Equipment Rental Revenue Forecast Shows Construction Growth Potential
American Rental Association | November 21, 2016

 

Economic signs continue to point toward a healthy and expanding market for construction and industrial rental equipment in the U.S. The latest forecast from the American Rental Association (ARA) calls for construction and industrial equipment rental revenue to increase by an average of 4.1 percent annually over the next five years.

ARA monitors rental revenue for the industry on a quarterly basis to ensure that association members have the best information available to drive business decisions in a dynamic economic environment. Overall equipment rental revenue is expected to increase modestly and reach a record $55.5 billion in the U.S. in 2020.

“The outlook continues to be one of growth and growth that will outpace the broader economy,” said Scott Hazleton, managing director, IHS Markit™, the respected global forecasting firm that compiles data for the ARA Rental Market MonitorTM and RENTAL MANAGEMENT.

Rental Penetration Also Solid

In addition to the steady growth pace, a solid ARA Rental Penetration IndexTM is another indicator of equipment rental market vitality. ARA and IHS developed the Index to measure the share of the U.S. construction equipment fleet accounted for by rental companies.

Rental penetration decreased slightly to 52.9 percent in 2015 — the most recent rental-penetration reporting year — from 2014’s 53.9 percent. However, the slight dip reflected the flexibility of the industry, not weakness in the outlook.

Energy markets were down and construction markets were robust in 2015. For rental companies that supply equipment to both industries, the solution was to defer some purchases of new equipment for construction sites and redeploy existing assets from energy to construction.

The Index has been on the rise over the past 10 years when rental penetration was just under 40 percent in 2005. ARA is releasing the 2016 ARA Rental Penetration Index at The Rental Show 2017, the annual convention and trade show set for Feb. 26 through March 1 in Orlando, Florida.

Why Contractors Are Renting

ARA analyses show that construction contractors continue to see the value of renting as an alternative to purchasing equipment. Rental has been popular in the construction/industrial segment as commercial construction has rebounded coupled with tight credit conditions and the increasing costs of buying new Environmental Protection Agency Tier 4 emissions-compliant equipment.

“Renting enables companies to get exactly what they need to get the job done while eliminating time and costs associated with buying, maintaining and storing equipment,” says John McClelland, ARA vice president of government affairs and chief economist. “It’s a simple and affordable way to manage a construction equipment fleet and focus on competing for more jobs.”

To help construction companies and contractors find equipment rental partners, ARA offers www.RentalHQ.com, an online rental store locator. Users can enter their zip code and the type of equipment required to obtain a list of local ARA-member rental companies that can assist with meeting their specific needs.