Heating Equipment Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Global Heating Equipment Market Trends and Insights

Cold-Climate Retrofit Electrification

Mandates in the European Union and northeastern United States require low-carbon heating systems in sub-zero regions, spurring sales of vapor-injection heat pumps that keep coefficients of performance above 2.0 at -15 °C ambient conditions. ^{[1] European Commission, “Directive (EU) 2024/1275 on the Energy Performance of Buildings (Recast),” europa.eu} New York’s USD 500 million rebate pool accelerates single-family conversions, and utility-backed subscription models further ease upfront costs. ^{[2]New York State Energy Research and Development Authority, “2025 Heat Pump Deployment Report,” nyserda.ny.gov} The resulting surge raised residential winter electricity demand in Germany by 9% in 2025, prompting grid operators to add battery storage buffers.

Carbon-Neutral Corporate Campuses

Global firms pursuing Science Based Targets are retrofitting campuses with megawatt-scale heat pumps that recycle server-farm waste heat into nearby offices. Microsoft commissioned units across 12 data-center sites, trimming primary energy 28% and meeting Scope 1 targets two years ahead of schedule.^{[3]Microsoft, “2025 Environmental Sustainability Report,” microsoft.com} Unilever replicated the model at 18 factories, reporting blended heat costs below EUR 45 per MWh (USD 48 per MWh). These deals popularize heat-pump-as-a-service contracts with uptime guarantees that shift maintenance risk to vendors.

Gas-Phase Heat Pumps for Industrial Drying

Pilot systems now elevate outlet temperatures to 160 °C with coefficients of performance above 3, replacing steam boilers in food, textile, and pharmaceutical lines. Danfoss trials in Germany showed 34% gas savings and sub-five-year paybacks after carbon-pricing credits. Widespread uptake hinges on refrigerant safety codes and viable thermal-storage pairings that buffer renewable power variability.

Performance-Based Building Codes

The recast Energy Performance of Buildings Directive forces public buildings to reach near-zero energy by 2028, while ASHRAE 90.1-2025 phases out non-condensing boilers across U.S. climate zones 4-8. Analysts estimate 420,000 U.S. commercial boilers will be replaced by 2030, unlocking a USD 3.8 billion opportunity for heat-pump and hybrid systems. Manufacturers reply with hydrogen-ready models capable of burning 20% hydrogen blends, easing future fuel transitions.

Grid-Capacity Bottlenecks in Electrified Neighborhoods

Upgrading distribution transformers lags behind clustered heat-pump rollouts, extending connection approvals up to 22 months in London and forcing U.S. utilities to earmark multi-billion-dollar reinforcement budgets. Demand-response algorithms can stagger compressor cycles, yet add USD 800-1,500 per home and require interoperable controls. Until reinforcement cycles catch up, municipalities have capped new installations in saturated feeders, throttling short-term growth.

Skilled-Labor Shortages for Multi-Technology Retrofits

HVAC technician enrollment fell 11% between 2020-2024, even as heat-pump projects grow 6% annually. German homeowners now wait more than seven months for an installer appointment, and U.S. contractors prioritize high-margin commercial jobs. Pre-charged cassette designs halve commissioning hours, and digital micro-credential platforms aim to certify 15,000 new installers by 2026. Nonetheless, labor scarcity continues to slow retrofit throughput.

Segment Analysis

By Equipment Type: Heat Pumps Erode Boiler Dominance

Boilers still hold 37.54% equipment share, anchored by industrial steam and district-energy loads requiring 90 °C-plus output. Heat pumps, however, are advancing at a 6.38% CAGR and increasingly cannibalize forced-air furnace replacements in North America and hydronic radiators in Europe. Furnaces linger in ducted U.S. housing but now face direct substitution via ducted inverter heat pumps. Niche devices such as radiant panels capture specialty applications yet carry premium margins. The competitive divide shows residential and light-commercial customers pivoting hard toward electrification, while high-temperature industrial lines retain boilers until gas-phase technology or hydrogen blending scales. Hybrid heat-pump-plus-boiler packages ease adoption by allowing 80% electrified annual load with fossil backup for extreme peaks, smoothing grid impact and homeowner cost.

Strategic differentiation revolves around software. Trane’s Tracer platform forecasts occupancy and weather, pre-heats during off-peak tariffs, and unlocks utility incentives for demand shedding. These features move the heating equipment market from hardware margin to lifetime service value, raising barriers for price-only entrants and encouraging incumbents to bundle analytics with warranty and maintenance.

Note: Segment shares of all individual segments available upon report purchase

By End-User Industry: Residential Volume Versus Industrial Value

In 2025, residential buyers made up 57.83% of the market share and are projected to grow at a CAGR of 6.42% through 2031. This growth is bolstered by U.S. tax credits, European retrofit mandates, and China's transition from coal to electricity. Meanwhile, commercial property managers, focusing on total cost of ownership, command a share of about 25%, showing a preference for units primed for building-automation integration.

Industrial customers, at 12%, value 120 °C-plus capability and custom engineering, often paying more than USD 100,000 per 500-kW unit; Thermax leveraged this specialization to win pharmaceutical and dairy waste-heat projects. Public facilities adopt early due to policy mandates despite longer paybacks. Purchase behavior thus varies, residential sales hinge on rebate simplicity and financing, commercial deals on demand-response and warranty, and industrial contracts on process integration depth.

By Fuel Type: Electricity Leads as Hydrogen Hedges

Electricity-based systems held 54.72% fuel share in 2025, reflecting cheap hydro in Scandinavia and Quebec and falling rooftop solar costs. Natural gas lingers where pipeline access keeps delivered cost lower than retail power. Oil use shrinks as subsidies vanish, while biomass boilers serve off-grid sites with forestry residues. 

Hydrogen-ready models grow at 6.63% CAGR, hedging grid decarbonization. Bosch launched a boiler certified for 100% hydrogen yet deployable today on gas networks, offering owners forward compatibility. Viessmann’s burner can convert in two hours, minimizing downtime once 20% blending becomes standard. Economics depend on green-hydrogen price trajectories that IRENA expects below USD 2/kg by 2030, a threshold that could reset comparative fuel costs.

By Technology: Air-Source Units Accelerate, Condensing Boilers Hold Installed Base

Condensing boilers captured 43.65% share in 2025 because they retrofit easily into existing hydronic loops while meeting efficiency rules. Air-source heat pumps, though, post a 7.67% CAGR as R-32 and R-454B refrigerants cut global-warming potential without sacrificing low-temp capacity. Ground-source systems boost seasonal performance but face high drilling cost barriers. 

Hybrid solutions blend the two, popular in the United Kingdom and Netherlands where gas infrastructure persists. Variable-speed inverter compressors represent the core technology leap, with Panasonic’s dual-rotary design retaining full capacity at minus-20 °C and Daikin’s high-temperature model delivering 70 °C water for legacy radiators. Smart sensors and cloud diagnostics turn equipment into grid-interactive assets eligible for balancing-market revenue.

Note: Segment shares of all individual segments available upon report purchase

By Installation Type: Retrofit Dominance with New-Build Upswing

Retrofits comprised 70.32% of 2025 activity as Europe and North America tackled boiler fleets older than 15 years. New installations, however, are climbing at a 6.89% CAGR because developers must now meet performance certificates that ban non-condensing units from day one. 

Retrofits are complex, often needing electrical-panel upgrades and envelope improvements; new builds integrate heat pumps with heat-recovery ventilation to minimize system size. Programs such as Germany’s EUR 13 billion Federal Funding for Efficient Buildings and France’s MaPrimeRénov grants compress replacement cycles but create policy-driven demand spikes when budgets lapse.

Geography Analysis

Asia-Pacific delivered 40.19% of global revenue in 2025, anchored by China’s coal-to-electricity push that installed 4.2 million heat pumps in northern provinces and cut particulate emissions 34% relative to 2020 baselines. Japan’s subsidy of up to JPY 400,000 (USD 2,700) catalyzed a 26% surge in shipments during 2025. India’s industrial heat-pump orders rose by double digits, while Australia posted 19% residential growth under state rebates. These developments sustain the global heating equipment market’s regional lead.

North America combines generous Federal tax credits with state-level incentives, spurring 3.1 million U.S. shipments in 2025. Canada’s Greener Homes Grant funds up to CAD 5,000 (USD 3,650) per retrofit, driving uptake in Ontario and British Columbia. Europe’s Fit for 55 package compels the installation of roughly 30 million heat pumps by 2030, and Germany alone recorded 356,000 new units in 2025. These retrofit waves reinforce the policy-linked momentum in the heating equipment market.

Middle East and Africa is forecast to be the fastest-growing region at 7.81% CAGR, powered by district-cooling-cum-heat-pump networks in the Gulf and industrial retrofits in Saudi Arabia. Dubai awarded contracts for three plants totaling 120,000 RT that integrate absorption chillers with heat-pump cascades. South African municipalities subsidize heat-pump water-heater swaps to curb electric-resistance demand, while off-grid solar-heat-pump bundles in Kenya reduce biomass reliance. Although small today, the region sets a high-growth frontier for the heating equipment market.