The Steam and Air-Conditioning Supply industry has grown over the past five years, despite the recession. Industry revenue has risen at an average of 1.8% annually to $1.9 billion over the five years to 2012, according to IBIS World industry analyst Deonta Smith.
Prior to the recession, construction firms built out commercial buildings, apartment complexes and other large buildings at accelerating paces amid ample credit availability. Building owners increasingly sourced district energy (centralized heating and cooling services off-site) to heat and cool their buildings. Using district energy often saved customers money (in comparison to using natural gas for heating and cooling) while energy prices were skyrocketing during the three years to 2009.
However, the recession reversed these trends and industry revenue growth slowed considerably. The recent surge in energy prices during the economic recovery have served to invigorate the industry once again; as a result, industry revenue is anticipated to grow 2.0% from 2011 to 2012.
Amid high demand for district heating in years before the recession, many large firms in the Steam and Air-Conditioning Supply industry expanded their footprints by purchasing smaller firms, streamlining operations and upgrading technology. In light of amplified acquisitions activities, the number of firms operating in the industry is expected to fall at an average annual rate of 8.6% to 70 in the five years to 2012, Smith says. Thus, market share has increased over the past five years in this historically highly concentrated industry.
The next five years are set to be brighter for the industry. Players will increasingly use cogeneration in their operations to boost output. The switch to cogeneration will be smooth, as the acquisitions that took place over the previous five years will create economies of scale and enable large firms to easily integrate cogeneration into acquired companies.
Additionally, many firms will also benefit from the construction of multi-family residences that were built during the recovery and will continue to be built during the next five years. Industry firms will generate higher revenue by providing district energy to these buildings. As a result of these trends, industry revenue is expected to grow in the five years to 2017.