Posted November 15, 2023

Rental outlook: Growth continues but will soften

In its updated forecast, the American Rental Association (ARA) indicates that United States equipment rental industry’s growth will soften but still grow.

Last quarter, the year-over-year growth was expected to be 7.6 percent in 2023 and 3.1 percent in 2024. The most current projections indicate 11.8 percent growth in 2023 totaling $71.5 billion in construction and general tool rental revenue. As for 2024, a 7.1 percent revenue increase is now expected.

This forecast includes both traditional and specialty as the new industry measure. Last quarter the association corrected the forecast that underestimated non-residential construction spending by at least 20 percent and ‘specialty rental’ in overall rental revenues. 

“We are more bullish this quarter than last quarter,” says Scott Hazelton, managing director at S&P Global. “We are seeing a decent uptick with inflation moderating and our projections are relatively similar — stagnant but strong. It’s important to note that there will be more growth in construction and industrial equipment (CIE) than in general tool.”

Earlier in the year, the forecast predicted a recession that did not materialize. While the first two quarters of the year proved slow, third quarter revenues are very strong, and the quarter four projections appear that way as well.

“The biggest change is in the general tool revenue projection,” Hazelton says. “This is probably a function of timing with manufacturing strikes and that the housing market has been more resilient than we thought it would be. People are renovating homes because they are staying in them and home values are trending upward so there is incentive to invest in their homes.”

Canadian equipment rental revenue growth is higher in 2023 compared to last quarter’s projections due to inflation and resilient demand.

The CIE outlook in Canada is slower growth with strong levels of activity in 2024, that is a 3.7 percent revenue increase, making it a $4.5 billion industry with stronger growth anticipated in outbound years, a 7.2 percent revenue increase in 2025 and 5.7 percent in 2026.

There are some very real issues with Canada’s housing market and that is the primary cause of the revenue decline in 2023, totaling $971 million. In 2024, the projected general tool revenue will total $963 million, a 0.9 percent decline from 2023.

ARA’s quarterly member survey showed conflicting results among members with half of respondents saying they expect to see a revenue increase in Q4 and half expecting a revenue decrease.

This quarter there was also an increase in members who believe the situation for business is more stagnant. 

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