The Year Ahead: Experts predict continued growth for the industry in 2015
Most businesses can look back on 2014 as having been a pretty good year. After years of struggling to emerge from the worst recession in recent memory, things seemed to be more on track in the past year. Optimism started to creep back into the economic psyche, and business was once again moving forward.
Many in the plumbing and HVAC industry saw this positive growth for their businesses. Part of this was due to a generally improved economy. But, other factors, such as rising consumer confidence and a continued drive toward energy and resource efficiency, have contributed as well.
"2014 was a banner year," said Brian Fenske, specialty channel sales manager at Navien. "Sustained interest in energy savings, both residential and commercial, has driven this growth with little or no government tax credit or rebate assistance."
"I think 2014 has been a good year for the industry," echoed Kevin Tindall, 2014-2015 president of the Plumbing-Heating-Cooling Contractors National Association (PHCC), and president of Tindall & Ranson Plumbing & Heating in Princeton, N.J. "The economy is steadily improving and our member contractors are reporting that business has picked up."
Having a good year is, in itself, often cause for optimism, and there appears to be an overall positive outlook going into 2015.
"It was important for the industry to have a good year, and 2014 was a good year in general," said Christian Geisthoff, vice president of Market Innovations at Viega. "The economy is still in recovery mode, but we are seeing improvement. We see many strong indications for growth in 2015. The U.S. economy looks strong. Recovery is ongoing and we believe the economy should keep growing."
Many broad economic outlooks are predicting a robust year for business in 2015. In its 2015 economic forecast, Wells Fargo uses sports analogies to predict that the U.S. economy will shift from defense to offense in the coming year. With businesses and consumers more secure in the recovery and the overall state of things, the hope is that trend will continue an ever-accelerating climb upward.
"I am reasonably optimistic. Many of the economic driving factors are positive and/or trending upwards," explained Dale Stroud, senior director of Marketing and Offerings at Uponor. "Consumer confidence, as measured by a couple of different indices, is nearly back to levels seen before the economic downturn. That signals that consumers are willing to more actively participate in making expenditures that will help drive economic growth."
"As economic conditions continue to improve, plumbing/heating/cooling (PHC) contractors are breathing a big sigh of relief," Tindall said. "However, I think we all are much more cautious and feel more vulnerable than we were before the downturn. None of us knows for sure what is ahead, except that our industry will continue to evolve. All we can do is pay attention to the changing landscape, put the right processes in place and choose the right kinds of investments to make sure we stay a step ahead of the competition."
The fluctuating price of energy looks to be a double-edged sword for the industry. On one hand, dipping oil and energy costs tend to loosen wallets for individuals and businesses. But on the other hand, there continues to be a desire for energy- and resource-efficient products and systems.
"The latest trend in dropping gasoline prices is welcoming to most, but it affects how a consumer thinks about energy efficiency," Fenske said. "With gasoline prices projected to be in the low $2 per gallon range, consumers' thoughts tend to be more on travel and other expenditures such as autos and electronics with the extra money in their budgets. While I remain optimistic of the year’s equipment sales, it wouldn't hurt to have the federal government develop a stimulus that we have lacked for some time."
In spite of this, most believe that efficiency and sustainability will continue to be driving factors in 2015.
"Continued incorporation of high-performance building attributes, in both residential and commercial buildings, is an encouraging sign," Stroud said. "In fact, sustainable building practices are becoming the de facto standard in many market segments. Of course, access to funding is critical to growth in all phases of the construction market, so continued improvement in obtaining favorable financing is essential."
"When it comes to [the water heater] facet of the industry, all eyes will be on the new [NAECA] water heater energy factor requirements that go into effect on April 16," Pinto said. "Manufacturers will have to be prepared to help their customers through the transition, which we expect will present a variety of challenges and opportunities across the board."
"There are opportunities for contractors to educate customers about how new regulations affect them, and a great example is the new water heater regulations that go into effect on April 16," Tindall said. "We're making sure our members have access to all the details of this new regulation so they can prepare, not only their companies, but their customers as well. Consumer research on the Internet can only go so far. Hearing information and solutions that work best for a specific situation from a PHC service expert can only help strengthen the relationship and create greater awareness of the importance of hiring professional contractors."
"There is an increasing trend to ensure plumbing fixtures and fixture fittings are 'green,'" said Russ Chaney, CEO of the International Association of Plumbing and Mechanical Officials (IAPMO). "We saw a decrease in the testing of 1.6 gallon per flush (gpf) toilets and an increase in 1.28 gpf and dual-flush toilets. Kitchen and lavatory faucets, showerheads and pre-rinse sprayers have lower water consumption ratings. All these products are designed to save water without sacrificing product performance and customer satisfaction."
Environmental conditions in some parts of the country look to continue to be a driving factor for water efficiency in 2015.
"As California and the Western U.S. continue to see a severe drought, there will be an increase in demand for green products," Chaney said. "Water scarcity and water quality problems here in the U.S. and globally will create a big demand for efficient, innovative products."
While the emphasis of sustainable and water-efficient solutions is important, there also is a growing recognition of the fact that it is possible to go too far with water-saving technology. Without sufficient flow, there can be a negative impact on water quality and safety. The industry will continue to work to strike the proper balance between savings and safety.
"The biggest industry issue we see for 2015 is an increased focus on water hygiene," Geisthoff said. "The new ASHRAE 188P standard on Legionellosis will change how the industry designs commercial plumbing systems."
The constant march of technology also will continue to shape the future of products and services within the industry, and will also continue to influence consumer and end user demand.
"The new year should bring continued leaps forward in terms of new or alternate technology," Pinto said. "Consumer focus on efficiency and technology trends, particularly increased integration of home or business plumbing/HVAC controls that can be managed via tablets or phones, should offer designers and manufacturers exciting new opportunities."
If history is a guide, the explosion of smart phone controls and integrated technology in 2014 will keep growing in 2015. End-user control, ease of use and comfort are the names of the game.
"In 2014, we saw an increase in the use of technology in plumbing products, like the use of smart phones to program plumbing fixtures and fittings," Chaney said. "We also saw an increase in touchless faucets and toilets, as well as toilets with remote controls that raise and lower seats, and turn on music and lights. There also are shower heads that can create different colored lighting to suit your mood."
Even as technology continues to rocket forward, it is important to take a measured and methodical approach to its application.
"It will be important for manufacturers not to lose sight of those customers who may be slower to migrate to new plumbing and HVAC platforms, regardless of how well they perform," Pinto said.
Of course, there are always potential challenges to be found, even in years that are broadly forecasting well. For 2015, many see adequate staffing as a key hurdle to overcome.
"The primary business challenges right now are related to keeping up with technology and finding enough qualified workers to meet demand," Tindall said. "To address the current shortage of qualified workers in the PHC industry, PHCC is very active with various programs to help build and train the workforce we need to continue to provide safe and efficient plumbing and HVACR services for the U.S. We know that the PHC trade offers a rewarding career and a comfortable living, and we want to make sure others see that too."
"We hear a lot about a shortage of skilled trades in the construction industry," Stroud echoed. "I hope we can attract enough workers to our very important trades so that we are able to keep up with the expected increase in construction activity."
Projects in the different building markets do indeed show a notable growth in construction and retrofit activity. For 2015, many are predicting good growth in the residential and commercial sectors.
"The residential market has started growing again," Geisthoff said. "The growth is slight, but it is increasing. We also see that the commercial market is stable and strong. Early indications are that the industry in 2015 will continue to experience growth."
"We should continue to see market lift the residential sector," Stroud predicted. "Demographics, particularly an expected resurgence in household formations, favor a sustained increase in housing starts. Also, as the 'shadow inventory' of existing homes in the foreclosure process diminishes, supply and demand of available homes should achieve a better balance. Many signs also point to an ongoing recovery in the nonresidential sector."
"Continued growth in the multifamily segment for new construction will bring about opportunities for many plumbing and HVAC professionals in 2015," Pinto added.
"Commercial applications continue to grow at a fast pace as building owners and design engineers look for cost-conscious, energy-efficient solutions," Fenske said. "System costs, operating efficiencies, unit redundancy and space-saving designs with tankless and boilers have become a strong consideration for both new and replacement systems."
Residential and commercial are commonly pointed to as potential hot spots for 2015, but some are even more broadly optimistic.
"All segments are predicting strong growth," Chaney said. "We expect 2015 to be even better than 2014."