Market watch - lighting equipment

Steady is probably the best word for describing the lighting equipment market over the last five years. Since 1996 the lighting products sector has demonstrated sustained nominal growth reflecting the general recovery in the construction market.

Demand for fittings and new lamps is largely driven by the commercial and residential construction sectors as well as public projects. The trend for commercial and industrial lighting tends to be cyclical and, like a lot of building services products, is linked to construction output (see table 1). Renovation work on the other hand leans towards a counter cyclical pattern, thereby partly compensating for downturns in new construction activity.

Competition within the lighting sector for different types of equipment largely reflects trends and fashions. "The current luminaire market is growing overall," say Harry Barnitt, marketing manager with Zumtobel Staff. "Niche markets like healthcare, retail, education, call centres are the current applications experiencing growth."

In turn these trends are influenced by a combination of factors including legislative requirements, environmental factors and design issues.

"The recent addendum to Lighting Guide 3, introduced in January this year, is beginning to have an effect," says Barnitt. "It underlies the necessity to employ lighting experts as each case will have to be given a certificate of conformity. This in theory should lead to better lit spaces for the occupants, with the walls and ceilings either being lit with additional luminaires or indirect/direct combined luminaires."

Hugh King from Thorn Lighting points to one area of increasing interest being shown by consultants and end-users: chilled ceilings and displacement ventilation. "There is a natural desire with chilled ceilings to use as much of the ceiling as possible," explains King. "This often constricts space for the lighting fittings leading to the demand for smaller fittings within the covering tiles, usually recessed compact fluorescent with hf gear and LG3 louvres." He adds: "With chilled beams lighting is often recessed into an acoustic panel between the beams, although a number of recent projects have actually integrating the lighting in the beam itself."

MBD predicts lighting equipment sales to continue to grow over the next five years (see figure 1 and table 2), although the annual rate of market growth is expected to remain modest in real terms. It is likely that product innovation will help offset more difficult construction market conditions. King points to generally improved efficacy and better colour products, particularly T5 lamps, with thinner, sleeker and smaller fittings as an example.

Reassuringly MBD sees the trend towards specifiers regarding lighting as an important design aspect, rather than merely a necessary utility, continuing. "There is real time pressure whereby turnaround on service must be rapid," says Barnitt. "Price would tend to drive the market towards commodity solutions but the design teams are becoming better educated, so there is some light at the end of the tunnel, he adds."

MBD anticipates a real growth of 2% in 2002 and 2003, taking the market to a level of £1871.8 million in the latter year. A further 1% increase is expected in 2004, prior to a negligible decline in 2005.

Market success also depends on the ability of manufacturers to maintain high levels of of product innovation and to educate customers in the benefits of energy efficient lamps which command a higher value. Security lighting equipment, energy saving lamps and floodlights for prestige buildings are seen as areas with the greatest market potential. MBD also expects anticipated changes to regulations in the emergency lighting sector to result in a significant demand for replacement equipment.

Technological advances also have an impact on competition in the market, with new material helping to keep the luminaires innovative and ahead of the commodity market.

It is not all good news though. MBD also adds that the long-term effect of increasing lamp life will reduce the market for replacement sales. Additionally, the environmental issues concerning the disposal of toxic materials may affect the demand for areas such as compact fluorescents. "Energy efficiency, through life performance, design for dismantling and recycling, as well as the reduction in hazardous elements such as mercury, cadmium are just some of the green issues being addressed in lighting," comments King.

The market for lamps is also driven by the replacement sector which is less exposed to cyclical economic fluctuations and therefore provides an element of stability in the market.

During 1999 MBD reports a rate of growth of 7%, reflecting the general slow down in the construction market created by increased interest rates and and fears of a renewed recession.

In addition, the intense price competition in the sector also reduced the rate of market development despite a gradual trading up to higher cost items with longer life spans and lower energy consumption. Unsurprisingly, this increase in the life span of the lamps has exerted a slight downward impact on the replacement market value. In 2000 MBD believes that a similar level of growth took sales to £1796.2 million.

Filament lamps make up the majority of residential lamps sales, primarily due to their low cost, driven by replacement needs. MBD predicts this sector will continue to dominate the market for the foreseeable future with sales forecast to increase by around 12% in real terms between 2001 and 2005 to £225 million. However continuing demand is expected to be one of the weakest due to greater market penetration of higher performance lamps.

The trend towards smaller light sources is expected to help the tungsten halogen lamp market maintain strong real term growth, with the long product life proving attractive. Significantly MBD expects the market to grow by 60% between 2001 and 2005, attaining £14.2 million.

The market for fluorescent lamps continues to grow, boosted by product development into compact fluorescent lamps. Between 2002 and 2005 MBD predicts that the market will increase by some 17%. This is attributed to the energy efficiency and long-life of products.

Demand for discharge lamps has demonstrated a varied sales performance, with the metal halide sector achieving strong market growth, mainly due to increases in floodlighting and security lighting. For 2002 a 13% increase to £42 million is expected.

Recent market growth has been reported throughout the infrared and ultraviolet lamps sector, this includes a wide range of products, including security which has been a particular growth area. Growth of 11% is expected between 2002 and 2005.

The market for light fittings is expected to remain relatively static, with MBD forecasting sales of £681 million in 2005, an increase of just 1% (see table 3).