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Latent Demand Could Double the Size of the World’s Largest Controls Market
The latest edition of i&i/ Proplan’s study on the North American market for Intelligent Building Controls (IBC(e))* shows that sales by IBC(e) manufacturers at engineered prices were approximately $1.3 billion in 1998 making it the world’s largest single market.
The report shows that it has by far the largest building stock and the highest spend on construction of new buildings, whilst installing more hvac equipment, consuming more energy per square foot and having the highest number of heating and cooling degree days of any developed economy. However the penetration of advanced controls is only half that of Germany and therefore it has the potential to double its size. The main reasons for this are lower specification and contribution from small and medium sized buildings, which are not cost effective due to the small proportion of controls distributed through controls contractors. At 35%, this is significantly lower than the 50% in countries such as the UK.
Demand grew by between 4% and 5% in 1994 but the rate of growth has gradually increased since then to reach 10% in 1998, whilst in the last two years ddc product growth has grown by 12% per annum. This market above all others offers the best opportunity in the developed world for sustained growth over the next five years and it clearly must be a priority market for all aspiring suppliers.
The report is sceptical that suppliers will aggressively tackle the challenge to release the latent market potential because growth at the present level can almost be guaranteed for the next two years, riding on the back of booming new build market. So, despite some assistance through changing legislation and a greater awareness of green issues, the untapped potential of the existing building stock will only trickle feed into the market place. New construction activity could well turn down after 2000 and it is therefore important, in order to sustain high growth, that companies now seek solutions to increase penetration of controls and strengthened their distribution channels.
New construction and major refurbishment have been the main drivers for growth during the last five years. But indoor air quality coupled with energy conservation will set the pace of growth in the new millennium. This is because the transition to a deregulated electricity market, in the short to medium term, will not result in the expected reduction in electricity prices for the demand for power is growing at a time when new capacity has been slow to come on line and there are bottlenecks on transmission lines. This has been clearly demonstrated by the fact that at least one Power Utility has not been able to meet the demand of its customers during the heat wave this summer and has incurred heavy financial losses. The need to reduce energy costs at the same time as improving air quality can only therefore be achieved by reducing energy consumption and this can only be realised by installing more advanced controls in buildings.
Footnote: * DDC sales value by manufacturers at engineered and commissioned prices.
i & i is Europe’s leading research and consultancy company specialising in intelligent systems in buildings. i & i provides a comprehensive range of professional services to suppliers, managers, government and industry. The Proplan division established in 1980 has analysed the markets and technology for building controls and services in 30 different countries in Western and Eastern Europe, Scandinavia, the Middle East, S.E. Asia and the Far East including Japan and China.
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