Intelligent buildings are a unique segment in the “Internet of Things,” an industry that has several different types of use cases for connected technology. For example, energy management and how demand response work in a building. Security is another area, such as video surveillance and access control, and the integration of these solutions in monitoring work zones within a building that adjusts lighting and ventilation in a zone based on the number of employees in a sector. Renewable energy and buildings that sell energy back to the grid. These are just a few examples.
When evaluating this market, there are several different types of owners and, based on the type of structure/culture, their willingness to adopt new technologies vary. The type of companies that tend to adopt connected technology are corporate campuses – where they own the building – or a new building. We see more companies looking to become sustainable, which is spurring innovation. Companies such as Apple are already showing innovation in this market with the buildings they own. For building owners, retrofits tend to be too expensive and deploying the latest technology tends to be less attractive.
For property owners, such as real estate investment trust companies in the commercial building segment, the primary areas of focus are: optimizing revenues, limiting expenses, reducing aged rent and ensuring that buildings meet local codes. The first three are key performance metrics that are typically tied to the pay of employees that manage buildings, and the latter keeps owners up at night. With that said, these are key areas of focus for stakeholders in the commercial building industry.
A problem that plagues vendors when they sell intelligent building solutions is that they are not completely aligned with the building owners and the tenants of those buildings. For example, an accounting firm, law practice, insurance company, startup firm, etc., may not be aware of intelligent buildings, therefore it is not a key priority when they look for office space. Typically, their primary concerns are: class of the building, location and rental rates. If an intelligent building technology is not key selection criteria, why should it be one for the commercial building owner?
In order to create awareness for the tenants of commercial buildings, intelligent building solution providers need to do more to better educate potential building clients. To date, most of the market education has been geared toward property owners. Increasing the awareness of tenants has the potential to drive adoption for retrofits because the demand could increase. By showing occupants how they can become more efficient with IoT/machine-to-machine solutions will help increase the demand for intelligent buildings.
The chart below provides a snapshot of an intelligent building.
Economic health of intelligent buildings
Currently, supplies are at an all-time low in the commercial real estate building market. Several areas around the world are overbuilt and there is a considerable amount of vacancies in the market. In addition, rental rates are at low levels, which are limiting the development of new buildings. Since intelligent buildings are primarily deployed in new construction, the current market opportunity is not strong. However, there is an expected opportunity once the market rebounds. The following chart shows the health of the commercial building industry.
Source: Urban Land Institute
Key companies in the value chain
Unlike other markets, the commercial building market is one of the most fragmented sectors. The market also varies from city to city and the key influencers can vary from region to region. Furthermore, depending on the segment, the path to market also varies. Some of the most common influencers include: architects, engineers, system integrators and building owners.
There are some companies that have a national presence and influence in the industry. These include companies such as Johnson Controls, Siemens, Honeywell, United Technologies and Bosch. These large conglomerates dominate the national conversation, but the demands of having a national infrastructure in place can be a hindrance to growth. The local and regional aspect of the industry adds to the challenge of changing the dynamics in the industry and this is perhaps witnessed best with the slow adoption of technology in the industry.
Final words
Intelligent buildings are a unique market for IoT. The potential for growth and the ability to add value to emerging solutions is vast, but the market is slow to change and it sometimes feels like the industry is stuck in the 1990s. While the barriers to develop emerging solutions are many, the industry is moving toward embracing changes. To really succeed in this industry, vendors and service providers must think globally but act locally. It is critical that vendors and service providers entrench themselves in the local economy to really succeed and flourish in this market. Compass Intelligence expects this market to embrace IoT solutions and provide long-term growth for IoT.
Keith Robinson is a senior strategist and consultant and the M2M practice lead at Compass Intelligence. Robinson directs the syndicated and consulting content for the M2M practice. He brings a considerable amount of project management and content development experience to Compass Intelligence’s M2M team. This experience has created new ways to improve clients’ experience and to better utilize business intelligence with various stakeholders throughout the ecosystem. Robinson has experience in monitoring several industries that include: M2M, telecom, retail, electronic manufacturing, transportation, industrial process control, medical devices, building automation, consumer electronics and the connected home. Robinson holds a B.A. from Fisk University and currently resides in Atlanta with his wife and two kids.
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