HVAC & Plumbing Contractors NAICS 238220

Dec 10, 2025 - HVAC Private Market Valuations May Be Inflated

• Fitch Ratings reports that direct lenders’ growing preference for stable, non-cyclical businesses has led to a sharp increase in investment in HVAC services, with representation in Fitch’s portfolio rising 1,050% since 2021. The surge reflects lenders’ search for predictable cash flows, but it also exposes the HVAC industry to risks tied to inflated private market valuations and high leverage. Unlike publicly traded peers in other sectors, HVAC service providers lack transparent valuation benchmarks, making recovery prospects uncertain if market multiples reset. Fitch warns that private equity sponsors may abandon struggling companies when equity cushions shrink, thereby increasing the severity of loss risks for creditors. While HVAC services benefit from steady demand, the sector’s rapid expansion in private credit highlights both opportunity and vulnerability, as lenders and investors could face significant challenges if the current valuation bubble bursts or financing conditions tighten.
• Nonresidential building construction starts increased 17.9% in October compared to the previous month, according to Dodge Construction Network. Commercial starts rose 19.5%, led by data centers (+45.5%) and retail stores (+15.1%). Office construction starts also improved, but starts were lower for hotels (-19.3%), warehouses (-1.7%), and parking garages (-46.1%). Institutional starts grew 3.7% due to project categories other than education and healthcare, which saw starts fall 20.8% and 2.7%, respectively. Manufacturing starts jumped 107.2% in October compared to September, but the sector remains volatile from month to month. Nonresidential building starts were up 5.6% for the first 10 months of 2025 compared to the same period in 2024. On a year-to-date basis, commercial and industrial starts increased 13.6%, while institutional starts fell 2.2%.

• America’s largest homebuilders are struggling to sell new homes despite offering 4% mortgages and deep discounts, according to The Wall Street Journal. D.R. Horton and Lennar have slashed prices and added incentives, but demand remains weak, pushing unsold inventory to levels last seen in 2009. Builders are slowing construction, with D.R. Horton cutting starts by 21% year over year for the three-month period through September. Regional gluts in Texas, Florida, Southern California, and Washington, DC reflect rising resale competition, fewer foreign buyers, and economic uncertainty. Investor activity is at a 15-year low, with institutional buyers demanding steep discounts that builders won’t meet. New homes, often located in less desirable areas and targeted at first-time buyers, are more challenging to sell.
• Multifamily developer confidence improved in the third quarter of 2025 but remained in negative territory, according to the National Association of Home Builders’ (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) rose six points in Q3 2025 to 46 compared to the third quarter of 2024. The Multifamily Occupancy Index (MOI) decreased by one point to 74 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. While the MPI index indicates weakness in the multifamily construction market, the softness is mostly concentrated in mid-to-high-rise and condominium development, while developers of low-rise and subsidized rental properties are more optimistic.