ARA forecasts softening rental
21 November 2022
The equipment rental industry is expected to see single digit increases over the next four years according to the latest American Rental Association (ARA) forecast released in early November.
The softening followed two years of rapid post-pandemic revenue growth in 2021 and 2022, the association said.
Its latest forecast is for equipment rental revenue — including construction, industrial and general tool — to increase by 3.4% in 2023 to nearly $57.7 billion after growth of 11% in 2022 to reach almost $55.8 billion.
In subsequent years, equipment rental revenue is expected to grow 2.9% in 2024, 3.3% in 2025 and another 3.4% in 2026 to reach nearly $63.4 billion.
“In the current forecast we see a definite softening in rental revenue growth, but we do not see negative growth,” said John McClelland, ARA Vice President for Government Affairs and Chief Economist.
According to S&P Global Market Intelligence, the forecasting firm that compiles data for the ARA forecast and the ARA Rentalytics subscription service, the construction and industrial segment showed double-digit revenue increases in 2021 and 2022 at 10.2 and 12.7% respectively. The segment is forecast to show a 4% increase in 2023, 2% in 2024, and 3% in 2025 and 2026.
In general tools, revenue growth was a more moderate 4.5% in 2021 and 6.2% in 2022 and is forecast to be 1% in 2023 and then 5% in 2024 and 2025 and 4% in 2026.
Tom Doyle, ARA Vice President, Association Program Development, said non-residential construction spending will be strong, with money continuing to be spent from government stimulus programs, “both are positives for the rental industry.”
“In addition, the supply chain is improving, which can help alleviate the backlog of equipment orders, allowing equipment rental companies to expand inventory to meet demand, which adds to the positive outlook for the industry in 2023 and beyond.”
Scott Hazelton, Director, S&P Global Market Intelligence, concurred that the outlook for the equipment rental industry was positive but said a slowdown was likely “with a recession and an anticipated reduction in demand.”
In addition, according to S&P Global Market Intelligence, investment in construction and industrial equipment now is expected to decline slightly in 2023 after growth of 55.1% in 2021 and 40% in 2022. Investment growth is forecast to be 4.8% in 2024 and 6.4% in 2025.
In Canada, equipment rental revenue also showed a post-pandemic boost of 15.8% in 2021 and 11.1% in 2022 to reach $4.6 billion. The same as in the U.S., revenue growth is expected to settle into a single-digit pattern over the next four years.
The ARA forecast calls for equipment rental revenue in Canada to increase by 1.6% in 2023, 4% in 2024, 5.3% in 2025 and 3.5% in 2026 to reach nearly $5.3 billion.
STAY CONNECTED
Receive the information you need when you need it through our world-leading magazines, newsletters and daily briefings.