CMD: U.S. and Canadian HVAC manufacturers combined annual sales soared to almost $50 billion in 2014

According to a white paper published by CMD, U.S. producers of HVAC equipment can be optimistic about their potential sales over the next 2 years.

02/09/2015


Among the world's major developed and emerging nations, the U.S. economy is performing best, as demonstrated in a surge in the value of the U.S. dollar, according to a white paper published by CMD, a provider of construction information in North America.

The more expensive greenback handicaps U.S. domestic HVAC producers. Their prices of goods sold to foreign markets are becoming less competitive. Meanwhile, offshore competitors seeking U.S. customers are benefitting from a currency-induced reduction in import prices.

Regardless, U.S. producers of HVAC equipment can be optimistic about their potential sales over the next 2 years. They will see an ongoing cyclical improvement in construction and trends within the various types of structures that will give them a boost. The following sections highlight trends expected to impact the activity levels in the next 2 to 3 years.

Mixed-use

As part of high-rise living, there has been a proliferation of mixed-use projects, especially in proximity to rapid transit stations. Mixed-use projects include:

  • Residential 
  • Office 
  • Retail  
  • Health care
  • Hospitality.

Leisure and hospitality is the subcategory of U.S. employment experiencing the most rapid increase in hiring over the past 2 years. The year-over-year percentage change in jobs has consistently been close to +4% compared to a total-economy rate of increase that has struggled to reach +2%.

Mixed-use projects and rapid transit, side-by-side or on top of each other, define the term "synergy." The second brings traffic to the first; the first assures ridership for the second. Politicians generally advocate rapid transit projects as a highly visible means to impress voters with the efforts being made on their behalf.

Rapid transit is also an easy pitch based on its cleaner environment connotations. Clusters of development that incorporate the live-work ideal, while reducing the carbon footprint from vehicular traffic, represent a winning green strategy for municipal planners.

Commercial offices

Greater office and residential tower construction is being planned in some of the nation's biggest cities, including New York (Hudson Yards), Tampa (Channel District), and Miami (Worldcenter Development). Forward-thinking companies in the high-tech sector are providing work forces with attractive campus-like locations where they can both live and work (e.g., Amazon in downtown Seattle and Apple in Cupertino, Calif.).

Retail

The retail sector also appears on the verge of a new construction wave. The dramatic decline in the price of gasoline is freeing up money that consumers can spend on other goods and services. While the Internet is taking away some brick-and-mortar construction, there is the impression that online retail sales may top out between 12% and 15% of the total. The progression from 0% to 7% happened quickly; from 7.0 to the current 9% has been slower.

All serious retailers must have an Internet presence to be successful. Many shoppers are taking advantage of online purchases. Additionally, consumers conduct online research about what products are available, which vendors have them in stock, and how their prices compare.

Avid shoppers go to their preferred stores and take out a wallet, purse, and credit or debit card. The physical act of shopping is not likely to disappear. For a majority of people, shopping a recreational activity. It's what gets them out of the house in the evening or on the weekends.

Arenas and stadiums

HVAC manufacturers, take note of the large number of stadium and arena projects planned across the nation by teams in the NFL, NBA, NHL, and MLB. Contract awards from these projects will be major revenue generators.

U.S. HVAC 2014: Sales, shipments, and new orders. Courtesy: CMDIndustry trends

In the institutional category of construction, aging baby boomers guarantee work in the hospital/medical field will be strong for decades to come once the virtual moratorium on projects, due to uncertainty surrounding the introduction of the Affordable Care Act, ends.

Increases in school enrollments, driven by the grandchildren of the baby boomers out to the 2020s, will create more jobs at the level of elementary and secondary schools.

Construction at universities will be bankrolled by the generosity of former students. Successful alumni often like to shower their alma maters with financial gifts. The act of philanthropy is inspired when donors' names are etched into new faculty buildings by ready-to-please administrators.

Manufacturing plant construction will benefit from a repatriation of jobs. In some overseas countries, there have been multifold increases in the cost of labor and/or the introduction of new workplace rules striving to bring health and safety standards closer in line with richer nations.

Low-cost energy-realized from the hydraulic fracturing of shale-rock is providing U.S. manufacturers with an advantage. CMD's industrial starts in 2014 were +16.5% over 2013. A further significant increase in current dollar (i.e., not adjusted for inflation) industrial construction is expected in 2015.

U.S. HVAC 2014: Unfilled orders. Courtesy: CMDEnvironmental impact

It would be easy to assume the drop in the global price of oil will curb the world's shift to greater fuel efficiency. Neither the technology wizards devoting their lives to the cause of energy efficiency, nor the environmental activists for whom this is their calling, are likely to let that happen.

It has long been known that carbon emissions from buildings are as pervasive, if not more so than those from the tailpipes of motor vehicles traveling the nation's roads and freeways. HVAC manufacturers will continue to face scrutiny over whether they are doing enough to purify the air we breathe.

2014 HVAC industry report

In 2014, U.S. and Canadian HVAC manufacturers' combined annual sales soared to nearly $50 billion. Though the U.S. carries the load with $45 billion, Canada's growth continues at a significantly higher rate.

Canada HVAC 2014: Sales, shipments, and new orders. Courtesy: CMDU.S. HVAC manufacturers

  • Total sales and shipments increased by 1.7% in 2014 versus 2013
  • New orders increased by 5.4%
  • Unfilled orders increased by 19.5% in 2014. 


Canada HVAC manufacturers 

  • Total sales and shipments increased by 10.4% in 2014 versus 2013
  • New orders increased by +17.5%  
  • Unfilled orders increased by +12.3% in 2014.

Canada HVAC 2014: Unfilled orders. Courtesy: CMDSummary

Currently, the biggest-ticket HVAC sales items for manufacturers--furnaces, cooling units, etc.--are in high-rise structures. This aligns well with the trend in North America toward stronger multi-unit residential construction and mixed-use project starts. "The 2008-09 recession, with its accompanying tidal wave of foreclosures, rendered many individuals and families leery about undertaking a new single-family home purchase," said Alex Carrick, CMD chief economist. "Societal and demographic trends indicate stronger multi-unit residential construction starts relative to the single-family market segment, and that bodes well for the HVAC industry." The HVAC Industry Report included in this document provides an in-depth analysis of these and other topics-analysis of HVAC segments and regional spends, the top areas for growth and uncovering opportunities, and the areas where HVAC companies should be focusing resources next.


Edited by Joy Chang, digital project manager, CFE Media, jchang@cfemedia.com. For more information, visit www.cmdgroup.com.



No comments
Consulting-Specifying Engineer's Product of the Year (POY) contest is the premier award for new products in the HVAC, fire, electrical, and...
Consulting-Specifying Engineer magazine is dedicated to encouraging and recognizing the most talented young individuals...
The MEP Giants program lists the top mechanical, electrical, plumbing, and fire protection engineering firms in the United States.
Combined heat and power; Assessing replacement of electrical systems; Energy codes and lighting; Salary Survey; Fan efficiency
Commissioning lighting control systems; 2016 Commissioning Giants; Design high-efficiency hot water systems for hospitals; Evaluating condensation and condensate
Solving HVAC challenges; Thermal comfort criteria; Liquid-immersion cooling; Specifying VRF systems; 2016 Product of the Year winners
Driving motor efficiency; Preventing Arc Flash in mission critical facilities; Integrating alternative power and existing electrical systems
Putting COPS into context; Designing medium-voltage electrical systems; Planning and designing resilient, efficient data centers; The nine steps of designing generator fuel systems
Designing generator systems; Using online commissioning tools; Selective coordination best practices
As brand protection manager for Eaton’s Electrical Sector, Tom Grace oversees counterfeit awareness...
Amara Rozgus is chief editor and content manager of Consulting-Specifier Engineer magazine.
IEEE power industry experts bring their combined experience in the electrical power industry...
Michael Heinsdorf, P.E., LEED AP, CDT is an Engineering Specification Writer at ARCOM MasterSpec.
click me