Rental outlook positive
American Rental Association (ARA) forecast shows equipment rental segment is moving from relief to recovery.
Equipment rental revenue, comprised of the construction/industrial and general tool segments, is expected to explode past its peak 2019 totals in 2022 according to the latest forecast released by the American Rental Association (ARA)in its most recent edition of Rental Pulse.
The updated forecast calls for equipment rental revenue to reach just under $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,” says 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,” McClelland says.
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, the segment is forecast to grow 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. 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,” says Scott Hazelton, director, economics and country risk at IHS Markit.
“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,” Hazelton says.
“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,” he says.
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