Smart buildings at a turning point between decarbonization and retrofit
The smart buildings sector is entering a phase of structural transformation, driven by the need to combine energy efficiency, compliance with climate regulations, and healthier indoor environments. In its latest white paper, The state of the smart buildings market in 2025, ABI Research outlines how technology is no longer a supporting feature, but a central pillar of global urban resilience strategies.
The next challenge, regenerating the existing building stock
One of the most consequential insights from the analysis concerns the future of the built environment. By 2050, roughly 80% of buildings still in use will already have been constructed. This reality is shifting investment priorities toward retrofit, meaning the technological upgrading of existing assets rather than new construction.
In urban areas across North America and Europe, where office vacancy rates surpassed 20% in 2024 due to remote work, the challenge lies in converting underused properties into mixed-use developments. These hybrid models, combining residential and commercial functions, already account for between 50% and 70% of new planning initiatives. High-profile adaptive reuse projects, from London’s Old War Office to micro-apartment developments such as Arcade Providence, illustrate how retrofit-driven regeneration is becoming a cornerstone of urban revitalization.
AI and interoperability, the brain of smart buildings
As expected, technological innovation heading into 2025 is driven by a triad of artificial intelligence, cybersecurity, and digital platforms. Together, these technologies are pushing building owners toward proactive management of maintenance and energy performance. According to the report, real-time monitoring and ai-based optimization are rapidly replacing isolated legacy systems, giving rise to fully interconnected building-wide ecosystems.
- Commercial HVAC systems are a key example. The global HVAC market, valued at $225.6 billion in 2023, is evolving toward connected solutions that use AI to optimize energy consumption while also managing water use and acoustic comfort.
- Smart lighting is following a similar trajectory. Networked lighting controls are expected to triple from about 200 million installed units in 2024 to nearly 600 million by 2030, driven by stricter efficiency standards and the adoption of sensors that adjust lighting based on occupancy and seasonal conditions.
- Security and indoor monitoring systems are also expanding rapidly. The installed base of sensors is projected to grow at an annual rate of 8.1% between 2025 and 2030, reaching 7.3 billion units, with smoke and fire detection systems accounting for the largest share.
- Interoperability is emerging as a non-negotiable standard. Seamless integration between Building Management Systems, IT infrastructure, and facility management platforms is now essential to avoid data silos, allowing systems developed by different vendors to communicate without friction.
Strategic alliances to scale sustainability
Another key takeaway from the ABI Research report is the acceleration of strategic partnerships across the sector. Industry leaders such as Siemens, Bosch, Honeywell, and Schneider Electric are acquiring smaller firms to scale solutions tailored to verticals like hospitals, hotels, and data centers. One notable example highlighted in the report is Siemens’ acquisition of Danfoss Fire Safety, aimed at strengthening its data center portfolio.
The education sector is also emerging as a major opportunity. Today, only about 10% of the world’s 11 million school buildings use smart technologies. However, government incentives and performance-based financing are turning universities into fully fledged smart campuses, cutting carbon footprints while improving operational efficiency through modular platforms and predictive maintenance.
The impact of new regulations on smart buildings
Regulatory pressure is another major demand driver, as governments worldwide tighten requirements on material transparency and decarbonization. In Europe, initiatives such as building passports, tested through schemes like BREEAM-C, are accelerating the shift toward circular construction practices. At the same time, cybersecurity is becoming an integral part of product design, protecting both physical assets and sensitive occupant data from the outset.
In this context, smart buildings in 2025 are no longer simply connected structures, but adaptive ecosystems capable of responding to market volatility and planetary constraints.
What to do and what to avoid when turning buildings into smart buildings
After outlining growth prospects and technological trends, the ABI Research white paper concludes with guidance for property owners and portfolio managers. In a market where competitiveness increasingly depends on attracting and retaining occupants, identifying the right actions, and avoiding common pitfalls, is critical to staying relevant in the digital transformation of the built environment.
Here is the compass for navigating the smart buildings market, according to ABI Research:
The winning moves for smart buildings
| What to do (do) | What not to do (don’t) |
|---|---|
| Secure systems: Embed robust data governance into it infrastructure | Ignore data silos: Do not allow poor interoperability to create data bottlenecks |
| Demonstrate real impact: Publish projects that show measurable energy, water, or cost savings | Neglect training: Do not skip educating building operators on the benefits of new technologies |
| Strategic partnerships: Collaborate with ecosystem players to test and scale smart technologies | Waste insights: Do not ignore real-time data that could improve design and performance |
| Strengthen renewables: Invest in technologies that support energy storage and smart grids | Delay compliance: Do not fall behind in adapting to regulatory changes |
| Support supply chains: Implement eco-friendly practices across production and services | Risk budget cuts: Do not fail to justify costs with clear evidence of savings |
| Optimize operations: Include predictive maintenance to improve safety and efficiency | Compromise well-being: Do not overlook occupant comfort and productivity |