Rental Market Revenues Rise

19 February 2018

The five-year forecast for equipment rental industry revenues in the United States shows consistent growth through 2021, projecting a total revenue of $59.6 billion in 2021.

According to the American Rental Association (ARA) Rental Market Monitor five-year forecast updated in February, total rental revenue in the U.S. is expected to grow by 4.5% in 2018 to reach $51.5 billion, 5.6% in 2019, 5% in 2020 and 4.4% in 2021. The February forecast is identical to the previous forecast released in November 2017 for 2018, with slight upticks in the expected revenue growth rates for 2019 through 2021.

In Canada, equipment rental revenue also is expected to show consistent growth, reaching $5.35 billion in 2018 with growth rates of 4.1% in 2019, 5% in 2020 and 4.7% in 2021 to total $6.125 billion, which is nearly identical to the November 2017 forecast.

The ARA said some of the positive expectations in the U.S. are a result of the Tax Cuts and Jobs Act taking effect in 2018.

“Our rental revenue forecast has increased somewhat in the out-years of the forecast. One significant reason for this increase is the long-term effects of the recently-passed tax cuts for both businesses and individuals,” said John McClelland, ARA’s vice president for government affairs and chief economist.

“Tax cuts generally provide fiscal stimulus to the economy, which can lead to more investment by businesses and higher employment. This can push wages higher, pushing up consumer spending on goods and services as well as leisure activities.

“All of these trends will help every segment of rental. The greatest concern we have is that of rising inflation that could result from an extremely tight labor market and rising prices for goods and services that are now part of the reflation of the global economy.”

According to the ARA Rental Market Monitor, which features data and analysis from IHS Markit, a leading business information provider, construction/industrial equipment rental revenue in the U.S. is expected to show a 4.3% increase in 2018, 4.5% in 2019, 4% in 2020 and 3.4% in 2021 to reach $40.5 billion.

General tool rental revenue is expected to post increases of 4.7% in 2018, 5.9% in 2019, 7.8% in 2020 and 6.7% in 2021 to total $15.1 billion, while party and event rental revenues are forecasted to show a 6.5% increase in 2018, 6.1% in 2019, 6% in 2020 and 5.6% in 2021 to reach $4 billion.

Investment in rental equipment by equipment rental companies is projected to increase by 3.1% in 2018, 8.8% in 2019, 3.2% in 2020 and 0.4% in 2021, surpassing $15 billion that year.

The share of revenue used for investment remains fairly steady at 25.9% in 2018, 26.6% in 2019, 26.2% in 2020 and 25.2% in 2021.

“A business and investment friendly climate suggests that the recovery can continue for some time yet and even accelerate modestly,” said Scott Hazelton, managing director, HIS Markit. “In 2019, we also expect a bump up in energy prices and an expectation of increased demand for equipment in the energy patch. That results in the expectation of a larger bump in investment in 2019, which also reflects the older fleet that will then be in use combined with expected future demand.

“Once you get an 8% growth increase, you are at a new plateau,” Hazelton said. “Absent another stimulus, you’re not going to get another big bump in investment, so we expect that the investment increase will settle down again in 2020 and 2021.”

ARA also released its latest ARA Rental Penetration Index, which shows penetration of construction equipment into the U.S. rental market at 53% in 2017, up 20 basis points versus last year after modest declines in 2015 and 2016. The index calculates the percentage of construction equipment in use in the U.S. that is owned by rental companies.

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