Despite the Covid-19 outbreak, Omdia predicts significant investment in smart building projects in the retail sectors as a mean of responding to the sector’s challenges. Sales of smart building technologies are anticipated to grow by 4.3% in 2020 to reach $685.7 million.
The outbreak of the COVID-19 coronavirus in central China and then in the rest of the world has been the most significant headline in 2020. Coronavirus disease (COVID19) is an infectious disease caused by a newly discovered coronavirus. In March 2020, the World Health Organization (WHO) announced COVID-19 outbreak a pandemic. As of 6th May 2020, according to the WHO, more than 3.5 million cases of infected individuals have been confirmed and 245,000 death were declared.
On the economic side, the impact of the coronavirus has already been extensive worldwide. Many countries have been put under strict lockdown to contain the spread of the virus, leading to a total halt to major industrial production chains, travel bans, and supply-chain disruption, along with deteriorating financial conditions and falling commodity prices. While some countries in Asia and Europe have been gradually lifting their lockdown restrictions and restarting their economy, experts predict a global recession that should be deeper than that of 2008–09. World real GDP is predicted to decline by 3% in 2020, compared with a 1.7% contraction in 2009.
Demand for smart building technologies remaining positive in 2020 despite slow down
At the time of publication of this article, it has proven difficult to quantitatively estimate the impact of the pandemic on the smart buildings market for 2020 and beyond. This is especially the case in Europe and North America were the Covid-19 outbreak took place at a later stage compared to Asia. According to industry feedback, the first quarter of 2020 was very positive in these regions, with the demand and revenues for software and equipment for buildings increasing at a rapid pace. However, as lockdowns were enforced, supplies disrupted and construction projects halted from March onwards, performance in Q2 is expected to be rather negative, before potentially gathering pace during the course Q3.
The Asian market for connected equipment and BMS platforms was the first to be hit by the pandemic. In China for instance, markets for connected equipment such as climate controls and security products were considerably affected by the COVID-19 outbreak in Q1 of 2020. New construction projects throughout China have been hampered, which has restrained demand for equipment and integration platforms. In addition, the nation’s factories have struggled to produce equipment as workers have remained in their homes, which in turn has threatened global supply chains. Nonetheless, as the country has resumed production and projects have restarted, Omdia anticipates the demand for smart building technologies to pick up in Q2 of 2020 while remaining positive throughout the rest of the year. Meanwhile, as Japan has declared state of emergency over the coronavirus at the beginning of April and extended it at the beginning of May, the country’s projected recession might exacerbate, which in turn should impact negatively spending in constructions projects and smart building technologies for the all of 2020.
However, Omdia believes that the overall market for smart building technologies is expected to suffer less than other markets for discretionary goods and services, as these solutions should play a pivotal role in most building sectors when countries come out of lockdown.
The key functions of smart building technologies post-lockdown in the office and retail sectors
During the lockdown, most offices have temporarily shut and employees have been encouraged to work from home. Omdia expects that an important share of this workforce will want to work from home at least weekly when the lockdown is lifted and the pandemic over, primarily for safety reasons. In addition, businesses and employees have recognised that working from home was a viable option as they were not less productive in this environment.
Omdia expects that this trend will push these companies to reconsider their strategies in terms of workplaces and space. As social distancing and working remotely might become the norms, workplaces will have to be reshaped, using technologies that enable effective space optimisation for instance. Offices and financial institutions already represent the largest end-user industry for BMS platforms (around 35% of total revenue worldwide), which is 2.5 times larger than any other vertical. Omdia anticipates that a growing number of enterprise-level buildings will connect data from their BMS platforms to space utilisation and optimisation software or invest in standalone solutions that can help monitor how every square foot of space is being used - with the future objective to consolidate part of the space to reduce costs across an entire portfolio of buildings. This software primarily uses occupancy sensors to track occupied/unoccupied areas in an office building, and further data is collected related to the numbers of employees present, employees’ habits during working hours, and the times of days these rooms are available. Collecting and analysing data from multiple sensors and sources within a building to deliver actionable insights enable businesses to better use, optimize, and prioritize building spaces while ensuring high levels of comfort for employees in the building. Finally, some businesses might want to move away from hot-desking applications and flexible offices as employees might request personal desks and equipment. This will put a strain on flexible working spaces such as WeWork, which could continue to suffer in the short term after lockdown restrictions are lifted.
While employers, owners and facility managers have already been gradually implementing solutions improving employees’ health and wellbeing in their buildings, the focus post-lockdown will be to create workplaces that are safe for employees and visitors. Smart buildings are already capable of integrating technologies that can provide this level of protection, therefore, Omdia anticipates facility managers and building owners to invest further in these solutions, with revenues for connected equipment almost doubling by 2024 in this vertical. A key example of this could be smart technologies that can detect fevers or other key symptoms, and help offices create different working ‘zones’ in case of contamination. Equipment such as thermal cameras to identify people with fever and frictionless security could see a boost in sales in the coming months. Investments in IoT devices and platforms could also see an increase as owners and facility managers will need access to real-time data regarding their buildings, while employees and visitors will also want to have access to this information through mobile apps or public-facing dashboards (clean zones vs contaminated zones and air quality in the building). Finally, Omdia believes that workplace hygiene will become crucial once lockdown restrictions are eased. Investment in smart restroom systems such as door contact sensors and fill level sensors on soap dispensers and hand sanitisers that can send alerts to maintenance staff will inevitably increase.
As many countries around the world have been under strict lockdown to limit human contacts and the spread of the virus, this is having a significant impact on businesses in the retail sector. In countries under lockdown, virtually every retail outlet has locked their doors to consumers except grocery and pharmacy stores. Even in markets where lockdowns are not in place, physical footfall in retail stores and shopping centres has dramatically declined.
As a result of the outbreak, non-food retailers have seen a strong decline in demand and customers shifting channels to online shopping instead. Some of these retailers have already been struggling for some time before the pandemic, especially in Europe and North America, and this extraordinary situation has been putting greater pressure on the industry. Store closures will likely increase for retailers already on the brink of going out of business. On the other hand, food retailers, warehouses and online delivery services have reported a huge growth in demand as customers have stockpiled goods and ordered more online. Food retailers have been facing record spikes in demand and must currently deal with significant out-of-stock situations on many key products. The ability to predict and manage demand has never been more important for these actors.
Omdia believes that smart building technology offers the potential to assist with the challenges (Covid-19 related or not) that some retail businesses are currently facing, especially in the non-food retailing segment. In a new report (Smart Building Technologies in Retail – 2020), Omdia predicts significant investment for smart building projects in the retail sector despite a slowdown in 2020 due to the Covid-19 outbreak.
Retailers should continue to implement smart retail technologies, domain integrations and analytics to reduce costs through energy efficiency and to retain customers. Although many retailers, especially small and medium-sized business, lack the commercial resources to finance more advanced BMS platforms or comprehensive integration, there is a growing consensus in the industry that stores must begin or continue to digitise with IoT-enabled devices and focus on offering customers superior shopping experiences to remain competitive and attract customers back in stores.
Enhancing customer experience has always been a key point of differentiation for bricks-and-mortar retailers from their physical and online competitors, and also helps drive greater consumer spending. In future, safety and reassurance are likely to become new and important aspects of customers experience following the Covid-19 pandemic. In fact, expectation among consumers will grow for a safe, enjoyable and hassle-free in store experience that replicates some of the experience of purchasing online. Store mapping and smart shelves are examples of use cases in retail that can enhance customers shopping experience. Through store mapping, either occupancy sensors in luminaires or Bluetooth beacons can track customers through a store. Customers can then potentially access this data through applications on their mobile phones. The application can display a map that enables indoor navigation and can guide them to the locations of items they wish to purchase. Smart shelves can directly interact with apps on a customer's smartphone and if the consumer has used the store's app to create a shopping list, the smart shelves can interact with the list and show you where to find the products you want. These solutions should help clients to feel more comfortable inside stores while limiting their shopping time.
The overall picture – cause for optimism?
Clearly the comprehensive impact of the outbreak on the smart buildings market for 2020 and beyond is still evolving. Nevertheless, there is strong potential for the Covid-19 pandemic to accelerate the uptake of connected equipment and BMS platforms across many sectors including the retail and office sectors.
This analysis is drawn from the Omdia Smart Buildings Intelligence Service, please contact us for more details.