Smart city market to reach $300 billion by 2032

May 3, 2023

The global ‘smart city’ technology market is expected to grow from US$121 billion in annual revenue in 2023 to US$301 billion by 2032, according to a new report from Guidehouse Insights. This represents a compound annual growth rate (CAGR) of 10.7 percent.

Cumulative revenue between 2023 and 2032 is expected to reach just under US$2 trillion.

The research and consulting firm said this growth is driven by the fact that cities are showing a strong commitment to infrastructure investment, digital technologies and increased sustainability, often supported by central government funding.

According to the research: “The smart city is no longer just a visionary idea”.

Eric Woods, research director with Guidehouse Insights, told Cities Today that while the concept of smart cities started out as a techno-centric, vendor-defined idea, it has evolved with cities such as Barcelona, Amsterdam and others demonstrating a more city-led approach.

“The sheer volume of ‘smart city’ projects in cities, the growing capacity of cities to work with advanced data analysis, digital twins etc., plus the general digitalisation of infrastructure such as smart grids and smart water networks means cities are no longer just exploring but actually implementing advanced technology projects,” he said.

“Therefore, they’re dealing on a day-to-day basis with the practicalities that presents, as well as the big questions around privacy, security and governance of these new technologies. Any reasonably large city or ambitious small city has to be engaged with these issues now – hence my feeling that all cities are in this sense smart cities now, presuming one agrees that the smart city is a journey without an endpoint.”

However, the report also finds that many cities still have a “long way to go” to develop sufficient capacity to manage the opportunities and challenges presented by new technologies.

City trends

The pandemic and the climate crisis accelerated technology adoption in cities, the report says.

“These global challenges are amplifying long-standing local issues around the quality of public services, environmental standards and social inequalities,” said Woods. “At the same time technology is transforming how cities work and how they are experienced.”

Trends in cities include innovations in urban design which embed digitalisation and decarbonisation as core principles. Digital transformation is accelerating as local governments tackle social, environmental and economic issues, and cities are showing greater maturity in their use of data analytics and in addressing data privacy and cybersecurity concerns, the report finds.

Cities are also investing in resilient and sustainable infrastructure, using IoT and advanced data capabilities to design, monitor, control and maintain urban infrastructure.

In addition, the report highlights that a focus on equitable outcomes for all communities is becoming a key pillar of many city programmes.

All sectors of the smart city market present significant opportunity, according to Guidehouse.

The digital transformation of city operations and services means that government is the largest sector of the market. Smart mobility is also expanding as advanced solutions for traffic management are deployed alongside low-carbon transport infrastructure and services.

The fastest growing sector is expected to be smart water systems as the impact of climate change forces governments and utilities to address underlying infrastructure issues.


New funding models are expected to help accelerate investment further.

“New partnerships are being established across the public, technology and finance sectors to support smart city investments and overcome the funding gap that has long been a significant drag on the market,” according to the report.

Funding trends highlighted include significant direct city funding, city-backed low-carbon finance schemes, revenue-sharing models, public-private partnerships, and community-backed developments.

Guidehouse notes a growing interest from private equity investors in smart city opportunities. Cities are also taking a ‘platform’ approach to addressing systemic, multisector challenges, as well as exploring ways to generate more value from the assets and infrastructure that they own.

Read the article here: Smart city market to reach $300 billion by 2032