ARA Forecast Shows Equipment Rental Moving from Relief to Recovery
Equipment rental revenue, comprised of the construction/industrial and general tool segments, is expected to explode past its peak totals in 2022 according to the latest forecast released by the American Rental Association.
The updated forecast calls for equipment rental revenue to reach just less than $47.7 billion in 2021, up 3.1 percent after a decline of 9.1 percent in 2020. However, the forecast calls for a robust 12 percent increase in construction/industrial rental revenue in 2022, taking the combined total for the two segments up to nearly $52.3 billion.
The growth rate is expected to be consistent at between 2 and 5 percent for the next three years according to the forecast with combined equipment rental revenues reaching $57.5 billion in 2025.
“The equipment rental segment is moving like the rest of the macro economy from relief to recovery. We are seeing a good uptick in business activity that is going to bring rental revenues back to pre-pandemic levels in 2022,” said John McClelland, Ph.D., ARA vice president for government affairs and chief economist. The biggest concern going forward is the slump in nonresidential construction. However, a robust infrastructure bill from Congress would provide a significant long-term boost to that sector as well.”
This is the first quarter that ARA has segmented the updated forecast to include just the construction/industrial and general tool segments. ARA currently is developing new ways to gather data and methodology to forecast results for the event rental segment with more information to be available later this year.
The new ARA forecast calls for construction/industrial rental revenue to grow 3 percent in 2021 to nearly $34.5 billion and then jump 12 percent to $38.5 billion in 2022. In 2023, ARA forecasts growth of another 5 percent to nearly $40.3 billion, followed by growth of 2 percent in 2024 to $41.5 billion and 3 percent in 2025 to $42.5 billion.
For general tool, the forecast is steady, calling for a revenue increase of 5 percent in 2021 to $13.2 billion and then growing 4 percent in 2022, and 3 percent during the next three years to surpass $15 billion in segment revenue in 2025.
Revenue for both segments is expected to surpass pre-pandemic peak levels reached in 2019 by the end of 2022.
“While the overall U.S. economy is recovering strongly, the sectors that drive equipment rental are coming along more slowly,” said Scott Hazelton, director, economics and country risk, IHS Markit, Andover, Mass., the economic forecasting firm that partners with ARA to provide data and analysis for the ARA Rentalytics subscription service for ARA members. “In particular, the nonresidential construction and infrastructure sectors are still contracting and may not see growth until the end of the year. However, leading indicators, such as the Architectural Billings Index have begun to show strong improvement.
“Construction activity follows architectural design by 12 to 18 months, which suggests a strong rebound in 2022. The energy sector has also begun to recover but will improve further next year as major economies in Europe and Latin American emerge from the pandemic and air traffic returns to something approaching 2019 levels. Further stimulus via an expanded infrastructure bill could push growth higher. The key takeaway is that we expect equipment rental revenue to recover to 2019 levels in 2022; it is a multi-year event, with the strongest recovery expected in 2022.”
The forecast for Canada calls for double-digit equipment rental revenue growth for both the construction/industrial (11 percent) and general tool (13 percent) segments in 2021 to reach a combined total of $3.98 billion.
Canada’s equipment rental revenue for the two segments also is expected to grow between 5 and 8 percent in 2022 to reach $4.29 billion, surpassing the previous peak revenue of $4.04 billion in 2018. Growth is expected to slow down to 2 to 3 percent in the next years of the forecast to reach $4.73 billion in 2025.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.