Tech firms set to cash in on 'smart building' boom

Increased demand for sophisticated software and analytics tools, claims IDC

The "smart building" market has emerged from years of stunted growth and is now ripe for investment from tech firms, according to IDC, which predicts explosive growth for the trend.

Smart buildings are those which are automated by the use of technology in order to make them more efficient for their users.

In recent years the market has failed to live up to expectations, posting slower-than-expected growth, according to IDC. But the analyst said that in the coming five years, smart buildings will really take off, presenting a prime opportunity for tech firms.

IDC forecasts spending in the smart building market will grow from $7.3bn (£4.43bn) in 2014 to $21.9bn in 2018 – representing a 28.4 per cent compound annual growth rate.

It puts the rocketing growth forecast down to a gradual increase in energy prices which has driven the need for more efficiency in buildings.

"Prior to 2013, the global smart building market grew more slowly than expected due to externalities such as less expensive electricity in several markets and a slow economic recovery leading to deferred capital investments," IDC said.

"In 2014 and over the next several years, adoption is expected to recover as the economic recovery takes hold and as energy costs remain a large and variable component of building operation."

The smart building market is poised for the most rapid growth in western Europe, North America and the Asia-Pacific region in the next five years, with the government and healthcare verticals set to be the prime early adopters.

The analyst said that as the market picks up, opportunities will arise for tech firms to supply software and services to make sense of data collected from smart buildings.

"With many basic control and monitoring systems in place, a need is developing for intelligent software and external services to help analyse, interpret, and prioritise the data that is being collected," it said.

Jill Feblowitz, vice president of IDC Energy Insights, added that data analytics is another important area for smart building managers to consider.

"Often, gathering building data is not the issue, rather combining, interpreting, and prioritising that data is becoming the key challenge," she said.