LOS ANGELES — Weakened demand for HVAC services in the United States during the recession intensified price-based competition and put pressure on profit margins. According to a new industry report from IBISWorld, the HVAC industry is forecast to return to growth this year and continue to grow for the next five years.

The HVAC industry is influenced in part by the new construction market, with revenue generated from HVAC equipment installations in new residential and nonresidential buildings. “Maintaining, monitoring, and repairing existing equipment also accounts for a significant share of revenue, lending the heating and air conditioning industry some stability amid the volatile construction markets of recent years, but also making it susceptible to changes in the levels of disposable income,” said Andrea Alegria, IBISWorld industry analyst. In the five years to 2012, the firm noted that the declining construction markets contributed to revenue contracting at an average annual rate of 4.5 percent to $58.3 billion.

The collapse of the housing market and subsequent recession caused new construction activity to decrease dramatically. “During the five years to 2012, demand for new housing was hampered by an oversupply of existing homes, the growing number of home mortgage foreclosures, and declining property values,” said Alegria. “Nonresidential building construction activity also declined as the recession led to a contraction in the business sector.” This contraction on two fronts hurt demand for HVAC products and services.

After several years of declining revenue, the HVAC industry is projected to return to growth in 2012, with revenue forecast to rise about 8 percent, according to IBISWorld. Growth is expected to continue to 2017. During this period, industry growth will be driven by improvement in the residential and nonresidential new construction markets as they rebound from recessionary lows. The industry is also expected to benefit from an increase in renovation and retrofit work.

Publication date: 7/16/2012