RESEARCH REPORT

Executive Summary:
IoT for Small and Medium Buildings
IoT Solutions for HVAC, Lighting, and Security: Hardware,
Software, and Services in Commercial Buildings

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Published 3Q 2018

Neil Strother
Principal Research Analyst

Casey Talon
Research Director
 IoT for Small and Medium Buildings

Section 1
EXECUTIVE SUMMARY
1.1 Introduction
Owners and occupants of small and medium-sized buildings have not been aggressive
adopters of Internet of Things (IoT) technologies. They have been laggards compared to
enterprises that occupy large commercial buildings and residential customers who have
embraced IoT. But there are signs of new growth beyond the early adopters as
increasingly compelling IoT products and services come to market and strong use cases
for small and medium-sized buildings become more apparent.

Among the key market drivers are prices that continue to drop for IoT hardware and
vendors that are willing to bundle solutions for use cases that provide benefits to the
building owners and tenants. Prices for data processing and analytics related to IoT
solutions have dropped as well.

Other drivers of adoption include viable use cases for small and medium-sized buildings.
For example, a well-designed IoT-enabled lighting or HVAC system can produce double-
digit energy savings for a tenant or building owner. The payback might not be immediate,
but over the course of a few months or a year, the savings can be apparent.

Beyond direct ROI benefits, IoT solutions for these types of buildings (small is up to
50,000 SF and medium ranges from 50,001 SF to 100,000 SF) can provide indirect or
softer benefits. For example, a building with IoT lighting solutions can help improve worker
productivity and create a sense of well-being for occupants.

For the building owner or manager, a building with IoT solutions can help attract new
tenants or retain existing ones because the facility provides an efficient and technically
advanced place to do business. IoT solutions can also increase the asset value of the
building from the owner’s perspective.

This report discusses the many factors expected to drive the market over the next decade
and the barriers that must be overcome. It also lists several steps market stakeholders
should take to help the market move at a faster pace.

1.2 Market Size and Forecast

Navigant Research expects revenue associated with IoT solutions for small and medium-
sized commercial buildings to increase from $533.8 million in 2018 to over $4.0 billion in
2027 at a compound annual growth rate (CAGR) of 25.1% globally. Initially, growth is
expected to be distributed somewhat evenly across hardware, software, and services, with
hardware representing the largest share of the market globally in 2018. But at the end of
the forecast, software and services are expected to gain larger shares as hardware prices

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 IoT for Small and Medium Buildings

decline and the market shifts to an as a service model. Revenue attributed to services is
anticipated to grow the fastest globally, from $158.9 million in 2018 to $1.6 billion by 2027
at a CAGR of 29.6%. Software revenue is expected to follow (CAGR of 26.4%), with
hardware growing the slowest at a CAGR of 18.1%. North America and Europe are
expected to be the leading regions driving revenue growth over this period, with Asia
Pacific in third position.

Chart 1-1. IoT for Small and Medium Buildings Revenue by Region, World Markets: 2018-2027

$4,500
North America
$4,000
Europe
$3,500 Asia Pacific
Latin America
$3,000
($ Millions)

Middle East & Africa

$2,500

$2,000

$1,500

$1,000

$500

$-
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

(Source: Navigant Research)

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 IoT for Small and Medium Buildings

Section 9
TABLE OF CONTENTS

Section 1 ...................................................................................................................................................... 1

Executive Summary .................................................................................................................................... 1

1.1 Introduction.................................................................................................................................... 1

1.2 Market Size and Forecast ............................................................................................................. 1

Section 2 ...................................................................................................................................................... 3

Market Issues .............................................................................................................................................. 3

2.1 Introduction.................................................................................................................................... 3

2.2 Definitions...................................................................................................................................... 3

2.2.1 IoT Applications for Small and Medium-Sized Buildings ......................................................... 3

2.2.2 From Silo Solutions to More Holistic Ones .............................................................................. 4

2.2.3 Defining Small and Medium-Sized Buildings .......................................................................... 5

2.3 Market Drivers ............................................................................................................................... 5

2.3.1 Lower Prices for IoT Solutions ................................................................................................ 5

2.3.2 Reduction in Energy Costs ...................................................................................................... 5

2.3.3 Digital Transformation and IoT ................................................................................................ 6

2.3.4 Productivity, Comfort, and Wellness ....................................................................................... 6

2.3.5 Attractive to New and Existing Tenants .................................................................................. 6

2.3.6 Increases in Asset Value of Building ....................................................................................... 7

2.3.7 Analytics and Space Utilization ............................................................................................... 7

2.3.8 Customer Experience .............................................................................................................. 7

2.3.9 Mobile-First Generation ........................................................................................................... 8

2.4 Market Inhibitors ............................................................................................................................ 9

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 IoT for Small and Medium Buildings

2.4.1 Additional Costs, Budgetary Constraints ................................................................................. 9

2.4.2 Crowded, Noisy, Confusing Vendor Landscape ..................................................................... 9

2.4.3 Interoperability ......................................................................................................................... 9

2.4.4 Data Security, Cybersecurity, and Privacy .............................................................................. 9

2.4.5 Risk Aversion, Unclear ROI................................................................................................... 10

2.4.6 Channel Issues ...................................................................................................................... 10

2.5 Regulatory Impact ....................................................................................................................... 10

2.6 Regional Perspective .................................................................................................................. 11

2.6.1 North America........................................................................................................................ 11

2.6.2 Europe ................................................................................................................................... 11

2.6.3 Asia Pacific ............................................................................................................................ 12

2.6.4 Latin America, Middle East & Africa ...................................................................................... 12

2.7 Case Studies ............................................................................................................................... 12

2.7.1 HVAC and Lighting ................................................................................................................ 12

2.7.2 Lighting and Space Utilization ............................................................................................... 13

2.7.3 Security.................................................................................................................................. 14

Section 3 .................................................................................................................................................... 15

Technology Issues .................................................................................................................................... 15

3.1 Introduction.................................................................................................................................. 15

3.2 IoT Architecture and Solution Stack ............................................................................................ 15

3.2.1 Hardware ............................................................................................................................... 16

3.2.1.1 Advanced Sensors........................................................................................................ 17

3.2.1.2 HVAC ............................................................................................................................ 17

3.2.1.3 Gateways ...................................................................................................................... 17

3.2.1.4 Security ......................................................................................................................... 17

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 IoT for Small and Medium Buildings

3.2.2 Software ................................................................................................................................ 18

3.2.3 Services ................................................................................................................................. 18

3.3 Communication Protocols ........................................................................................................... 18

3.3.1 BACnet .................................................................................................................................. 18

3.3.2 Bluetooth ............................................................................................................................... 19

3.3.3 EnOcean................................................................................................................................ 19

3.3.4 Thread ................................................................................................................................... 19

3.3.5 VLC ........................................................................................................................................ 19

3.3.6 Wi-Fi ...................................................................................................................................... 20

3.3.7 Zigbee.................................................................................................................................... 20

Section 4 .................................................................................................................................................... 21

Key Industry Players................................................................................................................................. 21

4.1 Introduction.................................................................................................................................. 21

4.2 Alarm.com ................................................................................................................................... 21

4.3 Aquicore ...................................................................................................................................... 21

4.4 Cisco ........................................................................................................................................... 22

4.5 cohesionIB................................................................................................................................... 23

4.6 Current, powered by GE ............................................................................................................. 23

4.7 EcoEnergy Insights ..................................................................................................................... 24

4.8 enTouch ...................................................................................................................................... 24

4.9 GridPoint ..................................................................................................................................... 25

4.10 Hitachi ......................................................................................................................................... 26

4.11 IBM .............................................................................................................................................. 26

4.12 Intel .............................................................................................................................................. 27

4.13 Johnson Controls ........................................................................................................................ 27

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 IoT for Small and Medium Buildings

4.14 Legrand ....................................................................................................................................... 28

4.15 Lynxspring ................................................................................................................................... 28

4.16 Panasonic.................................................................................................................................... 29

4.17 PTC ............................................................................................................................................. 29

4.18 Schneider Electric ....................................................................................................................... 30

4.19 Shields Energy ............................................................................................................................ 30

4.20 Siemens AG ................................................................................................................................ 31

4.21 Verdigris ...................................................................................................................................... 32

Section 5 .................................................................................................................................................... 33

Market Forecasts....................................................................................................................................... 33

5.1 Introduction.................................................................................................................................. 33

5.1.1 Forecast Methodology, Assumptions .................................................................................... 33

5.1.2 Offering Types ....................................................................................................................... 34

5.1.3 Applications ........................................................................................................................... 34

5.2 Global Overview .......................................................................................................................... 35

5.2.1 North America........................................................................................................................ 37

5.2.2 Europe ................................................................................................................................... 39

5.2.3 Asia Pacific ............................................................................................................................ 41

5.2.4 Latin America......................................................................................................................... 43

5.2.5 Middle East & Africa .............................................................................................................. 45

Section 6 .................................................................................................................................................... 47

Recommendations .................................................................................................................................... 47

6.1 Steps to Encourage IoT Adoption in Small and Medium Buildings............................................. 47

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 IoT for Small and Medium Buildings

Section 7 .................................................................................................................................................... 49

Building Types .......................................................................................................................................... 49

7.1 Office ........................................................................................................................................... 49

7.2 Retail ........................................................................................................................................... 49

7.3 Education .................................................................................................................................... 49

7.4 Healthcare ................................................................................................................................... 49

7.5 Hotels & Restaurants .................................................................................................................. 49

7.6 Institutional/Assembly ................................................................................................................. 49

7.7 Warehouse .................................................................................................................................. 50

7.8 Transport ..................................................................................................................................... 50

Section 8 .................................................................................................................................................... 51

Acronym and Abbreviation List ............................................................................................................... 51

Section 9 .................................................................................................................................................... 53

Table of Contents ...................................................................................................................................... 53

Section 10 .................................................................................................................................................. 58

Table of Charts and Figures..................................................................................................................... 58

Section 11 .................................................................................................................................................. 60

Scope of Study .......................................................................................................................................... 60

Sources and Methodology ....................................................................................................................... 61

Notes .......................................................................................................................................................... 61

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 IoT for Small and Medium Buildings

Section 10
TABLE OF CHARTS AND FIGURES

Chart 1-1. IoT for Small and Medium Buildings Revenue by Region, World Markets: 2018-2027 .......... 2

Chart 5-1. IoT for Small and Medium Buildings Revenue by Offering Type, World Markets:
2018-2027 ............................................................................................................................. 35

Chart 5-2. IoT for Small and Medium Buildings Revenue by Building Type, World Markets:
2018-2027 ............................................................................................................................. 36

Chart 5-3. IoT for Small and Medium Buildings Revenue by Offering Type, North America:
2018-2027 ............................................................................................................................. 37

Chart 5-4. IoT for Small and Medium Buildings Revenue by Building Type, North America:
2018-2027 ............................................................................................................................. 38

Chart 5-5. IoT for Small and Medium Buildings Revenue by Offering Type, Europe: 2018-2027 ......... 39

Chart 5-6. IoT for Small and Medium Buildings Revenue by Building Type, Europe: 2018-2027 ......... 40

Chart 5-7. IoT for Small and Medium Buildings Revenue by Offering Type, Asia Pacific:
2018-2027 ............................................................................................................................. 41

Chart 5-8. IoT for Small and Medium Buildings Revenue by Building Type, Asia Pacific:
2018-2027 ............................................................................................................................. 42

Chart 5-9. IoT for Small and Medium Buildings Revenue by Offering Type, Latin America:
2018-2027 ............................................................................................................................. 43

Chart 5-10. IoT for Small and Medium Buildings Revenue by Building Type, Latin America: 2018-2027
............................................................................................................................................... 44

Chart 5-11. IoT for Small and Medium Buildings Revenue by Offering Type, Middle East & Africa:
2018-2027 ............................................................................................................................. 45

Chart 5-12. IoT for Small and Medium Buildings Revenue by Building Type, Middle East & Africa:
2018-2027 ............................................................................................................................. 46

Figure 2-1. From Silo IoT Solutions to More Holistic Approaches ............................................................. 4

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 IoT for Small and Medium Buildings

Figure 3-1. Illustrative Example of IoT Technology Architecture for Smart Buildings ............................. 15

Figure 3-2. IoT Solution Stack for Small and Medium-Sized Buildings ................................................... 16

Table 2-1. Estimated Costs and Benefits of IoT Deployments in Small and Medium-Sized Buildings .... 8

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 IoT for Small and Medium Buildings

Section 11
SCOPE OF STUDY
This Navigant Research report examines and sizes the global market for IoT technologies in small and
medium-sized buildings, including advanced solutions for HVAC, lighting, and security. In addition, the
report sizes and forecasts the IoT market for hardware, software, and services from 2018 to 2027. Market
drivers and barriers are assessed, and the report covers the major global regions (North America,
Europe, Asia Pacific, Latin America, and the Middle East & Africa). Segmentation for eight commercial
building types are included as follows: office, retail, education, healthcare, hotels & restaurants,
institutional/assembly, warehouse, and transport. The baseline data for the forecasts in this report was
derived from Navigant Research’s Global Building Stock Database.

Navigant Research has prepared this report as a component of its Building Innovations Research
Service. The goal of this report is to provide an overview of the opportunities and challenges offered by
trends to shift global energy consumption in commercial buildings toward clean, distributed, and intelligent
energy. It examines the opportunities afforded by emerging business models in the commercial building
technologies and intelligent buildings markets, as well as how these fit into scenarios for the emerging
Energy Cloud.

This research applies to current and interested stakeholders at all levels of the commercial buildings
industry—including utilities, regulators, technology suppliers, service providers, investors, owners,
corporate leaseholders, and policymakers. The report provides examples of significant market and
technology developments, an overview of industry transformation, and forecasts for revenue streams
generated by new business models and platforms that interact with the intelligent buildings industry.

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 IoT for Small and Medium Buildings

SOURCES AND METHODOLOGY

Navigant Research’s industry analysts utilize a variety of research sources in preparing Research
Reports. The key component of Navigant Research’s analysis is primary research gained from phone and
in-person interviews with industry leaders including executives, engineers, and marketing professionals.
Analysts are diligent in ensuring that they speak with representatives from every part of the value chain,
including but not limited to technology companies, utilities and other service providers, industry
associations, government agencies, and the investment community.

Additional analysis includes secondary research conducted by Navigant Research’s analysts and its staff
of research assistants. Where applicable, all secondary research sources are appropriately cited within
this report.

These primary and secondary research sources, combined with the analyst’s industry expertise, are
synthesized into the qualitative and quantitative analysis presented in Navigant Research’s reports. Great
care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown
and assumptions must be made, analysts document their assumptions and are prepared to explain their
methodology, both within the body of a report and in direct conversations with clients.

Navigant Research is a market research group whose goal is to present an objective, unbiased view of
market opportunities within its coverage areas. Navigant Research is not beholden to any special
interests and is thus able to offer clear, actionable advice to help clients succeed in the industry,
unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech
markets.

NOTES
CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are
given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given
as well.

Figures are based on the best estimates available at the time of calculation. Annual revenue, shipments,
and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year
2018 US dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.

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 IoT for Small and Medium Buildings

Published 3Q 2018

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Note: Editing of this report was closed on September 21, 2018.

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