smart building market to hit $92.5bn by 2025, driven by worker … · 2019-12-17 · smart building...
TRANSCRIPT
Smart Building market to hit $92.5bn by 2025, driven by worker productivity goals
Smart Buildings Forecast 2019-2025
Companies mentioned in this report: ABB, Advanced Control Solutions, Airedale, AWS, Bajaj Electricals, Bosch, Boss Controls, Building Logix, Centrica, Cisco, Cylon, Delta Controls, Engie, Enel, Entelec, Eon, Google, GridDuck, Hitachi, Honeywell, HPE, IBM, Intel, Johnson Controls, Legrand, Microsoft, NEC, Oracle, Osram, Panasonic, PTC, Sage, Salesforce, SAP, Schneider Electric, Siemens, Signify (Philips), Spaceti , Trend, United Technologies, Verdigris.
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R E T H I N K T E C H N O L O G Y R E S E A R C H
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“R e t h i n k h a s a c o m mi t m e n t t o f o r e c a s t i n g m a r k e t s t h a t o t h e r s s h y aw a y f r o m – t h o s e o n t h e v e r g e o f r a d i c a l t r a n s f o r ma t i o n ”
Lead analyst: Alex Davies
Executive Summary Only
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Page
Contents 2
Graphs 3
Introduction and Top-Level View 4
Smart Buildings 7
Smart Buildings – The Technology 13
Smart Buildings – The Market 17
Methodology 19
About Rethink 20
Contents
Copyright © 2020 Rethink Research, All rights reserved.
Graphs
Page
Smart Building Value ($) vs Total Building Area (m2) 7
Smart Building Total Area (m2) - By Region 7
Smart Building Total Area (m2) - By Sector 8
Smart Building Area (m2) – Industrial 8
Smart Buildings Area (m2) – Commercial 9
Smart Buildings - Industrial by Region 2019 9
Smart Buildings - Industrial by Region 2025 9
Smart Buildings - Commercial by Region 2019 10
Smart Buildings - Commercial by Region 2025 10
Buildings Area (m2) 11
Total Smart Building Devices 11
Total Smart Building Value ($) 12
Copyright © 2020 Rethink Research, All rights reserved.
Introduction & Top-Level View
The smart building market will grow to $XX.Xbn globally, by 2025,
according to our research, up from around $X.Xbn in 2019, with the
primary driver being the desire to improve the productivity of the
workers that are housed within those buildings’ walls. In most
instances, no matter how you slice it, when you look at the costs of
occupying a building in terms of square-meters, human capital is
almost always the largest single component.
To this end, if you want to use smart building technologies to save costs
or increase margins, the main use case you should be targeting is
human productivity. While the technologies can certainly help manage
operating costs, such as energy bills, or provide improved services such
as secure access or usage analytics, on a per-dollar basis, these should
not be the priority targets for new installations.
This is something of a surprise for many in the technology markets. We
are accustomed to IoT technologies being used for process or resource
optimization, such as smart metering providing better purchasing
information for energy providers, or predictive maintenance helping to
reduce operational costs and unplanned downtime.
This line of thinking is not typically extended to human workers
however, but when you evaluate how buildings are used, it becomes
clear that getting more out of your workforce is a better use of your
budget. To this end, the IoT technologies needed to better understand
and optimize a building’s internal processes and the patterns of its
workers are vital, and will account for a large number of the devices
installed in the smart building sector.
There’s a rule of thumb used, called the ‘3-30-300 Rule,’ which was
popularized by real estate firm JLL. The gist of it is that for every square
-foot of space that a company occupies in a building, it will spend $X
annually on utilities, $XX on rent, and $XXX on its payroll. Based on
this ratio, you can see how smart building efforts should be
coordinated. A 100% efficiency improvement would only save $X.XX
per square-foot per year, which is the equivalent of a X.X% change in
the payroll costs.
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Using the rule, JLL argued that if you were to reduce employee
absenteeism by XX%, this would equate to $X.XX per square-foot
annually, and a XX% improvement in employee retention would
translate to an $XX per square-foot annual saving. If you were to
increase employee productivity by XX%, this would translate to $XX per
square-foot per year – and it points to the World Green Building
Council’s (WGBC) decree that an XX-XX% improvement is quite easily
achieved in the right environment.
The WGBC published a quite influential meta-study back in 2013 that
combined the findings of dozens of other pieces of research, to examine
the impact of sustainable building design on employee health. JLL was
interested in this from the productivity perspective, and the WGBC
found that eight primary factors had direct positive impacts on building
occupants – in this case, workers.
The factors were natural light, good air and ventilation, temperature
controls, views, and green spaces. The WGBC then posited that the
following increases in productivity could be achieved by making better
use of the factors: better lighting (XX% increase), access to green natural
spaces (XX%), improved ventilation (XX%), and individual temperature
control (X%).
JLL calculated the returns based on an algorithm some of its real estate
brokers developed, but of course, those figures aren’t applicable to
every building or task.
Payroll, in the commercial sector at least, is usually north of XX% of a
company’s operating costs, often much closer to XX%. Industrial output
has much more materials costs, and so JLL’s rule is not so applicable.
However, given that the commercial sector accounts for around XX% of
global GDP, with Industry on XX% and Agriculture at about X%, the
rule is still quite useful for evaluating the value of smart buildings
across the spectrum.
To this end, if a company has a given budget to invest, it seems prudent
to spend that cash on trying to make employees more productive, rather
than save on energy bills. That’s a message that isn’t going to go down
well in this environmentally-charged climate, but thankfully, many of
the energy providers and associated systems integrators will install
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Demand Response (DR) and automation technologies through regular
upgrade and replacement cycles, which will help optimize energy
usage in these buildings.
Collectively, buildings and construction accounts for around XX-XX%
of global energy use and energy-related carbon dioxide emissions.
Because of this, the per square-foot energy efficiency of buildings needs
to improve by around XX% in order to meet the Paris Agreement
environmental targets. By 2060, it is expected that the total buildings
sector’s footprint will have doubled – reaching around XXXbn square-
meters.
This forecast examines the value of smart building technology globally,
covering the proportion of the hardware that can be directly attributed
to smart buildings, the associated software and management platform
services, and installation and management related consulting. It does
not try to forecast the total value created by the technology, nor the
installation and upkeep revenues. That would be such a large number
that it would not be useful.
In terms of market variation, we expect North America and Europe
West to be the strongest initial market, with parts of APAC (China,
Japan, South Korea) making up for the rest of that region’s low
adoption. This is a pretty similar story to
many of our other IoT forecasts, and there
is not really reason to think that this one
will be markedly different.
This is a trend that is going to take longer
to emerge too, and we expect the years
immediately after the forecast period to
post some impressive growth. We foresee
this market being more gradual than the
explosive growth curves seen in other IoT
markets, but due to its potential size, this
slower penetration is not to be seen in a negative light.
Copyright © 2020 Rethink Research, All rights reserved.
The data collected for the report was drawn from a series of interviews
with operators, equipment vendors, silicon designers, and device
manufacturers. It draws on Rethink Technology Research’s deep
knowledge of the markets, as well as Riot Research’s expertise in the
IoT. Public documents and filings, and private confessions, have been
combined with and used to corroborate the forecast.
Riot Research maintains a demographic model that charts a range of
criteria that help us profile countries. This ranges from population
projections, landmass usage and urban population data, household
income and spending, broadband internet and mobile usage, transport
infrastructure and usage, and national productivity and economic data.
In particular, a model had to be created that would project the growth of
the construction industry, moving forward. This would be the basis for
the forecast, upon which we can forecast penetration according to
market enthusiasm and vendor success.
This demographic model formed the basis of initial projections, for the
key regions and countries we were interested in. From this, we can then
determine the value of each of the vertical market and value chain
classifications, which are modeled through the period. These
adjustments are based on our research and experience with the sectors
and other markets, and are intended to create a top-level view of the
sector.
Methodology
Copyright © 2020 Rethink Research, All rights reserved.
This report is for any at C-Suite and strategy level that is trying to
improve profit margins in buildings, whether that is in the managerial
and human resources realm or in the operations and facilities
management side. This report is aimed at anyone running industrial or
commercial buildings, those who employ large workforces, and any
equipment and service providers that would sell into those markets.
The data contained within this report, and the wealth of additional in-
formation you will find in the Riot Research and Riot archives, will
enrich your understanding of the IoT technologies at play here, and the
wider ecosystem in which they exist. Nearly every business can use this
understanding to optimize capital and operational expenditures,
improve worker productivity, and win more contracts.
This report should be read by C-Suite individuals, systems integrators,
electrical utilities, smart city providers, those in the energy transmission
business and power generation, and technology and software suppliers
to all of the above. Government regulators, lobbying firms, and strategic
decision makers should all study the data contained.
This report includes:
• Numbers you can drop straight into your business case
• An expectation of the number of smart building penetration
• A clear understanding of the initial scope of this market, without
hype
The full report can be purchase via our e-commerce store.
Who should buy this report and what should they get out of it?
Copyright © 2020 Rethink Research, All rights reserved.
RIOT RESEARCH MAIN CONTRIBUTORS
Alex Davies—Principal Analyst and Editor of Riot
+44 (0)117 329 1480
Philip Hunter—Research Fellow at Rethink Research
+44 (0)208 682 0862
Peter White—Co-founder and CEO
+44 (0)117 925 7019
Caroline Gabriel - Research Director
+44 (0)207 450 1230
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Published January 2020