The American Rental Association expects rental revenue to grow 3 percent in 2021 compared to 2020 and top $47.6 billion. The outlook for rental for the construction/industrial and general tool segments updated in its third quarter forecast.
Although the forecast is slightly less than the second quarter forecast, ARA now expects 2022 revenue to grow by 9.9 percent to $52.4 billion. The forecast also calls for equipment revenue increases of 5.5 percent in 2023, 2.5 percent in 2024 and 3.3 percent in 2025 to reach $58.6 billion.
Construction equipment rental revenue is forecast to jump 12.3 in 2022 to reach $38.7 billion. The forecast does not include the possible positive impact should Congress pass the Infrastructure Investment and Jobs Act of 2021.
Scott Hazelton, director, economics and country risk, IHS Markit, Andover, Mass., says that as long as the timing of the infrastructure spending remains unclear, it makes it difficult to assess the rental forecast implications over time, but that the company, which provides data and analysis for the ARA Rentalytics forecasting service, expects infrastructure spending to have a positive impact on future rental revenue forecast updates.
“While there is uncertainty in Washington, D.C., about when the bipartisan infrastructure bill will pass, many Washington insiders believe it is only a matter of time,” said
John McClelland, ARA VP for government affairs and chief economist, in a prepared statement. “However, most of the benefits of increased infrastructure spending will not occur in 2022 because it takes time for projects to be approved and funding obligated.”
IHS Markit is also monitoring the market to see to what degree inflation, which has not been an issue for well over a decade, is reflected in rental rate increases.
For now, Hazelton says the outlook this quarter remains positive because the forecast for nonresidential construction has been steady and the American Institute of Architects billings index has moved into positive territory.
“When that index indicates expansion for three consecutive months, there is a high likelihood that nonresidential construction will pick up 12 to 18 months later. While this only moves the nonresidential forecast from roughly flat to modest growth, it is enough to move rental equipment demand up,” Hazelton says.
Equipment rental companies significantly cut investment in equipment in 2020 during the coronavirus pandemic, as those in the construction and general tool segments spent 44.4 percent less in 2020, dropping investment in equipment to $7.64 billion, according to ARA.
The forecast shows that investment in 2021 should grow by 36.2 percent to $10.4 billion, followed by another 36 percent increase in 2022 to total $14.2 billion and to increase 10.9 percent in 2023, 2.3 percent in 2024 and 3.8 percent in 2025 to total more than $16.6 billion.