Equipment rental revenue in the U.S. and Canada, 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 (ARA).
ARA’s updated forecast calls for equipment rental revenue to reach just under $47.7 billion in 2021, up 3.1% after a decline of 9.1% in 2020. However, the association’s forecast calls for a robust 12% 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% for the next three years according to the forecast with combined equipment rental revenues reaching $57.5 billion in 2025.
From relief to recovery
“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 said it is currently 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% in 2021 to nearly $34.5 billion and then jump 12% to $38.5 billion in 2022. In 2023, the segment is forecast to grow another 5% to nearly $40.3 billion, followed by growth of 2% in 2024 to $41.5 billion and 3% in 2025 to $42.5 billion.
For general tool, the forecast is steady, calling for a revenue increase of 5% in 2021 to $13.2 billion and then growing 4% in 2022 and 3% 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.
Stimulus could push growth higher
“While the overall U.S. economy is recovering strongly, the sectors that drive equipment rental are coming along more slowly. In particular, the nonresidential construction and infrastructure sectors are still contracting and may not see growth until the end of the year,” 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. “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.”
Canada also growing
The forecast for Canada calls for double-digit equipment rental revenue growth for both the construction/industrial (11%) and general tool (13%) 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% 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% in the next years of the forecast to reach $4.73 billion in 2025.
Source: By Mike Brezonick
International Rental News