The American Rental Association (ARA) has revised its forecast for 2023 and 2024, predicting a significant increase in rental revenues for construction and industrial equipment (CIE).
CIE rental revenue was expected to reach $45.5 billion in 2023 and $46.7 billion in 2024, but new data suggests that CIE revenue will reach $56 billion this year and $59 billion in 2024.
ARA says two factors are driving these changes: the data on non-residential construction spending used in the model and the increasing importance of ‘specialty rental’ to overall rental revenues.
A recent analysis by economists at the Federal Reserve Board has suggested that data for non-residential construction spending produced by the U.S. Census Bureau has underestimated non-residential construction spending by at least 20 percent since the second quarter of 2021.
“The Fed economists’ analysis is both well-reasoned and analytically sound and we believe that this new information needs to be included in our revised forecast,” says John McClelland, Ph.D., ARA vice president for government affairs and chief economist.
“The second change in our forecast is the inclusion of information about specialty rentals which has been a growing trend. Recent work by our partners at S&P Global has constructed a ten-year time series of specialty rental from multiple data sources. Incorporating this new information into our model now gives specialty rentals a larger share among the variables that forecast CIE revenues.”
Rental revenue growth will slow through 2023 for the general tool market in the United States, totaling $14.9 billion this year, driven by weakness in residential construction markets. ARA says that growth in 2024 is also predicted to slow, with revenues equaling $15.7 billion.
With current CIE forecasts including both traditional and specialty rental as the new industry measure, Canadian CIE rental revenues are expected to reach $4.4 billion in 2023 as opposed to previous forecasts totaling $3.7 billion. In 2024, Canadian CIE rental revenue is predicted to total $4.4 billion, up from the previous forecast of $3.8 billion.
Canadian general tool equipment rental revenue is down slightly from the last forecast at $991 million. However, stronger growth is expected in 2024 and beyond, as the forecast indicated 2024 revenue at $1 billion.