Even as states lift COVID-19 restrictions and people return to public spaces, a heightened focus remains on houses and home renovations. Activity may be down slightly from last year, when people used stimulus money to transform parts of their houses into offices and gyms. Still, residential HVAC contractors expect another strong summer. Mortgage rates are a little higher than a year ago but extremely low by historic standards. That’s driving construction for those in the new-home segment.
It’s a different story for commercial HVAC contractors. Projects that were delayed last year were completed earlier this year. There are signs of a recovering market. The Architecture Billing Index has been positive since February, indicating more work in coming months. Right now, though, private nonresidential construction spending declined 7.7% year-to-date through April, reports the Associated General Contractors of America. The largest category for public construction spending, education, also declined.
What does the near-term future look like for commercial HVAC contractors? The Air Conditioning Contractors of America (ACCA) recently hosted an online event with representatives from three major manufacturers to discuss that topic. The panel consisted of Mark Bills, vice president and general manager at Emerson Commercial & Residential Solutions; Philip Smyth, executive director of commercial product management at Johnson Controls; and Elliott Zimmer, executive vice president and chief operating office of Lennox North America Commercial Heating and Cooling.
Challenges Ahead, But Worst Behind
Smyth said he believes the commercial market reached a bottom earlier this year and showed signs of a reversal in the spring. The outlook for offices seems weak, but there is considerable growth in the warehouse segment.
The office segment could turn around, Bills said. Large employers, such as Amazon and Wells Fargo, announced they expect employees working in-person at least a few days a week starting in the fall. Bills said the challenge for the HVAC industry is meeting the needs of building operators with fewer occupants at any given time. But there will be occupants.
“Human creatures want to be out and interacting with folks,” Bills said.
Getting through the next few months means paying extra attention to the market, Zimmer said. HVAC contractors need to know where stimulus money is going.
“When there is that kind of money being poured into certain categories, contractors should be aware of it and they should understand what those categories are,” Zimmer said. “It takes time for that to work through the system to where budgets are there for jobs to be actually happening.”
Some of the stimulus money is headed to schools for IAQ improvements. Zimmer expects that segment to continue growing. He said new building codes could even include IAQ requirements. Another growth segment for commercial HVAC contractors is marijuana grow facilities as more states legalize recreational use.
It’s also crucial to follow developments so HVAC contractors have the materials they need for their projects. Shortages continue to challenge all segments of the industry.
“We’re in a much better spot than we were 12 months ago, but there are still these pockets of disruption and volatility,” Bills said.
Zimmer said everyone in the industry learned the importance of being agile. He warned that volatility will continue for the foreseeable future. That’s another reason to keep up with what’s happening with both customers and suppliers.
“Volatility is solved with lead time,” Zimmer said.
The pandemic also made the ongoing labor shortage for the HVAC industry more difficult. But it may have also cast the industry in a better light among potential employees, Smyth said. It showed that HVAC technicians are essential workers and they have jobs that keep paying and can’t be off-shored.
“The pandemic has actually been, to some degree, an advertisement for our industry,” Smyth said.