The start of a new year always brings new possibilities, and PHVAC industry pros are cautiously optimistic about new opportunities in the coming year.
“Statistics tell us that U.S. residents have taken a greater interest in their homes and are now investing more in their upkeep,” says Dominic Sims, CEO of the International Code Council. “With that in mind, we are already seeing the construction and residential real estate industries rebounding. According to an analysis by the Associated General Contractors of America of government data, construction employment increased by 84,000 jobs in October, with jobs added in both nonresidential and residential categories. While this increase can be contributed to pandemic-induced social distancing, which has led to society placing a greater emphasis on the design and comfort of the home, we are expecting this trend continue long into the future.”
Kerry Stackpole, FASAE, CAE, CEO and executive director of Plumbing Manufacturers International, agrees with Sims, saying because people are spending more time at home due to the pandemic, they are not spending money on vacations and entertainment.
“As a result, individuals are choosing to invest disposable income into home improvements — many of which are plumbing related,” he notes. “This definitely creates an opportunity for plumbing manufacturers. We expect this general trend to continue into 2021. And, according to the most recent PMI Market Outlook reports, retail sales of building materials and supplies through outlets such as Home Depot and Lowe’s continued to grow into the third quarter of 2020.”
Growth and opportunities
David McMillan, executive vice president for building services, Grundfos, notes that technology has given people the tools and capability to work efficiently from home, so 2021 will see improvement for domestic buildings.
“Even after the virus and the vaccine, comfort will be a bigger priority as more people spend time at home,” he says. “Businesses that recognize the opportunity will succeed. For commercial buildings segment, we will build on the momentum we've established over the past few years by continuing our growth in 2021. The data center industry is poised for explosive growth — there is a huge demand for bandwidth to support teleconferencing, file sharing and other necessary tasks. More data centers will be built due to this demand and the decentralization of service from on premise to cloud-based software. We also expect warehouses to continue growing, especially cold storage.”
Additionally, McMillan notes the coming year will bring more plumbing products with a digital layer.
“Typically, a large building such as a skyscraper might have its pressure booster system connected to a building management system,” he explains. “A smaller building might not do this because it's too costly. I believe we will see the entry of cloud-based building management, energy optimization and data analytics that will be cost-effective for small buildings. We will see an acceleration of existing technology, growth that has been amplified due to the pandemic, and there will be more and more sensors — for vibration, predictive maintenance, etc. — attached to the equipment.”
Bill Gray, president, Uponor North America, says the effects of the COVID-19 pandemic will likely continue into 2021.
“Remote work has caused many to re-evaluate their living situations both in the amount of space and location where they are living,” he says. “The lower interest rates are offering access to the housing market for a broader group of people, so the residential market of single-family sales looks like it will continue on a positive course in 2021. The pandemic has triggered a heightened interest in hydronic heating and cooling because of concerns about both air quality and awareness about sustainability/efficiency. Healthcare may also be a stronger market segment in 2021.”
Additionally, Gray agrees that software technologies will see a boost due to concerns about people in close proximity on job sites.
“The more than can be done off-site, the better,” Gray says. “BIM and laser-scanning will be strong leverage points for increasing efficiencies, increasing off-site planning capabilities and also reducing on-site staff time and numbers while working to meet customer expectations and maintain profitability on projects.”
Bruce Carnevale, CEO of Bradford White Corp., expects to see connected technology really start to take a foothold in the industry in 2021.
“Most of the growth in connected technology is going to be driven by the regulatory environment,” he says. “Washington, for example, has instituted requirements for grid-enabled products, which requires connected technology for heat pump water heaters. Demand for the technology will begin to hit critical mass in 2021, so that is definitely poised for growth.”
Ventilation will be a huge market sector in 2021, notes Rich Medairos, P.E: senior systems engineer, Taco Comfort Solutions.
“There’s a great need to understand and accommodate ventilation — often at heightened levels to reduce the risk of transmitting COVID-19 and other infectious diseases — and its impact on indoor environments, plus IAQ,” he says. “The long-sustained international focus on COVID-19 has brought unprecedented attention and awareness of the role and value of mechanical system, which were once just the purview of facility maintenance pros. Now it seems everyone is involved in the conversation, even office personnel or school teachers, administration, etc. We find ourselves asking, ‘How can we make these buildings safer and healthier?’”
Medairos explains that there is an art and science to ventilation, which usually entails bringing outdoor air indoors.
“Though ASHRAE standards for proper ventilation haven’t yet changed, they may as a consequence of COVID-19 and the energy conservation movement,” he notes. “Currently, the standing recommendation is for 20 cfm per person. You’ve likely heard the old adage, ‘The solution to pollution is dilution.’ With COVID-19, we need to rethink the way buildings are monitored and maintained. As an industry, we’ve been measuring CO2 levels to determine how much ventilation is needed for interior spaces. It’s likely that governing bodies will be changing the recommendations for allowable CO2 levels within buildings — which will mean increasing outdoor/fresh air exchange.”
Because of the increased awareness in ventilation, people are looking for technologies that avoid systems that transfer air from one interior space to another, Medairos adds.
“Chilled beams, a hydronic technology, provide both heating and cooling,” he says. “They’re powered by outside air, but there’s no transference of air between adjacent spaces within a building, unlike most VAV- and VRF-based distribution systems. Chilled beams are always dry because they never operate at temperatures below dew point, and it’s easy to control and regulate the amount of outside air coming in from the DOAS.
“Chilled beam systems can also offset some of the increase in first cost with substantial savings in operating costs,” Medairos continues. “Chilled beam systems reduce the total amount of distribution air while increasing the amount of outside air (ventilation air). Distribution air is typically 80% less in a chilled beam system as compared to a conventional variable air volume (VAV) system. In many cases, this translates into using one-tenth as much fan horsepower for chilled beam distribution air verses a VAV system.”
Disrupters and challenges
While industry experts are relatively positive about the market outlook, 2021 will not be without its challenges.
Carnevale points to the decarbonization movement through electrification as a significant market disrupter for the plumbing industry.
“In other words, the wholesale shift by state and local governments away from heating equipment that uses natural gas or any form of fossil fuel,” he explains. “And while we may look at this trend and say that this is still well into the future, it’s actually happening now, and in some cases, there are attempts to accelerate the transition. We see municipalities and states taking different levels of action. Some, to the extent of banning natural gas usage completely. That changes our industry significantly — not only on the product side, but also when it comes to engineering, installation and maintenance. It changes the channels of distribution and the roles that everybody plays.”
However, the biggest challenge over the next year will be dealing with and getting past the various short-and long-term effects of the COVID-19 pandemic, Carnevale adds.
“Even if we're back on track in 2021 and come out of it, there are still going to be significant effects for some time, such as challenges in the recovery of the commercial segment and stabilization of the international supply chain, which has been significantly affected by the pandemic,” he says. “Even as the U.S. comes through this, we’re still going to be affected if COVID continues to linger in countries like China and Mexico, who supply raw materials and components to many manufacturers in our industry.”
McMillan advises companies to watch for disruption in places least expected.
“Companies tend to look for what's happening from the competition — we should keep an eye out on players we haven't thought about yet,” he says. “Not only will they digitize the industry, they will transform it. One of the ways we are working to avoid disruption is by moving from components to systems. Engineers and contractors want to get the quality right from day one. The Grundfos Hydro MPC HVAC is manufactured to reduce construction time and cost. When you make something in a factory with quality control processes, there is a higher probability of a quality outcome.”
According to Sims, the largest obstacle in 2021 will be reduced state, city and local budgets due to the pandemic.
“This is usually the time of year when local governments start making projections on proposed budgets,” he notes. “However, tax base is a driver for most local economies, and this has been all-but non-existent for more than three-fourths of 2020. A September 2020 report from the Brookings Institute, a non-partisan think tank, projects that as a result of the pandemic, state and local income tax revenues will decline 4.7% in 2020; 7.5% in 2021; and 7.7% in 2022 — that’s $22 billion, $37 billion and $40 billion, respectively. Building and fire prevention offices are currently feeling budgetary cuts with a code council survey from September of this year showing 43% having already experienced cuts, while 47% expect future cuts. In what will become a vicious cycle, building and fire enforcement departments will be even more backlogged regarding facility performance evaluations (FPE), which are both their primary expanse and source of income. With greater delays in inspections and permit approvals, we could, in turn, see a ripple effect for all related industries.”
Sims notes adopting remote virtual inspections and other virtual capabilities will allow local building departments to be able to mitigate some of the impact.
Stackpole says the pandemic has caused a major reconsideration for restrooms — especially those open to the public.
“We all have become much more reticent about touching services that have not been recently cleaned and disinfected,” he says. “This has led to a rise in demand for touchless bathroom toilets and faucets, as well as touchless ways of entering and exiting bathroom facilities. Many PMI members have reported increased sales of touchless products. In addition, PMI members have innovated by making deeper sinks with steep basin walls, which ensure water doesn’t splash back onto the user or collect in bacteria-attracting puddles on the counter. As you can imagine, this situation has created many design challenges for our industry, as well as innovation opportunities.”
What a Biden presidency means for the industry
Mark Chaffee, vice president of governmental affairs and commercial and industrial product management for Taco Comfort Solutions, notes a Biden presidency will place an emphasis on infrastructure spending.
“This isn’t just roads and bridges, but it will also focus on our aging water infrastructure, including significantly increased investment in state revolving funds. And, as part of that, there will be added attention to energy plus operational efficiency. President-elect Biden has made it clear that he plans to re-join the Paris Accord. This will likely mean more incentives for energy conservation, probably in the form of federal rebates for the purchase and installation of energy-conserving — and now IAQ — technologies. This will also incentivize manufacturers to develop more energy-efficient technologies.”
Chaffee notes Taco was deeply involved in DOE’s effort to bring about the labeling of commercial pumps, and believes the industry will soon see a similar action with residential circulators.
“This will again focus attention on the need to replace remaining non-ECM pumps and circulators, with far more efficient ECM-powered equipment,” he adds.
Carnevale also anticipates significant increases in regulations under a Biden administration.
“Particularly from DOE and DOL,” he explains. “This will impact all of the parties in our industry supply chain. While we do, and should, support good regulatory policies, we as an industry need to continue to work with the federal government to craft sensible regulations which avoids the negative and unintended consequences which have impacted our industry in the past.”
According to Sims, there are two key considerations for the industry to watch for, and they are his support for the infrastructure package and workforce development.
“The president-elect’s infrastructure platform calls for a significant investment in the country’s water infrastructure, which would help ensure the public continues to have safe, consumable water,” he says. “His plan has also supported investments to repair water pipelines and sewer systems, replace lead service pipes, upgrade treatment plants, the construction of 1.5 million homes and public housing units. We also expect president-elect Biden to continue support for WaterSense, which provides water efficiency benchmarks for plumbing products.
“The president elect has proposed a $50 billion investment in workforce training including community-college business partnerships and apprenticeships,” Sims continues. “Programs to increase interest in the trades is critical for HVAC industry, given much of the plumbing, mechanical and HVAC workforce reaching the age of retirement. Without an emphasis on programs to increase interest in the trades, the industry could be facing a severe shortage of talent that will limit its overall growth and innovation. But given the expected makeup of the 117th Congress, significant investments in either infrastructure or the workforce will require bipartisan support. It’s possible that these measures advance, but their size of scope could be curtailed.”
Stackpole suggests the new administration will find ways to work with Republicans on infrastructure investment.
“Democrats are likely to include incentives or dollars for “green” eco-friendly investment in legislation of this nature, which is good news for our member companies that make water-efficient and energy-efficient products,” he notes. “The Biden administration also will likely work to strike a less confrontational relationship with China and other international trade partners on trade and tariffs, which may result in tariff relief for our members. At the PMI20 Manufacturing Success Conference during a session hosted by the law firm Crowell and Moring, the presenters said they expect Biden to use tariffs as a tool to achieve certain concessions from China while being mindful of the adverse effect tariffs have on American businesses and consumers. American businesses and consumers paid more than $58 billion in tariffs since the trade war began — that’s about $1,277 for every family in the U.S.”
Preparing for the unknown
According to Gray, engineers and contractors can best prepare for the coming year by continuing to run their businesses using the best planning and forecasting models, incorporating as much technology into their process as is affordable to find efficiencies, and using that technology to possibly level some of the playing field or create differentiation.
“Because it is really difficult to forecast in any year — especially in a pandemic — there are a lot of unknowns,” he says. “This is where partnering with engineers and contractors to provide BIM capabilities and our design knowledge early in the project design process can help find efficiencies, solve problems early on, and create differentiation while ultimately serving customer needs.
“We are looking forward to 2021 and hope we all find a little more normal in every aspect of our industry and lives,” Gray continues. “Never before has wishing people good health been so heartfelt and important as well as working together to ensure businesses are healthy and can support customers and employees. This is a really challenging time for our industry and the world. Our wish is 2021 brings big change for everyone and that at some point this year the critical part of this pandemic and its affects throughout our industry will be behind us.”
McMillan sums up his advice with a quote from Dean DeBiase, an expansion phase CEO and Silicon Valley veteran: “Uber yourself before you get Kodaked.”
“It's time to embrace digital,” he says. “The days of calling on a trade counter may soon be over. Get a web presence, get an app for transactions. Don’t get left behind. The next generation will be digital. When every hour counts, the less time spent writing invoices and waiting for payment, the more efficient business will be. Digitalization will benefit the entire industry.”
“The best way to prepare is to continue to build out digital and virtual capabilities across all of their communications, whether it be with customers or with suppliers, whether it be training or e-commerce,” Carnevale adds. “The world was already moving towards virtual communications in a lot of activities within our industry. COVID just accelerated that significantly.”
According to Sims, the industry is innovating at an amazing speed to ensure people are comfortable venturing into public spaces again, and the best thing contractors and engineers can do is to stay up-to-date with the latest regulations, government affairs and technical issues.
“The best way to stay in the loop on these topics will be to read industry-related publications or join an industry group,” he says. “To help tradesmen and concerned parties keep track of the latest updates, we’ve aggregated all relevant resources and important information in our Coronavirus Response Center.
“While many of the concerns we are currently facing will not suddenly disappear at the start of the new year, we are in a much better position as an industry to address them. If there is any lesson to be learned from 2020, it’s that the built environment continues to be our first line of defense against all types of threats — whether natural or man-made — so investing in creating future-proof and structurally sound buildings now will pay dividends when we need it.”
Stackpole’s advice to contractors and engineers is simple — do your part to reduce infections by wearing a mask and physical distancing.
“These actions will reduce the adverse impacts of the pandemic and lead to a quicker economic recovery,” he says. “I think it was former Secretary of State Colin Powell who said, ‘People want to share your confidence, however thin; not your turmoil, however real.’ We need to stay optimistic. Listen to scientific evidence that will inform how to best proceed through the pandemic. We don’t have to choose between personal safety and economic health. We can have both. Protecting ourselves and others from COVID-19 is good business and responsible citizenship.”