The building services industry is key for pump manufacturers in Europe, especially the centrifugal pump makers.
This industry has been a major driver of the economies of a number of European countries. The major application segments for pumps within commercial and industrial buildings are for heating, ventilation, air-conditioning (HVAC), pressure boosting, drainage and sewage, and fire protection.
The global economic recession of 2008-09 impacted the growth of the building services industry across Europe, particularly in countries like Spain, Italy, and Greece.
Revenue generated from new pump installations across Europe decreased by $11.5 million from 2008 to 2009. 2010 witnessed a period of steady growth sustained primarily by the refurbishment market in Germany, Scandinavia, and Eastern Europe. However, the sustained sovereign debt crisis in 2011-12 contributed further to the slowdown in new building activity as end users became conservative with their budget allocations with regards to their investments, especially with the stringent austerity measures imposed by governments across Europe.
The decline in new building activity can be exemplified by the situation in Spain, where housing prices declined by 30 percent in 2009, and building licenses declined by 60 percent. The collapse of the building services industry in Spain, which was one of the key drivers of the Spanish economy, has deepened the crisis there. Major provinces, such as Valencia and Almeria, have partially built apartment buildings due to insufficient funds.
Italy was among the major European countries that were affected by the economic crisis, and witnessed a sharp decline in investments in new building projects in 2011-12.
The building services industry in Greece was particularly affected by the global economic recession, and is currently embroiled in a crisis with the introduction of stringent austerity measures. A reduction in public sector spending is expected to further contribute to a slowdown in the growth of the pumps market in the building services industry.
Situations such as this, mirrored across Southern Europe, resulted in a decline in new building activity, which reduced the revenue generated from pump installations in new buildings when compared to the years prior to the recession.
The scheduling of the 2012 Olympics and the European Football Championship in the UK and Poland, respectively, proved to be a spark for the building services industry in the years following the economic recession. These major sporting events resulted in the upgrading of transport terminals, apartment complexes, hotels, and stadiums, which proved a boon for the construction industry in Europe, especially during the difficult economic situation.
With the downturn in new building activity, enforcement of EU legislations to reduce the environmental impact of buildings is likely to be the catalyst for the recovery of the building services industry in Europe. In the years following the financial crisis, major pump manufacturers involved in the building services industry focused their attention on the refurbishment market. It was estimated that in 2011 and 2012, the replacement and spare parts market accounted for more than half of the revenue generated from the pumps market for commercial and industrial buildings in Europe.
The European Union has strict legislation pertaining to energy consumption and the environmental impact of buildings. The Energy performance of Buildings Directive has a target to reduce energy consumption in buildings by 20 percent by 2020. This directive is expected to result in the mandatory replacement of existing pumps with energy-efficient pumps that comply with this directive.
The Ecodesign Directive for energy using products (EuPs) is expected to come into effect in a staggered manner between 2012 and 2015, depending on the power range, which is focused on the design of products to minimize the impact on the environment and enhance the product quality. This directive will likely increase the demand for pumps in new building construction.
Since only pumps that comply with the Ecodesign directive can be sold and installed legally in Europe, high-efficiency pumps must be installed in all new buildings. Thus, these legislations provide a boost for the European pumps market in commercial and industrial buildings.
The question then arises: Whatís the trend that would shape the pumps market in Europeís building services industry in the future? The answer lies in the incorporation of more electronic features in pumps, leading to greater connectivity and integration into the overall system, which is particularly important in smart buildings that enable the regulation of the environment within the building. Europe, along with America, is at the forefront of this trend.
Niranjan Paul is a research analyst with Frost & Sullivan.