Plumbing, Heating, and Air-Conditioning Contractors (NAICS 23822)

A Histometrics industry primer for public-market and private investors

1. Overview

NAICS code 23822 is the five-digit industry covering the contractors who install, service, repair, and replace the plumbing, heating, ventilation, air-conditioning, and refrigeration systems inside buildings — the "mechanical" or HVAC (heating, ventilation, and air-conditioning) trades. NAICS stands for the North American Industry Classification System, the standard the U.S. government uses to group businesses [1].

This level is a single-child pass-through: NAICS 23822 contains exactly one six-digit industry, 238220, and the two are effectively identical in scope and in the numbers. This page gives the rollup figures for the five-digit level and points you to the full 238220 primer for detail on how the money works, who the players are, and how to invest.

Why it matters to an investor: demand is unusually durable. Buildings cannot operate without these systems, more than 90% of U.S. homes already have air-conditioning or a heat pump, and equipment wears out on a 10-to-20-year cycle — so much of the work is non-discretionary repair and replacement rather than new construction [30]. On top of that steady base sit two strong current cycles: a commercial build-out (data centers, factories, reshored industry) and a regulator-forced equipment turnover as a national refrigerant switch takes hold [31][33].

2. What's inside — and why this level equals its one child

NAICS is a nested hierarchy: each five-digit industry breaks into one or more six-digit national industries. Most five-digit codes split into several children; 23822 does not. It has a single child:

• 238220 — Plumbing, Heating, and Air-Conditioning Contractors. The one and only national industry beneath 23822, and identical to it.

Because the parent and child cover exactly the same establishments, every rollup number at the 23822 level equals the corresponding 238220 number. There is no aggregation, no blending of sub-industries, and no detail that lives at this level but not the child. For anything beyond the size figures below — the industry's structure, the listed and private investable universe, the service-versus-project economics, demand drivers, regulation (licensing and the refrigerant transition), consolidation, and risks — read the full 238220 primer.

The trade spans residential service-and-replacement shops (the truck-and-technician businesses that fix a furnace or unclog a drain), plumbing contractors, refrigeration and sprinkler installers, and large commercial/industrial mechanical contractors that pipe and duct out office towers, hospitals, factories, and data centers. It is contracting — installation and service — not the making or selling of the hardware; equipment manufacturing and wholesale distribution sit in separate NAICS codes (333415, 423720/423730/423740) [1].

3. How big it is

Federal figures for NAICS 23822 (our ground-truth statistics for this five-digit level). Because 23822 equals its single child, these match the 238220 figures. The periods differ, so they should not be combined mechanically.

Average pay works out to roughly $74,000 per employee (payroll divided by headcount) [2]. The concentration measures — a CR4 (combined revenue share of the four largest firms) of just 4.7% and an HHI (Herfindahl-Hirschman Index, a 0-to-10,000 concentration score where 10,000 is a monopoly) of 9.3 — confirm a very fragmented national market: competition is local, not national. Our extract does not provide a public-versus-private ownership split, a service-versus-installation revenue split, industry margins, or state-level revenue; those are noted as absent rather than estimated.

Undercount caveat. These are employer-business statistics and miss a large tail of the trade. County Business Patterns covers firms with paid employees; the Economic Census generally excludes both nonemployer businesses (the many one-person, no-payroll plumbers and technicians who file as sole proprietors) and government-owned establishments [4]. Because this trade has an exceptionally low barrier to hanging out a shingle, the true number of businesses is meaningfully higher than the ~112,000 employer firms, and total activity somewhat larger than the $298 billion figure. Read the federal numbers as a floor for the employer segment. (Widely quoted private "market" figures in the $1 trillion-plus range use much broader global or equipment-inclusive definitions and are not comparable to this U.S. contractor line item.)

4. Investable universe — where value concentrates

Because 23822 has one child, all of the industry's value sits in that single line — there is no second sub-industry competing for the investor's attention. There is no clean pure-play basket, though: the biggest listed names are either broader than HVAC/plumbing or sit one step up the supply chain.

• Listed contractors closest to the activity: Comfort Systems USA (NYSE: FIX) and Limbach Holdings (Nasdaq: LMB) for commercial mechanical; Chemed (NYSE: CHE) for residential plumbing/drain service via Roto-Rooter; EMCOR Group (NYSE: EME) for a broader mechanical/electrical mix; plus Everus Construction Group (NYSE: ECG) and IES Holdings (Nasdaq: IESC) [6][8][9][10][11][12].
• Adjacent "picks-and-shovels": distributors Ferguson (NYSE: FERG) and Watsco (NYSE: WSO), and equipment makers Carrier (NYSE: CARR), Trane (NYSE: TT), Lennox (NYSE: LII), and A. O. Smith (NYSE: AOS) [13][14][15][16][17][18].
• Private platforms — where most of the industry's scale actually is — include private-equity roll-ups such as Apex Service Partners, Wrench Group, Service Logic, and Sila Services [23][24][25][26].

See the 238220 primer for the full company tables and ownership map.

5. How the money works

Contractors earn from two engines with very different economics. The steady, higher-margin engine is service, maintenance, and replacement — a dispatched technician marks up labor and parts and sells replacements and recurring maintenance memberships; because equipment fails regardless of the economy, this is the defensive, best-margin work (Roto-Rooter runs mid-20% adjusted-EBITDA margins) [10]. The cyclical engine is project and new-construction work — commercial and industrial contractors bid to install systems and recognize revenue as the job progresses, so backlog (signed work not yet built) is the leading indicator; Comfort Systems USA entered 2026 with a record backlog near $11.9 billion [7]. Labor is the largest cost and the binding constraint. Full detail — cost structure, owner economics, and the operating metrics that matter — is in the 238220 primer.

6. Demand drivers

The core driver is replacement of an aging installed base: with saturation above 90% and a 10-to-20-year equipment life, furnaces, air-conditioners, water heaters, and pipes simply wear out [13][30]. Layered on top: seasonal weather and emergencies; interest-rate-sensitive new construction and renovation; the data-center and industrial build-out driven by artificial intelligence and cloud computing (the standout tailwind for commercial contractors) [7][30]; energy-efficiency and electrification upgrades [30]; and regulation-forced turnover from the refrigerant transition and tightening efficiency standards. Repair, replacement, and maintenance should stay more resilient than new construction. See the 238220 primer for the full breakdown.

7. Regulation

Plumbers and HVAC contractors are licensed at the state and local level, and anyone servicing equipment that can release refrigerant must hold EPA (Environmental Protection Agency) Section 608 certification under the Clean Air Act [29] — rules that double as a competitive moat. The big current event is the refrigerant transition: under the EPA's AIM Act (American Innovation and Manufacturing Act), new residential and light-commercial equipment must meet a 700 global-warming-potential limit from January 1, 2025, effectively ending the long-standard R-410A refrigerant and driving refrigerant price spikes [33][32]. Efficiency standards (the SEER2 test, effective 2023) again favor replacement [30], while the July 2025 One Big Beautiful Bill Act terminated the federal Section 25C heat-pump tax credit for systems installed after December 31, 2025 — a near-term residential headwind [33][32]. Full regulatory detail is in the 238220 primer.

8. Consolidation

This is a textbook fragmented, local, relationship-driven industry — a CR4 of 4.7% and an HHI of 9.3 say competition is essentially perfect at the national level [3] — which is exactly why consolidation is the dominant investment story. Private equity uses a "platform-and-add-on" model: buy a regional operator with roughly $5-25 million of EBITDA, bolt on smaller local shops, spread overhead across the local brands, then sell the larger entity at a higher multiple [20][21]. Private equity's share of HVAC deals rose from about 8% in 2023 to 23% in 2024, and by some counts more than 60% of the top 50 HVAC firms are now PE-backed [20][21]. Residential is mid-consolidation; commercial is still early [21]. The 238220 primer covers the platforms, the multiples, and the model's limits.

9. Risks

The number-one constraint is labor scarcity — an aging workforce (more than one in five plumbers is over 55) against lagging trade-school pipelines caps how fast any firm or roll-up can grow [31]. Other risks: cyclicality and interest rates on the new-construction layer; project execution (fixed-price bids, change orders, retainage, warranty); input-cost and refrigerant volatility [32]; policy risk (loss of the heat-pump credit) [33][32]; consolidation risk (integration failures and overpaying at today's multiples) [20][22]; and customer concentration for firms leaning into data-center work [7]. See the 238220 primer for the full risk discussion.

10. How to invest and the outlook

There is no pure NAICS 23822 index fund. Public routes: direct contractors (FIX, LMB, CHE, EME, ECG, IESC), distributors (FERG, WSO), and equipment makers (CARR, TT, LII, AOS) [6][8][9][10][11][12][13][14][15][16][17][18]. Private routes — where most wealth in this trade is made: buy or operate a local plumbing/HVAC firm and professionalize it, provide private credit, invest alongside a private-equity or search-fund home-services platform, or take a franchise. Because the industry is so fragmented and licensing keeps it local, the owner-operator and platform-add-on routes remain the highest-return, highest-effort ways in — underwrite the individual market, not national growth assumptions.

Outlook. The base case is favorable: replacement of an aging installed base plus regulator-forced equipment turnover give a durable demand floor, while the data-center/industrial supercycle is an unusually strong tailwind — reflected in record backlogs entering 2026 [7]. The binding constraint is skilled labor, which is more likely to support pricing power and further consolidation than to ease. Near term, expect the commercial/data-center side to stay strong; the residential side to be more sensitive to interest rates and the just-expired heat-pump credit; and the refrigerant transition to keep pulling replacement demand forward. Net: a defensive, cash-generative industry with a cyclical growth layer on top, and consolidation as the defining capital-markets theme. For the full company tables, diligence checklist, and economics, see the 238220 primer.

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Sources

Drawn from the child primer (NAICS 238220); numbering matches that primer.

1. U.S. Census Bureau, "2022 NAICS: 238220 Plumbing, Heating, and Air-Conditioning Contractors (definition)," 2022. https://www.census.gov/naics/?details=238220&input=238220&year=2022
2. U.S. Census Bureau, "County Business Patterns: 2023, NAICS 238220" (111,207 establishments; 1,214,761 employees; $89.5B annual payroll; $20.9B Q1 payroll). https://www.census.gov/programs-surveys/cbp.html
3. U.S. Census Bureau, "Economic Census — Concentration of Largest Firms (EC2200), NAICS 238220," 2022 (112,088 firms; $297.6B receipts; CR4 4.7%; CR8 6.7%; CR20 10.2%; CR50 14.4%; HHI 9.3). https://api.census.gov/data/2022/ecnsize/groups/EC2200SIZECONCEN.html
4. U.S. Census Bureau, "Nonemployer Statistics methodology and Economic Census scope (nonemployer and government establishments excluded)," 2024. https://www.census.gov/econ/overview/mu0500.html
5. Comfort Systems USA, "2025 Form 10-K" (installation 63.2% / RMR 36.8% of 2025 revenue). https://www.sec.gov/Archives/edgar/data/1035983/000110465926017530/fix-20251231x10k.htm
6. Comfort Systems USA, "Fourth-Quarter 2025 Results (Form 8-K): 2025 revenue ~$9.1B, backlog ~$11.9B," 2026. https://www.sec.gov/Archives/edgar/data/1035983/000110465925101818/fix-20251023xex99d1.htm
7. EMCOR Group, "2025 Form 10-K" (~$17.0B revenue; mechanical/electrical construction and facilities services). https://www.sec.gov/Archives/edgar/data/105634/000010563426000025/eme-20251231.htm
8. Limbach Holdings, "2025 Annual Report" (~$0.65B revenue; commercial building systems). https://www.sec.gov/Archives/edgar/data/1606163/000162828026026895/lmb2025annualreport.htm
9. Chemed Corporation, "Fourth-Quarter 2025 Results — Roto-Rooter segment," 2026. https://www.chemed.com/news-releases/news-release-details/chemed-reports-fourth-quarter-2025-results
10. Everus Construction Group, "2025 Annual Report and Form 10-K," 2026. https://www.sec.gov/Archives/edgar/data/2015845/000201584526000021/a2025annualreport-form10xk.pdf
11. IES Holdings, "2025 Form 10-K," 2025. https://investors.ies-corporate.com/sec-filings/sec-filing/10-k/0001048268-25-000174
12. Watsco, Inc., "2025 Form 10-K" (~$7.2B revenue; largest N.A. HVAC/refrigeration distributor). https://investors.watsco.com/static-files/015cc5c2-8f7e-4eee-8fb1-b5c4bda508e5
13. Ferguson plc, "FY2025 Annual Report / Form 10-K" (net sales ~$30.8B). https://www.sec.gov/Archives/edgar/data/2011641/000201164125000027/ferg-20250731.htm
14. Carrier Global Corporation, "Investor Relations," 2026. https://ir.carrier.com/overview/default.aspx
15. Trane Technologies, "Investor Information," 2026. https://investors.tranetechnologies.com/investor-resources/investor-information/default.aspx
16. Lennox International, "Investor Relations," 2026. https://investor.lennox.com/
17. A. O. Smith Corporation, "Investor Relations," 2026. https://aosmith.gcs-web.com/
18. Capstone Partners, "HVAC Services M&A Update," July 2025. https://www.capstonepartners.com/insights/article-hvac-services-ma-update/
19. PKF O'Connor Davies, "US HVAC M&A Industry Update — Summer 2025," 2025. https://www.pkfod.com/insights/us-hvac-ma-industry-update-summer-2025/
20. Cherry Bekaert, "Transaction Risks in the Home Services Industry," 2025. https://www.cbh.com/insights/articles/transaction-risks-in-the-home-services-industry/
21. Alpine Investors, "Apex Service Partners and Alpine Announce Strategic Minority Investment from Apollo Funds," 2026. https://alpineinvestors.com/update/apex-and-alpine-announce-strategic-minority-investment-from-apollo-funds-in-apex/
22. Leonard Green & Partners, "TSG Consumer Partners & Oak Hill Partner with Leonard Green and Management on Wrench Group," 2022. https://www.leonardgreen.com/portfolio/
23. Bain Capital, "Bain Capital Completes Acquisition of Service Logic," 2025. https://www.baincapital.com/news/bain-capital-completes-acquisition-service-logic
24. Goldman Sachs Alternatives, "Sila Services Announces Equity Investment from Goldman Sachs Alternatives," 2024. https://am.gs.com/en-gb/advisors/news/press-release/2024/sila-services-investment
25. The Farnsworth Group / ACHR News, "Data-Center Cooling and HVAC Replacement Demand," 2025. https://www.thefarnsworthgroup.com/blog/data-center-cooling
26. ACHR News, "Signs of a Turnaround: What 2026 Holds for the HVAC Construction Market," 2026. https://www.achrnews.com/articles/165674-signs-of-a-turnaround-what-2026-holds-for-the-hvac-construction-market
27. International Code Council, "Q4 2025 Update: EPA's Technology Transitions Program Related to A2L Refrigerants," 2025. https://www.iccsafe.org/building-safety-journal/bsj-technical/q4-2025-update-epas-technology-transitions-program-related-to-a2l-refrigerants/
28. U.S. Environmental Protection Agency, "Technology Transitions HFC Restrictions by Sector (AIM Act; 700 GWP limit from Jan 1, 2025)," 2026. https://www.epa.gov/hfcs/technology-transitions-hfc-restrictions-sector
29. U.S. Environmental Protection Agency, "Section 608 Technician Certification Requirements," 2026. https://www.epa.gov/section608/section-608-technician-certification-requirements
30. U.S. Department of Energy, "Purchasing Energy-Efficient Residential Central Air Conditioners; regional efficiency standards (SEER2)," 2024. https://www.energy.gov/cmei/femp/purchasing-energy-efficient-residential-central-air-conditioners
31. U.S. Bureau of Labor Statistics, "Occupational Outlook Handbook — HVAC Mechanics and Installers; Plumbers, Pipefitters, and Steamfitters," 2025. https://www.bls.gov/ooh/installation-maintenance-and-repair/heating-air-conditioning-and-refrigeration-mechanics-and-installers.htm
32. U.S. Internal Revenue Service, "Energy Efficient Home Improvement Credit (Section 25C)," 2025. https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
33. Rewiring America, "25C Heat-Pump Tax Credits and HEAR/HEEHRA Rebates — status after the One Big Beautiful Bill Act," 2026. https://homes.rewiringamerica.org/federal-incentives/25c-heat-pump-tax-credits