Second Quarter 2025 Revenue Drops 1.5 Percent Say Respondents to Baird/RER Equipment Rental Quarterly Survey

Respondents of the second quarter 2025 Baird/RER Equipment Rental Industry Quarterly Survey said revenue declined 1.5 percent year over year on a revenue-weighted basis (+1.8 percent equal-weighted). The drop was the only non-pandemic decline in survey history and below the prior three quarters, which featured 1 to 2 percent increases. In the first quarter of 2025, respondents expected an approximate 3.5-percent revenue growth in the second quarter.

On a revenue-weighted basis, 41 percent of respondents reported that their companies missed internal budgets for the second quarter. Sixteen percent said they posted better-than-expected results, and 43 percent said results were in line with their expectations. Expectations were net negative (-25 percent) for the seventh consecutive quarter.

The Baird analysts interpret these results as indication that high interest rates coupled with policy uncertainty have eroded construction backlogs particularly smaller projects, which are now starting to impact overall activity.

“Tariffs continue to drive a strong headwind,” said one respondent.

“Things have slowed quite a bit since January,” said another. “Tariffs, price increases, and other things have taken a toll on the economy.”

“A hold on demand until there is greater certainty,” said a third. “Need stability.” 

“New boss, same as the old boss, as the song goes,” said another, quoting the famous song “Won’t Get Fooled Again,” by The Who. “Non-residential outside of certain manufacturing verticals has headwinds. Need to see lower interest rates and tariff talks come to a conclusion; a lot of pent-up demand.”

Another respondent said the chip manufacturing market, data centers and hospitals are bridging the demand gap, while another added that projects are getting delayed because of bids coming in over engineers’ expectations.

Utilization was lower year over year, said respondents. Fleet utilization was 57.2 percent, compared to 61.6 percent in the second quarter a year ago, and 57.6 percent in the first quarter, thus being down from the first quarter where there would normally be a seasonal pickup. The supply of equipment has increased while demand growth is moderating.

The utilization rate for access equipment was flat at 63 percent compared to 63.1 percent in the second quarter of 2024. Utilization for earthmoving equipment increased moderately to 62.8 percent compared to 62 percent in 2Q24.

“Larger projects seem to be moving forward as planned, while smaller projects seem to be fewer than in the past,” said one respondent. 

“Housing and associated development are down,” said another. 

“The weather has been a significant factor with above-average rainfall,” said one, and another comment echoed that, saying, “We have had an abnormal amount of rain and flooding in our area. Despite this, our rental business has been good, and I expect increased business this summer.”

Another respondent noted that nonresidential construction projects remained on hold, with healthcare, education and institutional projects holding steady. However, the person noted, “office, warehousing, and light manufacturing [are] down dramatically.”

“It’s definitely been an ‘off’ year for us,” commented another respondent. “Demand hasn’t spiked as we hoped it would. Labor shortages and interest rates are still affecting our markets. Hoped for a better year but doesn’t seem like it’s going to happen.”

Rental rates softer in Q2

Average rental rates dropped 1 percent year over year, according to respondents, who also said they expect rental rates to decline 1 percent for the full year. In the first quarter 2025 forecast, rental rates were expected to rise by 1.2 percent, and in the 4Q24 forecast, rates were predicted to jump 1.8 percent.

“Oversaturated markets with competitors driving rental rates down by over 10 percent,” commented one respondent on his market.

“Top clients are squeezing rates and demanding newer equipment,” said another.

“Large profile jobs getting lots of attention by nationals and it is driving rates down in the market,” added another, with one respondent blaming the rate decline on, “Rate pressure by rental companies with poor salesmen and no value added.”

The average fleet size in terms of units grew 1 to 2 percent for the fourth straight quarter. The continued slowdown is consistent with softer forward capex plans. Equipment pricing was up 1.9 percent in the second quarter, after a 1.4 percent uptick in Q1 and being negative in 4Q24 for the first time in survey history as OEMs attempt to raise prices in a soft market to offset tariff headwinds.

“Rental companies are renting out older units that have constant problems, but still charging a premium rate for them,” said a respondent.

“The marketplace remains significantly oversupplied,” added another. “The estimated fleet utilization of competitors seems to be 60 percent or below. Large quantities of telehandlers, booms, scissors and compact equipment are sitting.”

“The majors appear to have slowed fleet purchases,” added another. 

Equipment capex slows

Fleet spending is remaining soft among rental companies. Survey respondents expect flat fleet spending growth over the next six months. Looking out to 2025 as a whole, 46 percent of respondents expect higher fleet spending in 2025, up slightly from 45 percent last quarter, while 23 percent expect lower spending, down from 26 percent last quarter.

“Competition seems to be getting nervous, and we are beginning to see rates lowered to try to improve utilization,” said a respondent. “This action can threaten fleet growth as higher equipment costs can’t be justified while compromising to accommodate lower rates.”

“Large demand for heavy material handling equipment,” said another. “A lot of smaller stuff is sitting on the lot for months at a time. Unable to predict consumer trends this year. Demand is all over the map.”

“Hesitant customers when it comes to spending money, utilization is down, along with a heavy supply of equipment,” added another, while another participant noted, “We are seeing increased demand for battery-powered equipment.”

The survey also asked rental participants if their customers have experienced immigration-related labor changes. Forty-four percent are not reporting project delays caused by current immigration policies, while 16 percent report some impact on the market. Meanwhile, 20 percent say projects are experiencing some delays in projects caused by immigration and another 20 percent said customers are facing severe disruptions.

“We are seeing more and more project delays to start the year,” said a respondent. 

“With uncertainty in the market over Trump’s flip-flops on tariffs and taxes, businesses are havlng a hard time planning,” said another, with a third adding, “Trump has been bad for the business outlook and optimism.”

“Demand is slowing down due to economic uncertainty,” said another respondent, with another adding, “The market is very soft, especially for smaller contractors like landscapers. Small commercial construction is much softer than expected, as customers are in a wait-and-see mode.”

Overall, rental revenue is expected to be flat in 2025, while last quarter respondents expected 5 percent growth. This estimate is consistent with first half growth.