The outlook for equipment rental revenue, comprised of the construction/industrial and general tool segments, is very positive for 2022 and beyond. The updated fourth quarter forecast released by the American Rental Association (ARA) in early November shows equipment rental revenue expected to grow by nearly 10 percent to exceed $52.3 billion in 2022, a record for the equipment rental industry, topping the $50.9 billion recorded in 2019.
The forecast also calls for equipment revenue increases of 5.5 percent in 2023, 2.5 percent in 2024 and 3.3 percent in 2025 to reach $58.6 billion.
Construction equipment rental revenue leads the way with a 12.3 percent increase expected in 2022 to reach $38.7 billion while the general tool segment is forecast to grow 3.7 percent in 2022 to $13.7 billion.
The current forecast does not include the potential impact of the Infrastructure Investment and Jobs Act of 2021 (IIJA), but the benefits of increased infrastructure spending isn’t likely to occur in 2022.
“It takes time for projects to be approved and funding obligated,” says John McClelland, Ph.D., ARA vice president for government affairs and chief economist. “We will be working closely with our forecasting partner, IHS Markit, to understand the full impact on rental.”
Scott Hazelton, director, economics and country risk, IHS Markit, Andover, Mass., the company that provides data and analysis for the ARA Rentalytics™ forecasting service, says the money from the infrastructure bill does not become available before January 2022, meaning the current forecast for 2022 isn’t likely to change much when the forecast is updated in February.
“Infrastructure projects also take a while to plan with surveying, public input and procurement, so we are not going to see increased spending on rental equipment until probably 2023 with peak spending occurring around 2024 and 2025 as these things ramp up,” Hazelton says.
In addition, IHS Markit also is monitoring the market to see to what degree inflation, which has not been an issue for well over a decade, is reflected in rental rate increases.
For now, Hazelton says the outlook this quarter remains positive because the forecast for nonresidential construction has been steady and the American Institute of Architects billings index has moved into positive territory.
“When that index indicates expansion for three consecutive months, there is a high likelihood that nonresidential construction will pick up 12 to 18 months later. While this only moves the nonresidential forecast from roughly flat to modest growth, it is enough to move rental equipment demand up,” Hazelton says.
Equipment rental companies significantly cut investment in equipment in 2020 during the coronavirus (COVID-19) pandemic, as those in the construction and general tool segments spent 44.4 percent less in 2020, dropping investment in equipment to more than $7.6 billion.
However, the forecast shows that investment in 2021 should grow by 36.2 percent to $10.4 billion, followed by another 36 percent increase in 2022 to total $14.2 billion and to increase 10.9 percent in 2023, 2.3 percent in 2024 and 3.8 percent in 2025 to total more than $16.6 billion.
In Canada, equipment rental revenue is following a similar trend. According to the ARA forecast, construction and general tool rental revenue combined is expected to grow 7.9 percent in 2022 to nearly $4.6 billion, surpassing the 2021 record total of $4.2 billion in 2018.
You can learn more online by visiting ARArental.org/ARA-Rentalytics.
Upgrading exclusive market intelligence
ARA Rentalytics™, the American Rental Association (ARA) subscription service offering exclusive rental specific industry data and more, has been upgraded to provide additional information to meet the needs of rental stores and manufacturers serving the equipment and event rental industry.
“ARA members are asking for more rental research and analytics, so we have expanded ARA Rentalytics with several new offerings,” says Tom Doyle, ARA vice president, association program development.
“These include a new low-cost state digest for local rental companies, a new national data source and, in response to member requests, ARA-driven rental company and consumer surveys. At the same time, we have reduced the price of the service by offering a two-year subscription,” Doyle says.
Offered exclusively to ARA members, ARA Rentalytics now has four levels to choose from with each successive level providing more data, services and benefits starting with the state digest, which provides a one-year revenue forecast for the national, state and metropolitan statistical areas (MSAs) as well as data related to the national and state forecast economic drivers affecting the rental industry.
Other levels include state, regional and North America subscriptions, expanding the available data beyond what the digest provides.
“North America subscribers will continue to receive the exclusive rental revenue forecasts compiled by our expert partner, IHS Markit, get interactive and ready-built charts, and they can have them updated automatically with each quarterly release. This is a definite time-saver for professional rental managers, manufacturers and suppliers,” Doyle says.
Subscribers also are invited to timely webinars that provide additional information to what is provided in the quarterly forecast as well as access to economic and rental experts.
“Manufacturers and suppliers continue to ask for help with the equipment and event rental industry forecasts as well. ARA Rentalytics probably won’t drive factory line rate, but it certainly can help forecasting by identifying trends and the change in forecasts on a national, state and MSA level,” Doyle says.
“We have taken steps to provide additional help at the product level. At a national level, we offer information about equipment product classes. The ARA Rentalytics model will forecast and present growth rates rather than levels, showing revenue growth, demand index growth, penetration and fleet growth,” Doyle says.
For more information about ARA Rentalytics, visit ARArental.org/go/data. You also can contact Mike Savely, ARA director, association program development, at 800-334-2177, ext. 246, or mike.savely@ararental.org.