In today’s economy, the benefits of renting equipment are magnified and the rental option is one that is being explored and used by a wider variety of industries, including contractors, construction companies, homeowners, event planners and more.

A shift to renting equipment in North America already has begun as many see the advantages of the fixed cost of renting, especially with the rental company taking care of maintenance, storage, delivery and more.

As a result, the equipment rental industry has been significantly outperforming the general economy and the industries it serves for at least the last five years and is projected to do the same in 2015 and beyond.

The American Rental Association (ARA) latest quarterly forecast from its ARA Rental Market Monitor™ subscription service paints a very positive future for equipment rental 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 for the U.S. 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.

Construction/industrial rental revenue in the U.S. 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 continues to innovate and find ways to expand its footprint. The benefits people have realized by renting equipment are being applied to more products and services in an unprecedented way. The industry is experiencing more than just a trend. It’s a shift in the way business is done,” says Christine Wehrman, ARA’s executive vice president and CEO.

“The benefits of renting equipment have become abundantly clear, such that it’s now understood to be a great way to manage and operate a business. Renting simplifies people’s lives, so they can focus on getting their work done in a smart, efficient and more economical manner,” Wehrman says.

“The customer base for rental continues to expand due to the availability of rental and because rental provides a practical solution to customer needs. ARA and rental companies will continue to get the message out that equipment rental is a very sound business strategy,” Wehrman says.

Also there has been significant growth in rental penetration for construction equipment and industrial rental customers as well as those with specialized needs in pumps, power generation, climate control and more.

Scott Hazelton, managing director, IHS Economics, the respected economic forecasting firm that compiles data and analysis for the ARA Rental Market Monitor, has been following the fortunes of the equipment rental industry with ARA for the last decade.

He also sees continued opportunities for growth in penetration, revenue and more in the short- and long-term.

“The only way to grow faster than underlying industry conditions is to gain share from competing options. In the case of the rental industry, this means converting contractors, industrial facilities and other potential customers from owning their own fleet to renting equipment. Indeed, this is how the rental equipment industry has managed to grow over the past five or six years while the underlying marketplace has been soft,” Hazelton says.

“As new customers learn that a rented fleet saves them maintenance and repair costs, arrives at the job site on time, has great service, eliminates storage hassles and generally makes their life easier, then as the economy improves and they need to make a decision on adding equipment, they will decide to rent more rather than revert to buying their own fleet,” he says.

The proof is evident in the latest growth forecast for the industry. “The equipment rental industry will achieve its new peak level in 2015 as the result of a prolonged, gradual improvement in the economy as a whole, and construction, industrial and consumer markets in particular. There also was some lift from energy markets, which have slowed, 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 recession also proved to be a great catalyst to move equipment rental from a construction focus to other markets and the search for cost control drove industrial manufacturers to consider renting equipment for the shop floor. Industry consolidation has become less about building national or regional scale and more about absorbing outlets with specific specialties to complete offerings to important accounts or to gain new accounts,” he says.

Hazelton also believes there are several reasons the current economic cycle will continue to show penetration and revenue gains for equipment rental.

“First, the past recession was induced by financial markets, particularly in the residential construction sector, and it remains the case that credit is tight for real estate developers. Hence the need to rent equipment still is strong. Second, we have observed that tight credit conditions can extend into the energy patch, given the uncertainty over oil prices,” he says.

“A third factor is Tier 4 engine technology. This technology can add 30 percent or more to the cost of equipment, which suggests that the payback needs to be that much more certain before purchasing. While Tier 4 technology has been on the market for some time, we are just now entering the era where the regulatory framework will require higher proportions of Tier 4 engines in construction fleets. In addition to the higher purchase price, Tier 4 engines are more expensive to maintain and require specialized tools that differ from OEM to OEM. A contractor with multiple types of equipment will need mechanics with extensive training and the tools for each equipment type. There is a strong incentive to rent equipment and allow the rental company to make the investments in maintenance and repair expertise,” Hazelton says.