What Does The Future Hold?
January 5, 2010
An industry group predicts the HVAC marketplace will undergo widespread change and enjoy high-volume growth in the next 10 years. The bad news? New competition will force many small, independent contractors out of business.
Imagine a world where HVAC contractors specialize, engage in building information modeling, discuss green technology, sustainability and carbon footprint issues, and enjoy greater profitability than they do today.
Picture a place where heavily backed, major players undercut small independent contractors and romance away customers. Utilities will own the homeowner’s HVAC equipment and service it. Globalization brings in foreign investors with deep pockets; home warranty companies take the freedom of choice out of the customer’s hands; and home centers have such a strong foothold, they force many contractors into labor-only agreements.
And finally, HVAC manufacturers, fueled by a decade-long push, are big players, locking up customers for themselves.
Welcome to 2018. You’ll find it a very competitive place.
If you survive!
In an all-encompassing, 18-month study to determine the future viability of the HVAC industry, the non-profit New Horizons Foundation looked at all the issues that future HVAC contractors will face.
The positive? The industry will offer those who can adapt great opportunities. For others, well, consider it a wakeup call, said Dennis Bradshaw, the New Horizons Foundation executive director.
“If ever there’s been a challenge to the small, independent contractor who says ‘this is the way we’ve always done things,’ this is it,” Bradshaw said. “Change is going to occur at an increasingly faster rate.
“Firms are going to have to adapt quickly, and if they don’t, I don’t think there’s any question that smaller, independent companies are going to go out of business.
“But we prefer to focus on the positive, the opportunity this study speaks to,” he said. “For small companies that respond and get out in front of this, there’s no reason why they can’t be competitive and more profitable.
“It’s a question of whether you push back from change or adapt to it.”
The foundation commissioned an independent consultant to hold meetings and sit-down roundtables with companies in and outside of HVAC and sheet-metal fabrication industries, conduct surveys, and then facilitate follow-up discussions to prioritize the most critical issues facing the industry. It began in 2007 and was completed last year with predictions about what the HVAC marketplace will look like in 2018.
- Among them:
- A wealth of new, strong players will dominate the industry in 2018, wrestling control from small independents, with everyone from utilities, home warranty companies and equipment manufacturers to foreign investors and consolidators grabbing a piece of the HVAC pie.
- An increase in government-funded, energy-saving incentives and regulations on the national, state and local levels, coupled with concerns for the environment, will prompt an emerging marketplace of customers willing to make the investment to reduce their carbon footprints.
- Reversing a longtime trend, the square footage of single-family and multifamily housing is expected to decrease as energy and building costs soar, and residents move back closer to cities to reduce their commuting time to jobs. While the square footage decreases, the importance of the design and efficiency of the housing space will increase. Homes of the future will be smaller, more energy-efficient and smarter.
- HVAC contractors will become leaders in the green movement, heavily focused on energy conservation and sustainability issues.
- HVAC contractors of 2018 are expected to be divided into five categories. This includes large, full-service firms; installation-only companies that act as sub-contractors; fabricationonly firms providing duct fabrication; energy/environmental specialists; and smaller niche specialists providing support to the energy/ environmental firms and handling small projects.
- The labor shortage that currently exists in the HVAC industry will continue to grow through 2018, and training will need to be revamped from a “one-size-fits-all” approach to address industry specialization.
- There will be a large increase in the demand for renovation, remodeling and HVAC retrofitting of existing residential structures, and a strong market for service work.
- Technology will rule the day, with construction tools such as building information modeling (BIM) gaining importance. This modeling will be used up front in construction to improve efficiency, ensure proper installations and minimize changes and mistakes on larger projects, then trickle down to being used with single-family residential construction.
- To compete, HVAC contractors will need to become fluent and invest in technology … and the foundation’s report says most savvy contractors know it. Of the companies the foundation surveyed, 90 percent said it is “likely” they will increase their IT staff to address new technology in the future.
“It’s very difficult in this industry to get contractors to plan three or five years down the road,” Bradshaw said. “And we want them to think even beyond that.
“Change is coming and they need to adapt to it.”
