The commercial heat pump (HP) markets in the United States and Germany are projected to grow at over 9% CAGR by volume through 2029, according to BSRIA’s May 2025 Market Watch report. Growth in the U.S. is driven by state-level regulations, particularly in California and the Northeast, where aggressive building decarbonization targets are accelerating adoption. In Germany, commercial uptake continues to expand due to falling electricity costs that favor heat pump competitiveness in both retrofits and new constructions.
In the UK, long-term commercial growth remains positive, though a temporary slowdown is expected in 2025 due to delayed funding from the Public Sector Decarbonisation Scheme. Across Europe, air-source heat pumps (ASHPs) dominate, with Finland diverging through growing use of ground/water (G/W) units, primarily in district heating applications.
Product design is increasingly shaped by refrigerant policy and charge restrictions, leading to widespread adoption of modular heat pump systems. Scroll compressors are transitioning to R290 (propane), while reciprocating models offer flexibility between CO2 (R744) and R290, based on application needs. Screw compressors are aligning with R1234ze, especially in mid-to-large systems. The modular approach helps manage A2L and A3 refrigerant classifications and charge limits in both retrofit and new builds.
In Australia and the U.S., domestic HP markets are expanding rapidly through water heating applications. Australia sees strong growth in CO2 monobloc units due to subsidies for replacing gas heaters, with cylinder-integrated heat pumps (CIHPs) maintaining market leadership. Reversible propane systems are expected to drive future space heating demand.
The U.S. domestic market shows a double-digit CAGR across most system types, supported by state-level mandates and federal incentives under the Inflation Reduction Act. Split and G/W-to-water systems are exceptions, showing slower adoption.
Europe’s domestic HP market contracted by 27% in 2024 after rapid growth in prior years. Monobloc systems fell 22%, and air-to-water split systems dropped 37%, influenced by inventory surpluses and reduced demand in France, Germany, and Poland. Ground/water systems saw a 34% decline, particularly in Germany, Belgium, and the Netherlands.
Nonetheless, the UK market remains resilient. CIHPs and exhaust air systems are gaining traction in new-build flats, supported by regulations promoting heat pump adoption. The conversion of commercial buildings into residential units has also created a new retrofit opportunity, potentially replicable in other European cities facing high commercial vacancy.
“Modular heat pump systems and low-GWP refrigerants are not just trends—they are now structural requirements,” said the BSRIA Market Intelligence Team. “Manufacturers and specifiers must adapt to evolving safety standards, refrigerant classifications, and localized policy landscapes.”
Refrigerant classifications (A2L/A3) will increasingly shape system design and safety practices, with modular configurations essential for compliance. Market stakeholders should monitor policy developments and regional funding cycles closely, particularly in the UK, Finland, and Australia, where unique adoption patterns are emerging.