Even with supply chain issues and labor shortages, U.S. equipment rental revenue, including construction and general tooling, is expected to grow 11.1% to nearly $56 billion in 2022, according to the latest quarterly forecast released by the American Rental Association (ARA). ) in mid-April.
Construction equipment leasing is leading the way, growing 13% this year to total revenue of $41.7 billion following a 10.2% increase in 2021. General tool in 2022 is expected to increase by 7% to $14.1 billion.
As equipment rental revenue growth slows to 6% in 2023, 2.9% in 2024, 3.6% in 2025 and 3.9% in 2026, the industry is expected to surpass $60 billion in 2024 and reach $65.5 billion in 2026.
“One thing we know is that rental revenue increases when the fleet grows or when rates increase,” says John McClelland, Ph.D., ARA vice president for government affairs and chief economist.
“In reality, both things are happening today. However, supply chain issues are holding back fleet growth while inflation is pushing fares higher. In the past, we have seen strong revenue growth which we attribute to fleet growth. We are now seeing revenue growth driven by higher rates,” McClelland says.
S&P Global Market Intelligence, formerly IHS Markit, the forecasting company that compiles data for ARA forecasts and the ARA Rentalytics™ subscription service, also revised the previous equipment rental revenue estimate for 2021 by 47, $9 billion to $50.2 billion in the latest quarterly update.
The revision did not have much impact on expected industry growth rates for 2022 and beyond, but reflects a larger total than in previous forecasts.
U.S. rental income
Scott Hazelton, director, S&P Global Market Intelligence, said while forecasting factors behaved roughly as expected throughout the year, inflation and rental rates took off more than expected in the second half of the year. 2021, with the fourth quarter being stronger, necessitating the increase in the revenue estimate for last year.
“The strong double-digit growth outlook for 2022 is contingent on stable underlying demand compounded by inflationary pressures that will allow, if not demand, rate increases,” Hazelton said.
“The underlying construction market will be relatively weak with residential and non-residential structural spending under pressure, although we will start to see the incipient impact of the law on infrastructure investment and jobs. However, we do not expect a downturn in construction, while the manufacturing sectors, and especially energy, will offer an improvement,” he says.
“Meanwhile, pricing pressures are rippling through the economy, in some cases affecting producer prices even more than the best published consumer price indices. Supply chain constraints are endemic in all manufacturing, including construction and material handling equipment. This results in shipping delays and equipment shortages. Rental companies are more likely to be able to supply equipment faster than any dealer, which gives them pricing power,” he says, adding that Federal Reserve intervention with interest rate hikes and improved supply chain will end by relieving price escalation, but probably not before 2023.
Canadian rental income
The revenue forecast for Canada is similar to that of the United States with growth of 9.6% in 2022 to reach $4.5 billion, followed by increases of 6.4% in 2023, of 3.8 % in 2024, 2.1% in 2025 and 1.8% in 2026 to reach $5.2 billion.
Click here to learn more about rental-specific economic data provided by ARA Rentalytics.
ARA also recently conducted a survey of contractors to find out what they are looking for in a rental store. Read the full results here.