Currently, there is an overall sense of optimism among MEP trade professionals working in the mechanical, electrical and plumbing (aka, MEP) industry.
Having weathered challenges posed by the response to COVID—and while experiencing more resiliency than other sectors—there are signs of stabilization for the MEP Industry.
However, some issues persist, including supply chain constraints and especially the skilled labor shortages. Consumer trends also give insight into what’s potentially ahead in the next five years, in terms of both challenges and opportunities for the residential and nonresidential segments of the construction industry.
Trends and Disruptors in the MEP Industry
As you strategize for the future, here are some of the potential disruptors, constraints and trends impacting the MEP industry:
1. Skilled Labor Shortage in Construction
The MEP industry is not immune to the skilled labor shortage that’s currently affecting many businesses, and in fact, this shortage has lasted several years already. As it continues to color the outlook for construction companies, builders and remodelers, and specialty installers in the coming years, these Pros are seeking ways to be more efficient with their workforces and on projects—such as adopting productivity-tracking software—while also employing solutions for employee retention. With twice as many jobs in MEP trades as there are trained professionals to work them, many companies are implementing apprenticeships to appeal to and effectively train new employees.
2. Supply Chain Issues
Similarly, supply chain issues are nothing new, and while research shows some signs of alleviation, they won’t magically disappear in 2023. One example is the global semiconductor chip shortage. Another is the supply of refrigerants and related equipment to professionals when and where needed. This corresponds with the gradual decline of hydrofluorocarbons (HFCs) for cooling applications and the transition to A2L refrigerants. While contractors can’t control shortages or the allocation of necessary MEP supplies, there may be a higher drive to implement supply chain management software to help companies better manage their businesses.
3. Changes in Regulatory Requirements
Another trend we’re seeing that could potentially impact the MEP industry is changes in regulatory requirements related to electrical equipment, along with pushes for carbon reduction and net-zero trends.
There has been an increase of state and local bans on natural gas, which will shift focus to the development of highly efficient heat pumps.
One example of this is the California Air Resources Board (CARB) announcing a comprehensive plan to ban the sale of natural gas heaters, furnaces and water heaters by 2030. As regulations and requirements such as these emerge over the next five years, it will force a shift for manufacturers, distributors, contractors, professional installers, DIYers and distributors.
4. Green Plumbing Trends
Worsening water shortages in the western United States, increasing concerns about water quality, and a growing demand for solutions to deal with water conservation are also driving innovation and green plumbing trends. Various technologies, even including artificial intelligence (AI) and automation, are being used to digitize plumbing and help address growing concerns—and they present an opportunity for market growth in the coming years.
The 2021 International Plumbing Code currently allows for leak detection devices to be used with the approval of a code official, and home and business owners are adopting new practices, such as getting mobile notifications about water leakage. Speaking of codes, the 2024 IPC is nearing completion, which will have residual impacts on the industry.
According to HIRI research regarding the State of the Smart Home, the percentage of homeowners purchasing smart water leak detection and humidity monitoring devices increased from 4% in 2017 to 6% in 2021. Further, the percentage of homeowners purchasing smart water flow meters and shut-off valve devices increased from 3% in 2017 to 5% in 2021
Intent to purchase these devices remains high at 1 in 4 consumers, but adoption has remained low, signaling a need for product improvement in the category.
38% of smart water leak detection and humidity monitoring device purchases experience a technical problem with the product and has led to one of the highest return rates of smart home devices.
5. Eco-Friendly HVAC Trends
The plumbing sector isn’t the only one facing the need for more alternative options.
Demand for energy efficiency and the push for better indoor air quality (IAQ) is also influencing the HVAC industry, leading to new building initiatives and renovation projects. The goal here will be to develop solutions and tools that reduce energy usage while simultaneously promoting health and safety.
As mentioned above, with the influx of natural gas bans across the country, companies will be seeking eco-friendly alternatives for heating, such as hydrogen fuel, and the U.S. Department of Energy’s Alternative Fuels Data Center can be a useful resource moving forward.
6. Infrastructure Investment and Jobs Act (IIJA)
The Infrastructure Investment and Jobs Act, or Bipartisan Infrastructure Bill, that was signed into law in 2021 won’t necessarily disrupt the MEP industry in a negative way, but it is having an impact that building materials manufacturers should keep an eye on.
Because of the IIJA, there’s expected to be strong and ongoing growth in the construction projects related to public water supplies and sewer facilities, including renovations, retrofits and new construction. This will provide a source of work for engineers and contractors for the foreseeable future and an opportunity for large contracts to be secured.
7. High Inflation
Speaking of inflation, the price of raw materials has continued to rise by-in-large, which is projected to persist into 2024. In response, we expect contractors and construction companies will be more likely to shop around for materials to reduce project costs while retaining top labor.
And as inflation is also impacting monetary policy, interest rates are simultaneously bouncing, but increased overall compared to recent memory. These are affecting individuals, as well as companies, and influencing lifestyle changes that could create disruption for the MEP industry.
For example, many people are deferring new construction projects, and they might not be ready to do them until 2024 or 2025. There had been an influx of demand for multifamily and build-to-rent housing, but various indicators are showing a slowdown in the rental market as well.
8. Rising Rates of Energy
One cause behind the inflated price of raw materials is the rising rate of energy—and when that’s alleviated, we are likely to see those prices go down. But currently, all forms of energy—from oil and natural gas to electricity and liquified petroleum (LP) gas—are more expensive. As a result, there’s a pressing need for industrial manufacturers to develop and distribute equipment and individual components that can save energy, such as higher-efficiency systems and ECM circulating pumps.
9. International Tensions
While it’s hard to predict what will happen over the next five years with the geopolitical landscape, it’s clear that tensions globally are creating international ripple-effects are creating market uncertainty and causing disruption in the energy market, in particular.
10. Artificial Intelligence (AI), Automation and Augmented Reality
AI and automation extend beyond the plumbing sector. These technologies are also at work helping with better building decisions, automating the installation process, connecting home systems, increasing IAQ in residential and commercial buildings, and saving fuel. MEP companies can make time-consuming tasks more efficient using fabrication software and automate cutting tools. Augmented reality (AR) is also on the rise, to the benefit of both MEP contractors and their customers. By merging digital and real worlds, AR enables them to better visualize different stages of a construction project and work with more efficiency and clarity.
Planning for Future MEP Disruptors with Market Research
While you can’t control what regulations, innovations, occurrences and market challenges might shake the MEP industry, you can be prepared to deal with them by fostering resiliency and having the right data to work with.
Conducting customized market research with the help of our team at the Farnsworth Group enables you to gather meaningful market insights to inform you business strategies and prepare you for what lies ahead.