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Equipment Rental Industry Poised to Set Industry Record in 2015

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Date: May 12, 2015 @ 07:15 AM
Filed Under: Rental News

The equipment rental industry stands poised to set an industry record for revenues in 2015 according to the latest updated industry forecast from the American Rental Association (ARA), despite reduced demand for equipment in oil patch drilling sites.

The new quarterly ARA forecast from its ARA Rental Market Monitor™ subscription service has been modified slightly from February and the numbers remain very positive with total revenue growth of 7.9 percent expected in 2015 to reach a record $38.5 billion in the U.S., including all three industry segments — construction/industrial, general tool, and party and event.

ARA’s current five-year forecast calls for steady growth of 7.2 percent in 2016, 8 percent in 2017, 7.9 percent in 2018 and 6.8 percent in 2019 to reach $51.3 billion.

“Those in the rental industry have learned how to thrive in different economies and customers continue to learn that renting equipment is a smart move as market conditions today can change rapidly,” says Christine Wehrman, ARA’s executive vice president and CEO.

“Even as several forces, including harsh weather, held back U.S. economic growth in gross domestic product (GDP) to 0.2 percent in the first quarter, total rental revenue was up 4.9 percent in the same time period and is expected to exceed 9 percent in the second half of the year,” Wehrman says.

Construction/industrial rental revenue is now forecast to increase 8.2 percent in 2015 to $25.9 billion, with general tool projected to grow 7.9 percent to $9.8 billion this year and party event to show a 4.7 percent increase to $2.7 billion.

“The equipment rental industry will achieve its new peak level as a the result of a prolonged gradual improvement in the economy as a whole, and construction, industrial and consumer markets in particular,” says Scott Hazelton, managing director, IHS Economics and Country Risk, the respected global forecasting firm that compiles data for the ARA Rental Market Monitor.

“There also was some lift from energy markets, which are slowing, but the majority of the growth has come from solid fundamentals. Given a current level of activity based on solid ground, an economy that continues to improve will lead to rental revenues that are achievable and lasting,” Hazelton says.

“The significant price reductions in oil are over and they will likely drift upwards over the year. Major cuts in new well drilling already have occurred and production will begin to taper off soon. We made the adjustments to the rental outlook for energy prices in February and we have not made any further adjustments as events are playing out approximately as anticipated,” Hazelton says.

“While low oil prices have reduced growth prospects in the oil and gas area, that situation affects primarily production at this point. We still are seeing strong growth in downstream facilities, such as refineries and petrochemical processing plants. However, low oil prices have increased demand for other goods. For example, the U.S. is expected to demand 200,000 more light motor vehicles than previously expected, which creates rental opportunity within auto plants,” Hazelton says.

“Lower energy costs also translate into improved consumer spending power and corporate profits, so the party and event sector also gets a boost,” he says.

The construction/industrial rental penetration also was up 100 basis points in 2014, from 52.9 percent in 2013 to 53.9 percent for 2014, according to the ARA Rental Penetration Index™. ARA released the 2014 ARA Rental Penetration Index in February at The Rental Show 2015 in New Orleans.

“Rental penetration continued to increase in conjunction with strong growth in rental revenues in 2014,” says John McClelland, ARA vice president for government affairs and chief economist.



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