Trends To Watch in the Installation Sector

Ever stop to think about what makes your morning routine so smooth? Say, stepping into a warm shower on a cold day, or the flip of a switch filling your room with sleek and cozy light? That’s all thanks to installation pros working behind the scenes. They’re the ones making sure your water’s hot, your Wi-Fi fast and your AC-unit gets you through summer peaks.

Daily comforts of our home-life are powered by the installation industry, but as technology evolves and our needs change, market dynamics shift. New trends keep emerging, reshaping the way we think about home comfort and the services we expect moving into the future. So, what can we expect? Let’s take a look at where the sector’s heading.

The core trend overview was published in September 2024. Historical research below is dated separately, and electrical-installer findings are kept distinct from HVAC and plumbing findings.

Sustainability

Sustainability plays a role in both electrical and HVAC installation work, but its prevalence differs by trade and market. The electrical-installer project figures used in the original overview describe the Q1 2022 research:

HVAC Projects: the Q4 2021 Baseline

HVAC installers are excellent sources to indicate how often these sustainable products and solutions are used in projects, and where sustainability plays a role in installation projects the most. We interviewed 700 HVAC installers from six major European markets for the Q4 2021 report of USP Marketing Consultancy’s European Mechanical Installation Monitor, and asked them how often they see sustainability play a role in their projects.

On average, installers from these six countries together report that sustainability is taken into account in 44% of their projects. There are substantial differences between countries, however. The UK seems to be lagging behind a bit, as sustainability is only reported to play a role in 31% of installation projects. On the other side of the spectrum, the Netherlands and Poland clearly take the lead, as sustainability is taken into account there in respectively 54% and 53% of installation projects.

The research also measured the shares of residential projects in which sustainability is taken into account. These residential shares did not differ much from the total. The only exception is France, where sustainability is taken into account in 42% of all installation projects, but slightly less in installation projects in the residential sector (35%).

Customer Interest and Willingness to Pay in Q4 2021

Knowing where demand derives from shows how manufacturers can help installers by providing the right certification, information or marketing materials to help the installers sell and install their products, thereby improving brand image and even market share. That is why, for the Q4 2021 report of USP Marketing Consultancy’s European Mechanical Installation Monitor, we asked 700 HVAC installers from six major European markets which of their clients actually ask for sustainable solutions.

European installers report that on average, 83% of the end consumers they work for ask for sustainable solutions. Of their business clients, for instance, contractors, architects or commercial building owners, 79% ask for sustainable solutions on average. With around four out of five clients asking for sustainable solutions, there seems to be little difference between business clients and end consumers on a total level.

Looking at specific countries, differences do appear. Demand from business clients seems to be higher than demand from end consumers in Belgium, The Netherlands and the United Kingdom, for instance. In Poland, and especially Germany and France, that is the other way around.

One barrier is the fact that sustainable solutions may cost more than less sustainable solutions. Even though around four out of five clients ask for sustainable solutions, less than half of all clients is willing to pay extra for sustainability. Interestingly, just like the demand for sustainability did not differ much between end consumer clients and business clients, their willingness to pay is similar as well. That means that end consumers and business clients are equally driving the use of sustainable solutions in the daily life of the average HVAC installer.

Demand and Budget: Findings Published in November 2023

As the results published in November 2023 of USP Marketing Consultancy’s European Mechanical Installation Monitor point out, installers are indeed increasingly busy with projects in which sustainability plays a role. The share of installation projects in which sustainability is taken into account has grown to half of the total installation projects in the six European countries we measured.

Only Polish installers report a decrease in the share of projects in which sustainability is taken into account. In the other five countries, that has increased. The largest growth of sustainability installation projects was seen by installers in Belgium, the United Kingdom, and France.

That increase is mainly driven by customers, who more often ask for more sustainable options. In that research, installers report that 79% of their business customers and a whopping 84% of their end-consumer customers show interest in sustainable options. Again, there are major differences per country. In the UK, only 63% of end-consumer customers ask installers about sustainable options, whereas that share is 91% in the Netherlands.

The fact that many clients ask for sustainable options does not mean those sustainable options are installed, though. In the same findings, 36% of business customers and 41% of end-consumer customers do ask for sustainable options but are then not willing to pay their often higher price. Regardless, 43% of customers are willing to pay that price and are thus driving sustainability with their demand.

Heat-Pump Enquiries Are Different from Installations

The following product findings were published in November 2023 and concern HVAC installers and plumbers. The percentages describe enquiries in projects where sustainability was considered.

In 59% of the projects in which sustainability is taken into account, heat pumps are sustainable systems that customers ask their installers about. At some distance, photovoltaics are the second most asked-for sustainable product (21% of sustainability projects). That is what customers ask though, not what is installed.

When we look at the sustainable products that are installed the most, heat pumps are also in the first place. Photovoltaics, however, are not the second but the third most installed sustainable products, following gas boilers or heaters. This shows that there is indeed a difference between the sustainable products that customers ask about the most and the sustainable products that they end up buying and getting installed.

Cost barriers keep some customers reliant on gas

The second-most installed sustainable products are gas boilers or heaters. Also, when we look at which type of heat pumps are installed, air-source heat pumps are installed the most, followed by hybrid heat pumps, which still use gas as well. This is interesting because the transition is supposedly away from gas and towards electrification. So why are gas-reliant systems still installed as much as sustainable solutions?

A clear answer is found in the high prices of fully electric heat pumps. Many consumers may not be able to cough up the hefty investment necessary for a heat pump. However, they may be able to buy a hybrid system, which is generally much cheaper than a fully electric heat pump, or else a new gas boiler or heater that is much more efficient than their old gas system.

However, the initial investment costs are not only determined by product prices. All these products need to be installed by qualified installers, and in the case of heat pumps, installations can take much more time than the old and familiar gas boilers. An increasing shortage of installers causes an installation bottleneck that will continue to drive up labour prices, thereby adding to the initial investment costs.

The September 2024 Outlook

The Russo-Ukrainian war rippled into an energy crisis, driving a surge in demand for sustainable solutions. As gas prices went up, the speed of adoption in sustainable alternatives grew, and we saw a big boost. At the time of that overview, the market was either stabilizing or seeing negative developments.

One of the reasons why sustainable projects are slowing down is due to new build still struggling. Sustainable retrofits often involve significant structural changes, so from labor to material prices, these modifications are expensive and disruptive. This means it’s cost-effective and efficient to incorporate sustainability features into new construction from the outset. But if there’s less outsets, there’s less sustainability.

Despite the rapid development of green technology, there are still challenges to overcome. The energy grid is often congested and reliance on battery storage for renewable energy can be expensive. These factors contribute to the ongoing development and refinement of green technology, making it a trend in flux.

Labor Shortage

The labour figures below were reported in the September 2024 overview. They describe installers reporting shortages, not the percentage of jobs left vacant.

A refrain of sorts, and a major trend we’re not likely to soon resolve, is a significant labor shortage straining the market. Looking at demographics, Europe faces unfavorable odds: an overwhelmingly aging population means that the average age of workers in the industry is high too, with a large projected outflow incoming in the next 5-10 years.

Take HVAC installers – the share reporting shortages was 46% in France, 56% in Poland, 67% in Belgium and 65% in the Netherlands, so the market is severely hindered. Electrical installers face, more or less, the same statistics (44% for France, 62% for Poland, 55% for Belgium and 61% for The Netherlands). Beyond hands-on-deck, we’re looking at labor productivity that hasn’t increased – especially compared to global stats. Advanced systems take longer to install, so where a gas boiler might have been installed in just a day, a heat pump can, now, take up to three days. This means productivity is taking a hit.

On the other hand, work itself is becoming more complex, and that means skills. Today’s installations require a whole new level of expertise, from understanding complex systems to working with digital interfaces. Coupled with fewer people working the industry, installers have mostly turned to hiring unqualified staff and subsequently training them.

All this means projects are getting delayed, costs are rising, and it’s becoming harder to meet customer expectations.

For manufacturers looking to capitalize on this situation, read more about how to combat labor shortage in the installation industry.

Digitalization

Digitalization is making its mark on the installation sector, but the journey has been gradual, with some aspects moving faster than others. The key feature to focus on is building information modeling, or BIM – holding great promise for increasing productivity, reducing on-site errors and enabling more efficient prefabrication. The adoption pace has, however, been relatively slow among installers due to the push to renovation and a traditional industry.

BIM usage is only slowly increasing among installers. Their adoption rate is significantly lower than contractors and architects. On the one hand this is due to their higher renovation activities and on the other hand the high traditional nature and the lower need to work in BIM.

Other digital tools are gaining traction more quickly. Communication tools like WhatsApp and social media have become indispensable for installers, especially when coordinating with wholesalers. They streamline communication, making it easier to manage orders, track deliveries and ensure that projects stay on schedule.

Smart and connected products are another area where digitalization is on the rise. Monitoring and managing them remotely allows installers and service providers to take pre-emptive measures, addressing potential issues before they become serious problems. This not only saves time but also enhances the overall efficiency and reliability of installations.

For the separate electrical and HVAC remote-service findings, see our smart and connected products analysis.

Prefab

We’ve gone over the data on prefab trends in detail, but looking specifically at the installation industry, there’s information to unpack. Due to the labor shortage and more complex installation projects (electrical and mechanical), productivity levels took a dip. Now they’re deteriorating even more, and prefab seems like a way out. Granted, it’s no panacea, but it’s a promising trend, pushing installation to become faster, cheaper and better.

Increasing productivity relies on more ready-made components, from prefabricating cut-to-length plumbing pipes to installing complete bathrooms or kitchens. The “simple stuff” has already been covered – think hotel bathrooms – but there are still strides to be made to significantly increase productivity and time-saving. So, with labor shortages potentially driving the market towards more prefab and higher levels of industrialization, adoption levels and speeds should increase.

Buying Behavior

The takeaway? Installers are a traditional bunch. But lately, we’re seeing a bit of a change. While wholesale still takes a sizeable chunk of the market – some 60-70% of it throughout Europe – the grip is loosening a little, especially in the mechanical sector. And it’s because more and more manufacturers are selling directly to customers (particularly true for systems like heat pumps and air conditioning units).

Online sales are also creeping up in this space. People are starting to explore these options, even if it’s just a small part of their overall spending right now. While sales aren’t as telling, online orders at traditional specialized wholesale, we see significant growth going fast. So Europe is ordering online more, just not yet from pure online stores.

So, while specialized wholesalers are still the preferred option, the way people buy in the installation market is slowly evolving, and it’s something to keep an eye on.

For the distinction between supplier spending and online ordering, see our electrical-installer purchase-channel analysis.

Conclusion

Wrapping everything up: from the push towards sustainability, an ongoing labor shortage to the steady march of digitalization, the installation sector is clearly in flux. These shifts may sound technical, but they directly impact our everyday lives, from how quickly you can get your new heat pump installed to how affordable and efficient home upgrades might become.

Curious about how these trends will continue to evolve? Our blogs will keep you in the loop, from in-depth articles to expert insights and the latest industry news. For a deeper dive, check out our webinars where we discuss these trends and more with industry professionals. Stay informed, stay ahead, because the future of installation is just getting started!