Lighting as a Service (LaaS) Market

Market Overview

The global lighting as a service (LaaS) market size was valued at USD 726.17 million in 2023 and is projected to reach USD 5,989.33 million by 2032, with a CAGR of 30.2% during the forecast period. (2024–2032).

Lighting as a service (LaaS) is a service-based model that provides technical and financial management services to facilitate a smooth transition from traditional lighting to smart lighting. It aids in installing lighting systems and recycling equipment, as well as their maintenance and management, through the use of sensors and Internet of Things (IoT) technology. In addition, it does not require up-front investments from end users, as it charges a monthly fee for light services rather than a one-time fee. Customers are charged for lighting retrofits through the service as part of an ongoing purchase agreement, allowing the cost to spread over several months or years. Reduced energy consumption, ongoing cost savings, no maintenance liability, and the ability to add features such as data collection, inter-device communication, and remote management are among the primary benefits of lighting as a service.

Market Dynamics

What are the Driving Factors for The Global Lighting as a Service Market?

The expansion of the global market for lighting as a service can be attributed to the rising demand for energy-efficient lighting systems, the absence of capital expenditure requirements, and the increasing convergence of the Internet of Things (IoT) in lighting systems to reduce global energy consumption. The growth of smart cities across the globe is anticipated to be a major factor in expanding the lighting-as-a-service market. In addition, the market is stimulated by the financial benefits provided by LaaS, such as an immediate return on investment, no initial capital expense, and the implementation of favorable government policies and regulations encouraging the adoption of energy-efficient lighting systems.

Also, Rapid industrialization and urbanization in economically developed countries are one of the most important market drivers for LaaS. In emerging nations of the developing world, there is a growing demand for LaaS. In the realm of urban and municipal development, the demand for LED lighting is growing due to its low energy consumption. Several commercial complexes, offices, public squares, etc., are driving the growth of the lighting-as-a-service industry. The global LaaS market is expanding, with a phenomenal response from emerging markets as well. According to market reports, the lighting system accounts for 18-40% of the net energy consumption in commercial buildings and nearly 10% in residential structures. In the next ten years, energy-efficient lighting such as LED lights will reduce global electricity demand by 30-40%. These factors increase the desirability of contracting a third-party subscription-based LaaS setup, which significantly reduces overhead expenses. Since the contracted company handles the installation, maintenance, and services of lighting, the end-users incur lower monthly operational expenses. These are the primary factors driving the expansion of the LaaS industry.

In addition, the widespread adoption of smart lighting in commercial areas positively impacts the growth of the lighting as a service market (LaaS). In addition, the preference shift toward sustainable lighting solutions and the emergence of LED as an energy-efficient lighting technology are major factors influencing the market's growth. Consequently, these are some of the factors driving market expansion.

What are the Restraints for The Global Lighting as a Service Market?

Emerging markets' lack of awareness and infrastructure is one of the most significant market restraints for LaaS. There is a notable shortage of skilled and trained personnel to manage the market's modern lighting requirements. The uneven distribution of cutting-edge technology harms lighting-as-a-service market profits in several global regions. Small and medium enterprises (SMEs) predominate in developing nations. Although end-users save money on upfront investments and net monthly expenditures with LaaS, a significant portion of the SME market cannot afford the service fees.

This factor is slowing the global Lighting-as-a-service market's expansion. The current market is counterintuitive to a lack of trained personnel. Especially when end-users enter into contractual agreements with vendors and the service is inadequate, the user experience during the remainder of the contract period becomes challenging. Due to these unavoidable factors, the lighting-as-a-service market will grow more slowly.

What are the Future Opportunities for The Global Lighting as a Service Market?

This market is anticipated to experience lucrative growth opportunities within the commercial end-user segment. Lighting as a service provides energy savings and lower energy bills, which is appealing to commercial end users, given the growing emphasis on energy conservation and sustainability.

The indoor installation segment is anticipated to continue to lead in the near future, as it has in recent years. The rapid growth of the commercial sector in developing nations is fostering the expansion of this market's indoor segment. However, the outdoor segment is anticipated to have the highest CAGR over the forecast period. The increasing convergence of the Internet of Things (IoT) for effective street lighting solutions is the primary factor driving the growth of this market's outdoor installation segment. Among the outdoor installations are street lighting, parking garages, parks, and recreational areas.

Regional Analysis

The global Lighting as a Service market has been segmented based on geography into North America, Europe, Asia Pacific, and LAMEA.

North America is anticipated to be one of the leading regions contributing to the expansion of the global market over the forecast period, Due to increasing government efforts to replace traditional lighting systems with energy-efficient lighting systems. One of the contributing factors to the increasing use of LaaS and LED technologies is the expanding offerings of systems that enable users to program and control lights through connectivity with sensors and networks. The transition to connected lighting is gaining pace, particularly in developed countries of the region, which is driving the market growth. Government policies supporting energy savings fuel the growth of the Lighting as a Service market. Also, It is anticipated that the development of smart cities in the United States and Canada will contribute to the growth of the market for lighting as a service (LaaS). Consequently, increasing demand for lighting systems that boost the system's efficiency and reduce costs is one factor driving the market's expansion.

After North America, the Asia-Pacific region is anticipated to experience significant growth during the forecast period. Asia Pacific is experiencing healthy growth in the lighting as a service market, with governments of developing countries such as India and China endorsing energy-efficient lights. Many LED chip and package factories in China, South Korea, Japan, and Taiwan are also contributing to the growing demand in the region.This can be attributed to regional manufacturers' rapid production of sustainable lighting systems. In addition, the rising expenditures on home renovations and the robust demand for lighting fixtures and lamps in countries such as Australia are anticipated to increase the adoption of the LaaS business model in the region, thereby boosting the market's growth.

Europe is witnessing the fastest growth in the lighting as a service market, backed by the widespread adoption of LaaS in European countries such as the U.K. and Germany. Latin America accounts for the least share in the lighting as a service market; however, increased efforts in reducing carbon footprint are driving the demand for LaaS.

Segmental Analysis

The global Lighting as a Service Marketis segmented into Components, Applications, and Installation.

The market is segmented by Component into Luminaries and Controls, Software, and Services.

In terms of revenue, the Software segment dominated the market. The Lighting as a Service market is currently in its infancy, and the lack of awareness among businesses has hindered its development. However, the combination of IoT and LaaS is anticipated to create market opportunities, which has significantly fueled the market growth of the Software segment. With IoT-based Lighting as a Service system, users of varying degrees can customize the lighting and temperature in their workspaces using a smartphone application, resulting in an enhanced work environment. The IoT-based LaaS will enable facility managers to track light usage patterns, thereby reducing unnecessary lighting and significantly reducing the building's carbon footprint.

The market is segmented by Application into Commercial, Industrial, and Others.

The Commercial Subsegment of the Application is the market's largest investor. The business or commercial segment dominates the LaaS market, primarily due to their increased adoption of the subscription-based LaaS model in lieu of owning and maintaining the lighting infrastructure. The municipal sector, which is anticipated to fall under the Other segment, is projected to have a significant CAGR of 44.8% due to the adoption of LaaS by major cities and towns attracted to its energy-saving advantages over conventional ones lighting solutions.

The market is segmented by Installation into Indoor and Outdoor.

The Outdoor segment is the largest shareholder and is anticipated to grow at the highest CAGR during the forecast period. Installation is the exterior segment of the market with the highest growth rate. The indoor segment holds a significant market share in 2021 and has the potential to dominate the market in the coming years due to the rapid adoption of LaaS in business offices and business venues. The expansion of the indoor segment of the lighting as a service industry is primarily driven by the expanding business sector in developing nations.

Recent Developments

• In 2020, Signify NV introduced its innovative LED Top lighting system with a streamlined switch. This advanced lighting system can reduce greenhouse energy consumption by fifty percent.
• In 2020, Enlighted Inc. introduced its brand-new surface sensor technology for commercial end-users and intelligent buildings.
• In 2020, Savant Systems, a prominent figure in the professional smart home sector, had officially finalized the acquisition of GE Lighting from GE.
• In 2021, Schneider Electric has acquired DC Systems B.V. to advance innovations in electrical distribution. DC Systems, a start-up located in the Netherlands, focuses on active AC/DC microgrids, DC power conversion, and a wide array of DC solutions.
• In 2021, SMART Global Holdings, Inc. has acquired Cree, Inc.’s Cree LED Products business unit (“Cree LED”).