August 2013

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Building Automation’s Journey

William Rhodes

William Rhodes,
Senior Market Analyst
Building Technologies
IHS/IMS Research

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The building automation market is currently on a journey towards an ideal where the majority of buildings has an automated control system achieving energy savings. Whilst some journeys can be fast, efficient and stress free; others are not as simple. On this building automation journey, different parts of the world are having very different experiences.

The European building automation market is currently driving along the road quite slowly. Over the past few years there has been some large pot holes to avoid, causing the market in some countries to contract, such as Spain and Portugal. Unfortunately, the situation is likely to get worse before it gets better. A potential exit from the Euro for either Greece or Cyprus is looking more unlikely, but the lack in confidence across the region is straining construction spending.

The German building automation market was historically traveling on the autobahn, but today the German market has stalled. In 2012, the German building automation market was essentially flat on 2011 and is unlikely to get going again until confidence returns within the wider region.

The Middle East market is on a helicopter on-route. The building automation market is keeping up with the Asian market in its plane and certainly growing faster than parts of Europe and North America. Across Africa and the Middle East, the ‘Arab Spring’ unrest has led to some hesitancy on the part of investors, thus moderating construction growth. On the other hand, some wealthier countries, particularly those such as Saudi Arabia and Jordan, have boosted construction in a move to quell potential dissidents in their countries.

The American building automation market is on the train but over the past few years has not being going at full speed. The US Congress avoided going over the fiscal cliff in March 2012, but the deadline for a deficit reduction package was not met, thereby triggering automatic spending cuts but since then the train has not derailed.  There is currently an excess capacity of non-residential structures in the US which will need to be worked off before there is a significant need for new structures to be constructed. However, this provides an opportunity for the building automation retrofit market, particularly in retail stores.

Control Solutions, Inc The Asian building automation market is on a plane. It left the airport a little later than the European’s car or the American train, but it is now traveling faster than the other two. The building automation market in Asia, excluding Japan is forecast to see the highest growth in comparison to the other major regions in the world over the next five years. However, emphasis on energy savings and efficiency is not such a priority as in other regions, which is slowing potential growth. The Asia region accounted for approximately 44% of global construction spending in 2013 and will lead global construction growth in 2013, albeit at a slower rate than in previous years.

The Japanese building automation market has had to land in order to weather the economic storm. The Japanese market should be growing stronger because of a renewed interest in energy savings. However, the investment capital to pay for building automation installations in existing buildings is lacking because consumer confidence and economic confidence is low. The new stimulus programs created by Prime Minister Shinzo Abe have created a more optimistic outlook for construction, which may start to filter down into the building automation market in the medium term.

Overall, the world building automation market is on its way but is not traveling as fast as it could be. While 2012 construction spending finally saw an increase over the high of 2007, (in real terms) it is clear that construction spending remains weighed down by the weakness in the global economy. However, as construction spending picks up, the road blocks slowing the building automation market growth will start to be removed and the general outlook for 2013 and beyond will improve. 



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