Distribution: State of Play 2025

Despite a laundry list of challenges ahead, the HVACR distribution sector appears to be in a good place as it warms up to the new year. 

Talks with several HVACR distribution executives, plus with the CEO of Heating, Air-conditioning & Refrigeration Distributors International (HARDI), indicate a fair degree of confidence for growth in 2025, and a keen awareness of the major issues that will impact the industry this year. 

“Our forecast is for modest growth in ‘25, though not to suggest that it’s going to be easy,” said Talbot Gee, the HARDI CEO, during the annual HARDI conference in December. “You’re gonna have to work for it. It’s not going to be an easy one, but the headwinds aren’t such that it should hold back the ability to grow.” 

“We see 2025 as an uptick year, leading to bigger years in 2026 and 2027,” said Tom Schleisner, area leader at the distribution giant Winsupply Inc., based in Dayton, Ohio. 

The A2L transition and the possibility that tariffs on imported products will be imposed by the new presidential administration are of concern, Schleisner said. But the good news, he added, is that interest rates are trending downward and inflation has stabilized, fueling consumer optimism and increased purchases of durable goods, such as HVAC equipment. 

“The economy presents a potential short-term challenge, but the housing shortage, coupled with declining interest rates, should provide significant upside to replacement and new-unit demand if we can avoid major impact from tariffs,” said Katie Poehling Seymour, president of First Supply, a 128-year-old distribution firm based in Madison, Wisconsin. 

Seymour said First Supply’s sales indicate an increase in demand for equipment repairs, something she expects to continue “for the foreseeable future.” Patrick Newland, strategic marketing director at Hercules Industries Inc., based in Denver, Colorado, said he foresees greater product demand coming from the new construction sector. 

“One area we are anticipating the most growth in is non-residential construction – such as data centers and large manufacturing facilities,” Newland said. “The multifamily residential construction sector is also set for strong growth in 2025, driven by population increases, urbanization, and government initiatives promoting affordable housing.” 

Equipment prices, which have increased rapidly over the past four years, and the fact that many Americans say they feel pinched in the pocketbook, are on the minds of distributors, however. 

“I worry that the average American is not in the same financial place that they were several ago,” said Cory Anderson, president of M&A Supply Co. Inc. in Nashville, Tennessee. Anderson said contractors need to become more proficient at offering financing options to customers in order to overcome the hurdle of high prices. 

“I can see comments like ‘highway robbery to fix my air conditioning’ from the public, who is more than likely under-educated in the regulation changes and impacts,” said Christopher Duncan Hendricks, president and CEO of Duncan Supply Co. Inc., based in Indianapolis, Indiana. 

But according to Gee, the A2L transition is, “by far and away,” the biggest headwind distributors will face this year. 

Contractors have until the end of the year to legally install residential and light commercial a/c and heat-pump systems that use refrigerants, such as R-410A, with a GWP greater than 700; beginning Jan. 1, 2026, only systems that function with lower-GWP refrigerants, such as R-454B and R-32, can be installed. 

“Managing these transitions on product that obsolesces at the end of the year is always such a challenge, and manufacturers have struggled in recent transition years, so that is probably my overarching, greatest concern about the outlook or prospects for ‘25,” Gee said. “Do the manufacturers make what they say they’re going to make, deliver when they say they’re going to deliver it?” 

Distributors will have to gauge how much of each type of equipment to stock, and when to make a complete product switchover so they’re not stuck in 2026 with equipment they can’t sell. 

“There’s going to be a healthy 410A demand for this year, but you can’t end the year with any of that, right?” he said. “At some point in time, every single OEM’s light switch has to change.” 

His worries aren’t a knock on manufacturers, Gee stressed, but an acknowledgment of the complexity of the changeover, which he calls “ripping the Band-Aid off.” A missed deadline, he said, could leave a distributor stranded without enough of the right kind of products. 

“The complexity leaves so many opportunities for plans to be missed, which creates availability issues, lost sales opportunities,” he said. “If all of this works out and everybody’s able to execute their stated plan, that won’t be a problem.” 

President Donald Trump’s second term, and the Republican majority in both houses of Congress, potentially represent both pluses and minuses for HVAC distribution. Energy and regulatory policies could be more favorable, but the possibility of tariffs on imported products, which Trump has pledged to impose, could hurt. 

“Are we worried about broad-based tariffs? No,” Gee said. “What we do worry about is, what if a key component with a very small group, very small world, of suppliers, gets hit with a tariff, and it all of a sudden creates a choke point for an entire class of product?” Tariffs, for example, could apply to small but critical components, such as sensors, circuit boards, or chips, Gee added. 

“If something like that happens and all of a sudden we go back to 40-week lead times on rooftops or something like that, then all of a sudden, 2025 can look like a rough year,” Gee said. 

But Gee said he expects tariffs to be used as a negotiating tactic, targeted and short-term. If they lead to more products being produced in the U.S. or closer to it, he said, that’s a good thing. 

Gee is extremely upbeat about HARDI, which represents approximately 530 distribution companies  — its highest distributor membership ever — and about the work distribution professionals put in at the conference and the way they’ve taken advantage of the resources HARDI offers to upgrade their skills. 

“There’s a lot of opportunity for our distributors to really distance and differentiate themselves from the companies who don’t put in that work, who aren’t here, who aren’t engaged,” he said.