Uncertain future signals end of boom for Intelligent Controls in the European building market. 

The EU(7)1 market for environmental control systems grew strongly at a rate of 9% per annum from1997 to 2000 and although growth will be much reduced in the next two years, there is still an abundent latent potential waiting to be tapped through strategies that focus on specialisation and the development of integrated building management systems (IBMS). Increased output of new building construction and refurbishment, further penetration of ddc controls and their convergence on conventional systems have been the main demand drivers which resulted in a total environmental systems market worth Euro 2.163 billion in 2000 at installed prices. Against these very favourable trading conditions manufacturers have increased their share of the total value added business to Euro 1.559 billion and extended their involvement in IBMS. Strong demand has temporarily reduced competitive pressure and margins have held up well in all markets, but manufacturers can not afford complacency in this ever changing market. These are the main findings of the 8th study of the "European Market for Intelligent Building Controls - Environmental Systems" by i&i limited-Proplan. 

The i&i study shows that despite the controls contractor's strong hold on the systems market and the software and communication specialists' established presence in supervisory software and communication hardware, manufacturers have in all countries held back erosion of market share and in some have even reversed this trend. This is particularly true of the major global suppliers who have increased their share of the business, however, they have generally been less successful in holding onto their highly profitable and prized maintenance work. More recently, ddc hardware has been targeted by OEM's and controls companies from the process and industrial controls market and competition will continue to grow here once product distribution channels are further developed. Internal forces are already at work to develop new routes to market and rationalise and consolidate the supply structure to prepare suppliers to contend with falling prices and smaller unit contract size. 

The i&i study forecasts that in 2001, aggregate growth of manufacturer sales in the EU(7) will be 2.8% but this rate of growth will decline to 1.6% in 2002, due to small growth in construction output. This forecast could be well exceeded if environmental controls manufacturers continue to take the lead position in meeting demand for IBMS. There is an enormous difference in penetration of ddc controls in each of the EU(7) countries and those less well developed markets such as France, Italy and Spain will achieve higher rates of growth. 

Even after more than ten years only a small percentage of projects in the EU(7) specify a common communication standard. BACnet, EIB (Konnex)and LonWorks are the three most often used and are penetrating the market, albeit very slowly, but the signs are that "interconnectivity" will, for some years, be provided by overlaying manufacturers' proprietary protocols on IT networks using TCP/IP. Technology will continue to drive product development and there will be a migration towards information communication technology and internet protocols for the transmission and management of data from building management systems and its integration within the wider enterprise environment. 1 EU(7): Belgium, France, Germany, Italy, Netherlands, Spain, United Kingdom 

Despite Recent Unprecedented Growth The Building Controls Market Is Not Fully Ignited 

North America extends its lead as the world's largest single market for environmental controls, now dwarfing even the biggest markets in Europe, as manufacturers' sales in 2000 at engineered and commissioned prices rise to $2.04 billion, having grown at an unprecedented 16% per annum since 1998. These are the findings of the 2nd study of the North American market for Environmental Control Systems in non-residential buildings by i&i limited - Proplan. Edition 1 published in 1998 confirmed that this market was sitting on a powder keg of growth but despite the remarkable performance over the last two years, the business is far from fully ignited, for projects continue to be under specified, resulting in a lower penetration of building controls per capita than developed markets in northern Europe. 

i&i demonstrate through a whole series of benchmarks that the full potential of this market is simply not being realised and that the penetration of advanced controls in North America should be very much larger than it is today. This continent has a larger building stock, a higher spend on building construction, installs more air conditioning & refrigeration equipment, consumes more energy per square foot and has a higher number of heating and cooling degree days than any other developed economy. Nevertheless, it spends considerably less on DDC controls per dollar of construction or per square meter of floorspace than many of the developed markets of northern Europe. 

This market continues to offer the best opportunity in the developed world for sustained growth over the next five years. Growth has been driven in part by buoyant new construction and expanding refurbishment business, but also by factors such as increased demand for improved indoor air quality, optimisation of energy consumption as electricity and natural gas prices escalate, and strong growth in integration and remote control of building services and it is these additional factors that are most likely to sustain demand in the future. For new construction activity is expected to weaken and there is much uncertainty about the economy. Although i&i forecast that ddc systems sales will still achieve around 10% growth in 2001, they will fall back to 5% in 2002. As competition intensifies, margins which have held up well during the last two years, will come under increasing pressure and manufacturers will need to develop innovative strategies to stay ahead.

The total environmental control systems market which has now reached $3.8 billion, would get an additional boost if third party distribution channels were strengthened for this would open up the small and medium building sector market. Although this channel has grown, it contributes just 30% of the total environmental systems business, which is lower than the European average. 

Even after more than ten years, only a small percentage of projects specify a common communication standard. BACnet and LonWorks are the two most often used and are penetrating the market, albeit very slowly, but the signs are that "interconnectivity" will, for some years, be provided by overlaying manufacturers' proprietary protocols on IT networks using TCP/IP. Technology will continue to drive product development and there will be a migration towards information communication technology and internet protocols for the transmission and management of data from building management systems and its integration within the wider enterprise environment.

 i&i limited is Europe’s leading research and consultancy company specialising in intelligent buildings, providing 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 37 different countries in Western and Eastern Europe, Scandinavia, the Middle East, S.E. Asia and the Far East including Japan and China. For more information on i&i limited PROPLAN please visit: www.proplan.co.uk 

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