Commercial HVAC Market Analysis, Opportunities & Trends 2031

Report Description

Market Outlook:

The Global Commercial HVAC Market was estimated at USD 1,20,445.0 Million in 2022 and is anticipated to reach USD 1,98,063.0 Million by 2031, expanding at a CAGR of 5.8% during the forecast period.

Commercial HVAC (heating, ventilation, and cooling) system regulates and facilitates the movement of heated and cooled air throughout the space where it is installed. This system is responsible for heating, cooling, and ventilating the commercial space, either with packaged system or split system. It is a collective term for the different types of cooling and heating systems used to change the temperature and humidity indoors. These systems improve the air quality through mechanical, ventilation and filtration.

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HVAC systems are employed in commercial buildings to control the indoor environment. Commercial HVAC system differs from residential HVAC systems, due to their size, complexity, and location of installation. They are usually installed on rooftops and are responsible for regulating temperature in multiple rooms or spaces in a large commercial building.

Macro-economic Factors

Government Regulations

The dynamic nature of the HVAC industry and constantly changing and evolving government regulations across the globe is a major source of uncertainty in the market. Global, national, and state regulations have targeted the phase-down of HVAC in recent years, hence, the industry has registered a shift towards alternative technologies with low global warming potential (GWP). Government regulations are focusing on energy-efficient and green products to reduce the energy consumption. HVAC systems consume a lot of energy in commercial buildings. Thus, governments across the globe set some regulations or standards for the efficient functioning of HVAC.

SEER (Seasonal Energy Efficiency Ratio) is a regulation that is set to measure an air conditioner or air-source heat pump’s cooling output as compared to the electrical energy it consumes. High SEER rating indicates an efficient cooling system. Additionally, the industry adopted the SEER 2 standard. SEER 2 is similar to its predecessor, in that it measures the total heat removed from a specific space versus how much energy it uses in the process. Furthermore, the U.S. Department of Energy (DOE) has established minimum efficiency standards for air conditioning and heat pump equipment. It requires all HVAC manufacturers to redesign air conditioners to be energy efficient, effective January 1, 2023. These government regulations have a significant impact on the HVAC industry.

Inflation

Inflation rates are rising rapidly in many developed economies. Impact of the increased inflation rate on the construction sector is high. The shift in inflation is a challenge for many construction companies. Increased inflation has a significant impact on the commercial construction sector in terms of increased cost of materials, machinery, fuel, and labor. The price increase across the industry has a negative impact on the profitability of construction projects. Therefore, rising inflation rates leads to a decline in the construction activities, which further affects the commercial HVAC market. HVAC systems are widely employed in almost every commercial space for specific purposes. Thus, it is directly associated with the growth of the construction industry.

Market Dynamics

Market Driver- Expanding Commercial Construction Sector

The construction sector is growing rapidly in the developing and developed economies, due to the structural changes, such as changes in development goals, changes in demographics. Demand for new commercial building facilities, multi-family properties, data centers and advanced technology spaces is increasing. Governments in developing countries are investing in the construction sector to meet the growing demand. HVAC systems serve many purposes in commercial buildings. It keeps the space comfortable and improves air quality. Thus, increasing commercial construction activities in developing countries such as India, Saudi Arabia, and the US accelerates the growth of the commercial HVAC market.

Market Driver- Technological Advancement

Technological and mechanical advancements in commercial HVAC are driving the market. This market is registering a wave of technological advancements that are evolving the cooling and heating processes. Significant technological advancements in HVAC systems are credited to new and complex HVAC technologies such as smart homes, geothermal heating, and dual-free heat pumps. These innovations in products are influencing the HVAC industry in several ways. Another key advancement in the HVAC industry is the emergence of Variable Refrigerant Flow (VRF) systems. These systems offer precise control over heating and cooling by adjusting the flow of refrigerant to match the specific demands of different zones within a building. Furthermore, the rise of smart technology has revolutionized the HVAC industry through the introduction of smart thermostats and building automation systems. All these factors contribute to the growth of the commercial HVAC market.

Market Restraint- High installation and Maintenance Cost

High installation and maintenance costs of these systems pose a challenge to the commercial HVAC market. In many cases, HVAC manufacturers face high raw material cost. Companies had to adjust their pricing structures, inevitably passing on a portion of these costs to the consumer. Major HVAC manufacturers are based in the US. The U.S. Department of Commerce announced a 25% tariff on steel imports and a 10% tariff on aluminum imports in 2018. These government practices make the price of raw material expensive, which affects the overall cost of HVAC systems. This factor restricts the growth of the market.

Market Opportunity- Integration of IoT and Other Smart Technologies in HVAC Systems

The Internet of Things (IoT) has been transforming various sectors since the past few years, including the HVAC industry. IoT is transforming the performance of HVAC systems for both residential as well as commercial applications. The implementation of IoT in the digital world of HVAC is gaining pace at a significant speed. These smart HVAC systems monitor equipment such as boilers or cooling units for maintenance purposes. They allow HVAC systems to provide high performance for commercial and residential buildings. Adoption of these high-tech solutions is revolutionizing the HVAC industry since the past few years. IoT-enabled HVAC takes the form of smart thermostats and sensors monitoring environmental changes. Smart HVAC equipment collects data and automatically adjusts the temperature as needed. Therefore, this industry is adopting these technological changes to automate sales and services processes to help cut costs and keep prices competitive. Thus, the integration of smart technologies provides lucrative growth opportunities in the market.

Scope of the Report  

The report on the global commercial HVAC market includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.

Segmental Outlook

Based on type, the global commercial HVAC market is bifurcated into packaged HVAC system and split HVAC system. The split HVAC system is further bifurcated into ducted split system and ductless split system. The packaged HVAC system segment held 60.7% market share in 2022. Packaged system includes all cooling, heating, and ventilation units in the large cabinet. These systems are largely found in commercial buildings, as they are easy to install and maintain in large spaces. Additionally, packaged units are typically less expensive to install than split systems, as all unit’s components are housed together and less labor is involved than a split system. However, split HVAC system are gaining popularity, as they are more energy-efficient than packaged HVAC systems.

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Based on function, the global commercial HVAC market is segmented into heating, cooling, and ventilation. The cooling segment is projected to expand at a CAGR of 6.4% during the forecast period. Demand for HVAC cooling equipment is rapidly increasing and they are being installed in almost every commercial space. Demand for cooling systems is increasing in regions with high temperatures, thus consumers are investing in efficient cooling systems, such as air conditioners, to provide pleasant temperature in commercial spaces.

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On the basis of equipment, the global commercial HVAC market is categorized as heat pumps, furnaces, air purifiers, air handling units, unitary air conditioners, variable refrigerant flow system, and others. The unitary air conditioner segment dominated the market with 33.6% share in 2022, owing to its energy efficiency and cooling capacities. However, VRF systems are gaining popularity, as they are integrated in smart technologies for high control and efficiency. Companies are investing in VRF systems to take advantage of these technologies.

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Based on end-use, the global commercial HVAC market is differentiated into hospitals, shopping malls, restaurants & hotels, offices, and others. The offices segment is projected to expand at a CAGR of 7.0% and occupy a large market share during the forecast period. Commercial offices require HVAC systems for keeping temperatures comfortable and improve the air quality in the space. Packaged HVAC systems are preferred in commercial offices for controlling the climate conditions.

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Based on installation, the global commercial HVAC market is differentiated into new construction and retrofit. The retrofit segment is projected to expand at a CAGR of 7.2% and occupy a large market share during the forecast period. Retrofit systems provide greater efficiency in heating and cooling as compared to conventional old units. Additionally, the cost to install HVAC systems is much higher than replacing or retrofitting the system, which drives the segment.

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Regional Outlook

On the basis of region, the global commercial HVAC market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.

The market in Asia Pacific is projected to expand at a CAGR of 7.4% during the forecast period, owing to the expanding commercial construction sector. Developing economies, such as China, India, and Japan, are heavily investing in commercial construction to meet the evolving needs of demographics. Furthermore, the increasing number of commercial spaces, such as hospitals, schools, restaurants, and retail places, in these countries provide growth opportunities in the commercial HVAC market. Urbanization in India is driving the market. 60% of population in India is expected to live in urban areas, which further increases the demand for commercial buildings and retail places.

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Recent Developments

• On September 5, 2023, Carrier introduced a comprehensive line of high temperature and very high temperature heat pumps for use in industrial, commercial, and public buildings and district heating. Designed to reduce both carbon emissions and energy costs, the new line consists of AquaForce® and AquaSnap® air and water source heat pumps with varying capacities from 30 to 735 kW and water temperatures from 82 to 120 deg C with low global warming potential (GWP) hydrofluoroolefin refrigerants.

• On April 7, 2023, Daikin started the construction of a factory in Poland. This new factory is expected to start the production of heat pumps in July 2024, with a total investment of US$ 316.4 Million. The new factory is anticipated to create 1,000 jobs by 2025 and 3,000 jobs by 2030.

• On June 7^, 2023, Daikin's Vision® air handler with Sorbent Ventilation Technology (SVT) was selected as the 2023 Commercial Comfort Product of the Year for Indoor Air Quality.

• On September 13, 2023, Johnson Controls-Hitachi Air Conditioning introduced the Hitachi air365 Hybrid dual fuel system, which combines a heat pump and furnace to provide efficient, economical home comfort year-round while reducing carbon emissions. The air365 Hybrid system features an electric Hitachi Mini VRF heat pump as the primary heating and cooling source and an innovative dual fuel module that attaches to a new or existing gas furnace in the home.

Key Benefits for Industry Participants & Stakeholders

• In-depth Analysis of the Global Commercial HVAC Market

• Historical, Current, and Projected Market Size in terms of Value

• Potential & Niche Segments and Regions Exhibiting Promising Growth Covered

• Industry Drivers, Restraints, and Opportunities Covered in the Study

• Recent Industry Trends and Developments

• Competitive Landscape & Strategies of Key Players

• Neutral Perspective on Global Commercial HVAC Market Performance