Lighting as a Service (LaaS) Market

Market Overview

The global Lighting as a Service (LaaS) market was valued at approximately USD 1.1 billion in 2024 and is projected to reach USD 3.9 billion by 2033, growing at a CAGR of 17.2% during the forecast period (2025–2033). Lighting as a Service (LaaS) is an innovative business model where customers pay for lighting services rather than owning the lighting infrastructure. The demand for energy-efficient lighting solutions, increasing adoption of smart lighting systems, and government incentives promoting sustainable energy consumption are fueling market growth.

Key growth drivers include the rising emphasis on reducing carbon footprints, lower upfront costs of LED lighting solutions under service-based models, and increasing integration of IoT and AI-powered lighting solutions in smart buildings. Additionally, commercial and municipal sectors are rapidly adopting LaaS to enhance operational efficiency and sustainability.

Market Dynamics

Market Drivers

Growing Demand for Energy-Efficient and Smart Lighting Solutions and Reduced Capital Expenditure and Cost Savings

The transition toward energy-efficient lighting is a primary driver of the LaaS market. Governments and regulatory bodies worldwide are promoting sustainable lighting solutions to minimize carbon emissions. According to the International Energy Agency (IEA), lighting accounts for nearly 15% of global electricity consumption, and the shift to LED-based smart lighting systems can reduce energy use by up to 50-80%. LaaS facilitates this transition by offering lighting solutions with minimal upfront investment, allowing businesses to achieve cost savings while contributing to environmental sustainability.

In addition to this LaaS model eliminates the high initial costs of lighting infrastructure and provides businesses with predictable monthly or annual expenses. Organizations, particularly in commercial and industrial sectors, prefer LaaS due to its cost-effectiveness and ability to provide access to the latest lighting technology without the need for large capital investments. Additionally, ongoing maintenance and upgrades are handled by service providers, reducing operational expenses and ensuring long-term savings.

IoT and AI-Driven Smart Lighting Integration

With the rising adoption of IoT and AI-powered lighting, LaaS is becoming a key component of smart building ecosystems. Intelligent lighting solutions equipped with motion sensors, daylight harvesting, and predictive analytics optimize energy consumption and enhance user experience. According to the Smart Cities Council, the integration of LaaS in smart city projects is expected to grow at a CAGR of 20.1%, as municipalities seek energy-efficient urban lighting solutions to improve infrastructure sustainability.

Market Restraints

Concerns Regarding Data Security and System Compatibility and Long Payback Periods for Some End-Users

Despite its advantages, the adoption of LaaS is hindered by data security concerns associated with IoT-enabled lighting systems. Smart lighting solutions collect and transmit data, making them susceptible to cyber threats. Additionally, businesses may face interoperability challenges when integrating LaaS with existing lighting infrastructure, leading to compatibility issues and additional costs.

While LaaS reduces upfront investment costs, the long-term subscription fees may be perceived as expensive for certain end-users. Small and medium-sized enterprises (SMEs) may hesitate to adopt LaaS due to longer payback periods compared to traditional lighting ownership models.

Segmental Analysis

The Lighting as a Service (LaaS) market is segmented by component, installation type, and end-use industry, each playing a vital role in shaping industry dynamics.

By component, the market is divided into luminaries and control systems, software and analytics, and services. Among these, the luminaries and control systems segment accounted for the largest market share in 2024 due to the growing adoption of energy-efficient LED lighting. LED-based solutions offer up to 75% lower energy consumption compared to traditional incandescent bulbs, making them highly sought after by commercial and industrial sectors. Meanwhile, the software and analytics segment is witnessing a rapid CAGR as businesses increasingly adopt IoT-integrated smart lighting systems. The ability of smart lighting to collect real-time data, optimize energy consumption, and enhance user experience is driving investments in lighting control platforms. The services segment is also expanding, with demand for subscription-based lighting solutions and ongoing maintenance contracts on the rise, especially in corporate offices and retail chains.

By installation type, the LaaS market is categorized into new installations and retrofit installations. Retrofit installations dominate the market, as organizations worldwide are upgrading their existing lighting infrastructure with energy-efficient, sensor-based, and remote-controlled LED systems to meet stringent energy regulations. Governments across North America and Europe are mandating the phase-out of inefficient lighting, further propelling the retrofit segment. For instance, the European Union’s Ecodesign Directive requires the elimination of halogen lamps by 2030, boosting demand for LaaS-based upgrades. Meanwhile, new installations are gaining momentum in smart cities and commercial real estate projects, where developers integrate advanced lighting control systems during the construction phase to reduce long-term operational costs.

By end-use industry, the LaaS market is segmented into commercial, industrial, municipal, and others. The commercial sector holds the largest market share, with significant adoption in corporate offices, retail stores, hospitality, and educational institutions. The demand is fueled by organizations seeking cost-effective lighting solutions to enhance employee productivity and reduce operational expenses. The industrial sector is witnessing strong growth, particularly in manufacturing plants and warehouses, where high-bay LED fixtures combined with motion sensors help in optimizing energy usage. The municipal segment is experiencing rapid expansion, driven by the increasing adoption of smart street lighting in cities aiming for carbon neutrality and reduced power wastage. According to the U.S. Department of Energy, switching to LED-based public lighting could save municipalities over $6 billion annually in electricity costs.

Regional Analysis

North America accounted for 42.2% of the LaaS market share in 2024, with strong adoption in the U.S. and Canada. Government incentives and energy regulations are key growth drivers. Major commercial and industrial players in the U.S. and Canada are opting for LaaS solutions to meet corporate sustainability goals and reduce electricity costs. Additionally, advancements in wireless lighting controls and cloud-based analytics platforms are fueling demand in this region.

Europe holds a significant share due to the EU’s stringent energy efficiency policies and widespread adoption of smart lighting solutions. The European Commission’s Green Deal aims to reduce greenhouse gas emissions by 55% by 2030, propelling the adoption of energy-efficient LaaS solutions across corporate offices, hospitals, and government buildings. Countries like Germany, the UK, France, and the Netherlands are at the forefront of this transition, with cities implementing smart lighting infrastructure to improve public safety and energy efficiency. Moreover, European governments are offering financial incentives to businesses and municipalities for adopting smart lighting-as-a-service models.

Asia-Pacific expected to witness the highest CAGR of 19.5%, fueled by rapid urbanization, smart city initiatives, and government-led energy efficiency programs in China, Japan, and India. For instance, China’s Five-Year Energy Plan includes aggressive targets for reducing carbon emissions and implementing LED-based smart lighting in public and commercial spaces. India’s Ujala program, aimed at replacing traditional lighting with LED solutions, is further accelerating LaaS adoption. The growing presence of global and local lighting service providers in this region is also intensifying market competition. 

The Middle East & Africa (MEA) is emerging as a promising market, driven by government-led sustainability initiatives and investments in smart infrastructure. The United Arab Emirates (UAE), Saudi Arabia, and South Africa are making significant strides in green energy policies, promoting LaaS adoption in commercial and municipal sectors. Dubai’s Smart City 2025 Vision includes ambitious goals to transition to 100% energy-efficient lighting in government buildings and public spaces. Additionally, the demand for cost-effective lighting solutions in Africa, where power shortages are a concern, is increasing the appeal of LaaS among commercial and municipal entities.

Latin America is experiencing steady growth, with Brazil and Mexico leading the market. The region’s demand is driven by rising electricity costs, urban modernization projects, and government efforts to reduce energy consumption in public spaces. Brazil’s National Energy Efficiency Plan aims to increase LED lighting penetration in commercial and public sectors by 40% by 2030, creating opportunities for LaaS providers. Mexico’s smart city initiatives in cities like Guadalajara and Monterrey are incorporating IoT-powered lighting systems, further driving adoption.

Recent Development

1. January 2025: Signify N.V. announced a partnership with smart city developers to implement AI-driven street lighting solutions under LaaS contracts.
2. November 2024: Acuity Brands launched an advanced IoT-enabled lighting system tailored for commercial office spaces, aiming to optimize energy consumption.
3. September 2024: GE Current expanded its LaaS offerings to industrial customers, integrating AI-powered predictive maintenance features.
4. July 2024: Osram Licht AG introduced a cloud-based lighting management platform for real-time analytics and energy monitoring.