value enhancement for building owners
A summary understanding of the markets was developed for component systems of various building automation systems. With this information in hand, trade publications and Internet searches were performed, along with concurrent interviews with industry representatives, regulators, and legislators to discern trends in the extent of implementation of fully integrated building automation systems.
INFORMATION SOURCES (Continued)
Attention was also paid to activity in markets for systems that integrate disparate component systems. In this regard, networking and data transfer capabilities of the product lines of various component system vendors were taken as an indication of manufacturers’ thrust toward integrated or integratable systems.
Revenue from the various building automation products comes from two sources. New construction is one source. Analysts estimate that building automation elements account for 2.5% to 3.5% of the total construction project value for new buildings. The costs included both equipment and services. In addition, owners decide to renovate their buildings to make them more attractive to current and potential customers. Because new building construction is such an expensive proposition, the bulk of the revenue comes from renovations. Building automation revenue was divided into equipment sales and consulting services associated with these projects. The market for these products is shifting, with equipment accounting for a smaller percentage of a vendor’s revenue and consulting services accounting for a higher percentage. Consequentially, suppliers are not only trying to develop strong products, but they are also building up their distribution channels.
In addition, the world economy has been in a tailspin since Fall 2008. With companies curbing expenses and cutting back on hiring employees, the market slipped 7.7% in 2009. A gradual recovery is anticipated. In the U.S., the government has pumped $787 billion dollars into a stimulus plan to spur additional hiring. The immediate impact of that move is expected to slow the downturn, but hiring, and therefore building expansion, is expected to remain stagnant in 2010. The downturn is also having an impact in Asia, especially in China, which had been seeing strong growth as companies moved their manufacturing abroad to cut expenses and take advantage of the inexpensive labor pool.
In the years following 2010, the economy is expected to grow at a modest rate between 1% and 2%. These numbers came from projections from various economic monitoring groups, including the International Monetary Fund, the World Bank, and the CIA World Fact Book. Input from these various sectors was used to complete the 5-year market projections. All revenues are expressed in U.S. dollars. The gradual uptick in the world’s major economies will have a major impact in the building automation market. The sudden downturn in 2009 delayed many necessary projects. Consequently, the pent up demand will become evident in 2011 and 2012 before settling into a more typical mature growth period in 2013 and 2014.
ANALYST CREDENTIALS
With more than two decades of experience, Paul Korzeniowski is a market research analyst and building automation consultant. His work has centered on determining major market trends in areas such as interest in the development of new networking standards, integration of various building systems, and the emergence of new technologies such as wireless communications. He has authored reports on markets for building automation systems for a wide variety of publications, including Investors Business Daily, Business 2.0, and EnergyBiz.
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DISCLAIMER
The information developed in this report is intended to be as reliable as possible at the time of publication and of a professional nature. This information does not constitute managerial, legal, or accounting advice; nor should it serve as a corporate policy guide, laboratory manual, or an endorsement of any product, as much of the information is speculative in nature. The author assumes no responsibility for any loss or damage that might result from reliance on the reported information or its use.
Report Code: IFT010B, Published: May 2010, Analyst: Paul Korzeniowski
