The global pandemic significantly impacted the commercial real estate (CRE) industry, forcing investors and companies to seek innovative solutions for boosting operational efficiency, reducing costs, and exploring new revenue streams. Building Management Systems (BMS) have emerged as a promising technology to address these challenges, driven by increasing sustainability goals, energy efficiency demands, and technological advancements.
What is BMS and its Benefits for Occupants
A Building Management System (BMS), also known as a Building Automation System (BAS), is a centralized platform designed to monitor and control various systems within a commercial building. This allows for:
- Efficient Building Operations: A BMS optimizes building operations, facilitating data-driven decision making and maximizing energy efficiency.
- Improved Occupant Experience: Occupants can personalize temperature and lighting settings through mobile apps, creating a comfortable and productive work environment. Real-time data on air quality and occupancy allows for adjustments that promote well-being.
The Building Blocks of a BMS - A BMS typically consists of three core components:
- Hardware: This includes workstations, servers, sensors, fire alarms, CCTV cameras, and more.
- Software: Software encompasses programming tools, configuration utilities, graphical interfaces, and user interfaces.
- Networking Components: These components connect and manage the various subsystems and technologies controlled by the BMS.
The Future of BMS: Integration with Cutting-Edge Technologies
The future of BMS is bright, with the potential for even greater impact through integration with emerging technologies like:
- Internet of Things (IoT): IoT devices will provide a wider range of data points for analysis and optimization.
- Artificial Intelligence (AI): AI can analyse data and automatically adjust settings for maximum efficiency, further reducing operational costs.
- Machine Learning: Machine learning algorithms can predict equipment failures before they occur, minimizing downtime and ensuring a smooth tenant experience.
Below is the value chain which depicts the legacy functionality and the areas where technology companies are playing a big role.
Building Energy Management Systems (BEMS): A Lucrative Niche
Building Energy Management Systems (BEMS) are a sophisticated subset of BMS specifically focused on monitoring and controlling a building's energy consumption. BEMS represent a significant revenue opportunity for building management service providers, offering control over various aspects like HVAC, lighting, power systems, and more.
According to Allied Market Research, the global BEMS market was valued at USD 8.8 billion in 2021 and is projected to reach USD 44.2 billion by 2031, reflecting a Compound Annual Growth Rate (CAGR) of 17.2%.
Sustainability Regulations Drive Market Growth
Sustainability targets and regulations aimed at reducing carbon footprints are driving the adoption of energy-efficient building practices. As demand for various building types like offices, retail spaces, and data centers continues to rise, BEMS and building automation solutions offer a sustainable path to meet these growing needs.
Key Players in Building management systems (BMS) space
Prominent players in the BMS industry include companies like Johnson Controls, Siemens, Schneider Electric, and Honeywell. These leaders employ various strategies such as product launches, partnerships, mergers, and acquisitions to solidify their market positions. Each company offers unique software solutions catering to the diverse needs of clients and delivering actionable data insights for building owners and tenants.
The complex challenges of building management, encompassing energy efficiency, indoor air quality, and overall operational optimization, necessitate a multifaceted approach. No single company currently offers the entire spectrum of solutions.
Below table provides a perspective to understand the various offerings by the key players to depict their value proposition, business model and customer focus which showcases the prowess of these companies in BMS solution market.
Leading CRE Players Embrace BMS
Major CRE players like CBRE and JLL are actively integrating advanced BMS functionalities into their existing building operations offerings. They achieve this primarily by acquiring proptech (property technology) companies with expertise in building energy management and building operations.
- CBRE
CBRE utilizes an AI/ML-powered Smart Facilities Management (FM) solution to optimize operational reliability and drive efficiency at more than 20,000 Global Workplace Solutions client sites. Below table highlights their prominent activities in BMS space:
|
Target company
|
Description
|
Investment
|
---|---|---|---|
CBRE
|
E2C Technology
|
An AI/ML data-driven technology company that will enhance and further differentiate CBRE’s facilities management service offering and unlock significant value for client
|
Undisclosed
|
Building
|
A provider of Occupancy Planning and Technology Services to bolster its smart FM solution services
|
Undisclosed
|
|
VTS
|
CBRE led the $125M Series E Funding Round of VTS in September 2022
Though VTS’s product suite primarily caters to lease management and tenant management but ‘VTS data’ suite also offers an opportunity to digitise the building operations of the clients |
$US 100 million
|
- JLL
JLL has made strategic acquisitions of companies like Envio Systems, Hank, and Building Engines to bolster their BMS offerings. These acquisitions enhance their ability to collect and analyse data from building systems, enabling predictive analytics and building automation. The table below shows their significant moves to bolster their building management system offerings:
|
Target company
|
Description
|
Investment
|
---|---|---|---|
Jones Lang LaSalle Inc (JLL)
|
Envio System
|
JLL acquired Envio in July 2022, whose hardware and software offerings enable access and analysis of data from sensors and applications across HVAC, lighting management, energy management to facilitate predictive decision-making around utilities and operations
|
Undisclosed
|
Hank
|
Hank which was acquired by JLL in January 2022, which provides system which encompasses ML and AI to solve the commercial real estate (CRE) industry's largest operational challenges, including HVAC programming inconsistencies and energy and equipment performance inefficiencies
|
Undisclosed
|
|
Building Engines
|
JLL made one of its biggest acquisitions of the building operations platform, Building Engines. Its cloud platform streamlines the whole lot from work orders to maintenance scheduling, tenant engagement, building operations and equipment controls.
|
$US 300 million
|
- Disruptors/Agile Start-ups
Apart from these bigwigs, there are multiple providers who offers point solutions that can be integrated into a comprehensive BMS or used as standalone systems for specific building management tasks. Below table discusses few disruptors who have raised substantial funding due to their promising capabilities and solutions
Company
|
Description
|
Valuation
|
---|---|---|
Augury
|
Augury provides AI-driven predictive maintenance and machine health solutions for industrial companies. Their core offering is a "Machine Health-as-a-Service" platform that uses sensors, AI, and data analytics to monitor the health and performance of critical industrial equipment
|
Current valuation of the company is over $1 billion as of its most recent $180 million Series E funding round in 2021
|
Aquicore
|
Aquicore's "people plus technology" approach supports large real estate institutions in obtaining high-quality energy data, identifying efficiency and decarbonization strategies, and achieving improvement targets across their portfolios
|
It has an estimated valuation in the range of $100M to $500M and have raised a total of $49.97 million over 11 funding rounds
|
BrainBox AI
|
BrainBox AI's AI-powered HVAC technology aims to make buildings smarter, greener, and more efficient by autonomously optimizing energy use
Their solutions leverage AI, cloud computing, and custom algorithms to help building owners and operators drastically reduce their scope 1 and 2 emissions while decreasing energy costs |
Raised a total of $72.4 million in funding. The latest funding round was a Series A - III for $20 million on April 28, 2023
|
Opportunity for CRE players
Currently, technology companies dominate the BMS market due to their established product suites and continuous investments in hardware and software advancements. However, CRE firms like CBRE and JLL are making significant inroads by acquiring proptech companies and developing their own SaaS-based BMS solutions.
The current market landscape presents both challenges and opportunities for CRE players. Integrating advanced BMS functionalities into existing legacy systems is crucial. CRE firms also need to leverage the vast amount of tenant and building operations data they already possess, seamlessly integrating it with advanced BMS modules. Modernizing legacy hardware and software systems is essential to handle increasing data volumes and growing complexities.
Path forward for CRE firms
The market for Building management system (BMS) is poised to grow exponentially and it can accommodate not just couple but multiple players in the overall BMS space. So, there is a lot of upside potential in the chance to convert real estate holdings into energy assets.
Furthermore, engaging in the energy optimisation market opens a completely new source of income for CRE players. Though, it will take them a thorough grasp of energy demands, the adoption of pertinent technology, and cooperation with creative players to fully embrace this paradigm change. It would be interesting to see how big CRE firms present them as formidable competition in front of technology companies to acquire the largest pie of BMS revenue opportunity.
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