Propelled by the economic uncertainty of the past several years, the U.S. equipment rental industry is expected to surpass $32 billion in 2013, according to rental industry consultant and president of Mandelein, Ill.-based Manfredi & Associates, Frank Manfredi.
According to Manfredi, whose 2013 Rental Industry Forecast is available on the RER website at http://rermag.com/business-info-analysis/rental-industry-forecast-surpass-32-billion-2013, the tumultuous state of the U.S. economy and other global economies in the past several years has contributed to positive revenue and utilization growth for the equipment rental industry. More contractors and homeowners are turning to equipment rental to supplement their equipment needs instead of investing their dollars into new equipment and fleet purchases — a veritable boon for the rental industry.
Returning to solid growth in 2011, as reported in Manfredi’s 2012 rental industry forecast published in the February 2012 issue of RER magazine, the equipment rental business maintained its hold on that sweet spot well into 2012.
Manfredi & Associates expects that the market will benefit from a number of tailwinds in 2013 allowing it to continue growing at double-digit rates into 2014 and perhaps beyond. Overall, it is forecasting that 2013 rental of construction equipment in the U.S. will increase 16 percent to more than $32 billion.
“The economic uncertainty that has prevailed for several years has actually been a big benefit for the rental industry,” Manfredi said. “Equipment users facing an uncertain future have turned to renting as a way to conserve cash. Renting is also an alternative for users who may be unable to obtain equipment purchase financing. The case for rentals is still strongest for equipment users that are utilizing their machines 50 percent of the time or less. Anyone who has a need for a production machine that is a primary tool in their fleet would be better off purchasing it.”
EPA emission regulations that began Jan. 1, 2012 have also benefitted equipment rentals, according to the latest forecast from Manfredi. The regulations require many new machines built after Jan. 1, 2012 to be equipped with Tier 4 interim, which are considerably more expensive than machines with Tier 3 engines. The higher machine purchase price and possibly uncertain operating performance also have caused uncertainty over the future residual values of new machines, which is another factor that has driven users to favor rentals.
“Our forecast for the economy as a whole is for slow growth,” Manfredi said. “The 2013 market will benefit from an improving housing market, continued high levels of demand from the energy sector and improving non-residential construction investment by manufacturers. Overall we expect 2013 growth of equipment sales to be approximately 5.4 percent compared with 2012. We expect the sales slowdown that began in the second half of 2012 to extend into the first half of 2013, with most 2013 growth occurring in the second half.”
The U.S. rental market for construction equipment reached approximately $28 billion in 2012. Based on underlying market trends, Manfredi & Associates believes the total market will grow to more than $32 billion in 2013 — a forecast based on its estimate that there will be approximately 14,000 rental locations in 2013 and the average revenues per location will be slightly more than $2.3 million.
Frank Manfredi is president of Mandelein, Ill.-based Manfredi & Associates, a marketing information firm that specializes in the construction, mining, farm and material-handling equipment industries. For more information, visit www.machineryoutlook.com.