Market research group IBISWorld has released a new report on the heavy construction equipment rental industry, predicting a return to stronger demand from “downstream transportation and construction industries” during the next five years. The report says general trends and activities of “downstream industries such as air, sea and rail transportation; highway, street, tunnel and bridge construction; and oil exploration and drilling all affect the industry’s performance.”
IBISWorld adds that economic conditions, such as interest rates, unemployment and disposable income, also affect demand. Over the last five years, the economic recession and its impact on U.S. construction markets particularly hurt demand for heavy construction equipment. IBISWorld estimates revenue will have decreased at an average annual rate of 2.5 percent to $24.9 billion over the last five years to $24.9 billion over the last five years to 2012, according to IBISWorld industry analyst Andrea Alegria.
Conditions were grim for rental and leasing business from 2008 to 2010, the report says, especially 2009, the peak year of the recession, when IBISWorld estimates revenue dropped 16.6 percent. However, the industry has experienced positive revenue growth starting in 2011, as firms benefitted from a cautious business environment in which developers and business owners opted for renting instead of buying equipment to free up capital for other needs. Alegria estimates revenue will grow an additional 6.1 percent in 2012.
The report predicts that during the next five years there will be a return to stronger demand and improved profitability. Average profit margins are forecast to account for about 12.2 percent of revenue in 2012, down from 13.4 percent in 2007. As demand for rental equipment stabilizes, the report says, profit margins are expected to increase through 2017. Growth in establishment and employment numbers is expected to trail behind revenue as operators consolidate and focus on cost savings.
IBISWorld is based in Los Angeles. For more information, visit www.ibisworld.com.