ARA Forecast Shows Equipment Rental Segment Moving from Relief to Recovery

ARA ForecastEquipment rental revenue, comprised of the construction/industrial and general tool segments, is expected to explode past its peak totals in 2022 according to the latest ARA forecast released by the American Rental Association (ARA).

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. This will take the combined total for the two segments up to nearly $52.3 billion.

It is the expectation that the growth rate will be consistent at between 2 and 5 percent for the next three years. According to the forecast, this with combined equipment rental revenues will reach $57.5 billion in 2025.

“The equipment rental segment is moving like the rest of the macroeconomy 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.

Segmented forecasts

This is the first quarter that ARA has segmented the updated forecast to include just the construction/industrial and general tool segments. ARA currently is developing new ways to gather data and methodology to forecast results for the event rental segment with more information to be available later this year.

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 forcast shows that the segment will grow another 5 percent to nearly $40.3 billion. It will be followed by growth of 2 percent in 2024 to $41.5 billion and 3 percent in 2025 to $42.5 billion.

General tool forecast

For general tool, the forecast is steady. The forecast is calling for a revenue increase of 5 percent in 2021 to $13.2 billion. It will then grow 4 percent in 2022, and 3 percent during the next three years to surpass $15 billion in segment revenue in 2025.

The expectation is that revenue for both segments will 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. They 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. Hazelton is the director of economics and country risk at IHS Markit in Andover, Mass. IHS Markit is the economic forecasting firm that partners with ARA to provide data and analysis for the ARA Rentalytics subscription service for ARA members.

“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. However, it will improve further next year. This comes as major economies in Europe and Latin American emerge from the pandemic. It also comes as 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.

Canadian forecast

The forecast for Canada calls for double-digit equipment rental revenue growth. This is for both the construction/industrial (11 percent) and general tool (13 percent) segments in 2021. They will reach a combined total of $3.98 billion.

Canada’s equipment rental revenue for the two segments also is expected to grow between 5 and 8 percent in 202. It will reach $4.29 billion, surpassing the previous peak revenue of $4.04 billion in 2018. The forecast shows that growth will slow down to 2 to 3 percent in the coming year. It will reach $4.73 billion in 2025.

About ARA

The American Rental Association, Moline, Ill., is an international trade association for owners of equipment and event rental businesses. It is also for the manufacturers and suppliers of construction/industrial, general tool and party/event rental equipment. ARA members include more than 11,000 rental businesses and more than 1,000 manufacturers and suppliers. They are also located in every U.S. state, every Canadian province and more than 50 countries worldwide. Founded in 1955, ARA is the source for information, advocacy, education, networking and marketplace opportunities for both the equipment and event rental industry throughout the world.

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