HVAC Market Outlook For 2011 & 2012

[Editor’s Note:  Here are Goodway’s 2012 HVAC industry outlook and 2012 HVAC technology outlook.]

According to a report recently released by the financial services company J.P. Morgan, the HVAC market bottomed out in 2009, started climbing in 2010 and both the residential and commercial sectors of the market should improve and yield a “solid” 2011.

Further, as noted in the J.P. Morgan report, growth in the residential sector will not be coming from increased housing starts, but rather from pent-up demand for replacement of units that have either been repaired or where repairs have been deferred for the past three years.   An increase in consumer confidence is also a factor.

The company’s report details expected residential system replacements to grow to 6.91 million units in 2011, 8.16 million replacements in 2012 and 9.12 million in 2013. One factor playing into these numbers is that many of the systems repaired (rather than replaced) during the depths of the 2007-2009 downturn will need to be repaired again very soon.

On the commercial side, the report is equally optimistic and projects commercial sales to turn positive in 2011.  Continued growth rates should actually exceed the residential sector toward the end of 2011 and into 2012.

A separate study conducted by Bharat Books (an India-based research company) predicts the U.S. HVAC market will grow about 3.2% through 2011 to a total of $16.8 billion. The drivers of that growth, according to the report, will be replacement of residential units and growth in non-residential construction.

According to Bharat, geothermal energy will, despite starting from a small installed base, be among the fastest growing segments of the HVAC market.  Heat pumps will remain the largest and fastest growing segment ($2.1 billion in 2006).

“Unitary air conditioners and packaged terminal air conditioners are forecast to achieve above average annual gains.  This growth will be due in part from their use in industrial and commercial markets, two areas that are expected to post strong recoveries in construction spending through 2011”, the report concludes.

Not everyone agrees with these outlooks, however.  Talbot Gee, Executive VP of Heating Airconditioning & Refrigeration Distributors International (HARDI) feels those predictions are a bit rosy, according to an article in ACHR News.

Gee wondered how much of the forecasted replacement activity would be covered under warranties and therefore not a true generator of revenue.  He also expressed some skepticism about the replacement numbers, noting that 8.16 and 9.12 million units in 2012 and 2013 would be at or above the levels of the best markets ever seen in this country.  The robust housing market that supported that level of business is now gone.

Gee also noted that new energy-efficiency rules have had a negative effect on sales, and that the tax breaks available to homeowners who buy new HVAC equipment would have expired at the end of 2010.

He did agree that there would be growth in both the residential and commercial sectors of the market, but that it would be considerably more modest. “We’ve had a very cautious optimism this year,”  he said, “and we’re easing off our expectations for for 2011.”

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Rich Silverman
Goodway Blogging Team