NEW YORK — The HVAC service franchises industry is highly dependent on activity in the downstream construction sector as many HVAC systems are installed at the time of construction. After the housing bubble burst, the value of nonresidential and residential construction plummeted, pushing industry revenue down from 2009 to 2010. Furthermore, demand for maintenance and upgrades waned, as well, due to declining corporate profit and disposable income per capita.

Since then, demand for HVAC services has quickly increased as construction expenditures recovered. In 2014, industry revenue is expected to continue to rise as demand fully recovers, according to IBISWorld, which expects service franchise revenue to continue increasing at an average annual rate over the next five years, though growth is partly due to the recovery from recessionary lows.

“The strong performance from 2012 to 2014 is not anticipated to fully bring the HVAC service franchises industry to its pre-recessionary levels,” said David Yang, industry analyst, IBISWorld.

Yang does expect revenue to reach pre-recessionary levels in 2014, but profit is estimated to remain below that benchmark.

IBISWorld representatives expect the five years following 2014 to be more fruitful for HVAC service operators. “Construction activity is forecast to increase in both residential and nonresidential markets,” said Yang. Corporate profit and per capita disposable income will also enable businesses and homeowners to upgrade their existing HVAC systems. Federal and state governments will continue to incentivize the move toward more energy-efficient systems via tax credits, supporting industry growth. IBIS World estimates HVAC franchises spend 7 cents on captial for every $1 spent on labor. Franchises often pay relatively high wages for skilled labor, with transportation vehicles being their only costly capital investment, states the report.

Publication date: 9/15/2014

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