Key Trends for PHC Contractors to Know in 2025

Economic forecasting is essential for p-h-c contracting businesses as it allows them to plan for market fluctuations, manage costs, and make informed strategic decisions. By analyzing economic trends such as inflation, interest rates, and construction activity, businesses can anticipate demand for new installations, retrofits, and maintenance services, and determine when to invest in expansion, workforce development, or new technology.

The Plumbing-Heating-Cooling Contractors—National Association (PHCC) takes this to a next level through its annual Environmental Scan, a process through which the association looks at key economic indicators, regulatory and legislative changes, consumer demands, trends and technological advancements to anticipate the factors that may impact p-h-c contractors and PHCC as an organization.

So what were the key findings of the 2025 Environmental Scan?

• The U.S. economy is entering into a period of tempered growth, according to FMI’s Fourth Quarter North American Engineering and Construction Outlook. Residential new construction and multifamily residential are both expected to decline over the next few years before rebounding in 2027 and 2028. However, nonresidential construction areas are anticipated to see growth (in manufacturing) and stability (in office, health care, and education) in 2025.
  
  
• There are many new opportunities and a few challenges going into a new Administration and the 119th Congress in 2025. Mark Valentini, PHCC’s vice president of legislative affairs, said in the November PHCC Online e-newsletter, “We expect Congress to introduce energy legislation, and PHCC will work with the House and Senate to ensure our priorities are enshrined in any legislation that promotes a robust and diverse national energy portfolio and allows consumer choice when it comes to powering their homes and essential appliances for health and welfare.” Tax, tariff and workforce policies also will be a priority for PHCC in 2025, and trade and immigration proposals will be monitored closely. It is expected that programs related to the Inflation Reduction Act (IRA) will be prime targets for budget cuts as they represent some $370 billion.
  
  
• The A2L refrigerant transition is here. Starting Jan. 1, Original Equipment Manufacturers (OEMs) can no longer manufacture packaged rooftop units and no complete split system may be installed that utilize refrigerants with a Global Warming Potential (GWP) exceeding 700 in the United States. EPA did later amend this rule to allow a sell-through period for products that had been manufactured prior to Jan. 1, 2025. Variable Refrigerant Flow (VRF) systems will undergo a similar transition to Low GWP refrigerant on Jan. 1, 2026. HVAC contractors must ensure systems are installed properly by following OEM manufacturer installation instructions as well as ASHRAE Standard 15.2.
  
  
• Labor shortages are likely to remain a key concern for p-h-c contractors in 2025. Not only must contractors attract the next generation to the trades, but they also need to focus on training and retaining current talent.
  
  
• The acquisition and consolidation of plumbing and HVAC contracting businesses by private equity groups continues to be a notable trend in the industry. Private equity firms continue to invest heavily in the sector attracted by its steady demand and growth potential, creating challenges for smaller, independent contractors who may struggle to compete with the scale and marketing power of larger, consolidated entities.
  
  
• Personalized service, training and upskilling employees will continue to be key for p-h-c contractors to remain competitive in the market. Associations like PHCC can help mitigate these challenges for smaller contracting firms by providing access to training programs, peer groups, and more to help them stay competitive in a consolidated market.

This year presents opportunities for contracting businesses to grow through technology adoption, market expansion, and service diversification. By staying ahead of trends and investing in energy efficiency, smart home technology, workforce training, and marketing, p-h-c contractors can position their businesses for long-term success.

Growth opportunities include the following:

• Getting certified in energy-efficient and sustainable systems to attract eco-conscious customers and qualify for government-backed projects;
  
  
• Offer smart home and IoT-integrated solutions, partner with smart home technology providers, and provide monitoring services;
  
  
• Offer subscription-based maintenance plans to create steady revenue streams and build long-term customer relationships;
  
  
• Capitalize on aging infrastructure. Position your business for retrofitting older HVAC and plumbing systems, focusing on efficiency and compliance with updated regulations and building codes.
  
  
• Invest in workforce training programs, apprenticeships and upskilling to build a reliable team and expand capacity;
  
  
• Offer emergency repair services and disaster-resistant solutions, such as generators and freeze-proof plumbing systems;
  
  
• Consider expanding into adjacent services, such as Indoor Air Quality solutions, duct cleaning, or geothermal heating; and
  
  
• Adopt AI solutions to increase operational efficiency.

Staying informed on industry trends, regulations, and economic forecasts is crucial for p-h-c contractors to remain competitive and profitable. Advancements in technology, such as smart HVAC systems and energy-efficient plumbing solutions, are reshaping customer expectations, making it essential for contractors to stay updated and adapt their services accordingly. The coming year should bring about more opportunities for growth than 2024, although additional challenges for p-h-c contractors could arise.

In an end-of-year 2024 report to members, PHCC CEO Cindy Sheridan said, “As we look to the future, PHCC is energized by the opportunities to further strengthen the association and expand the services we offer to our members and chapters. We look forward to a year of growth, collaboration, and continued success.”