ARA Expects U.S. Equipment Rental Revenue to Top $57 Billion in 2020 | Construction News

The American Rental Association (ARA) expects reach equipment-rental revenue to reach $57.3 billion in the United States in 2020.

 

The ARA's prediction is part of its latest five-year forecast for the equipment rental industry, and is based on a projection that revenue will see compound annual growth of 4.9%.

The numbers in the ARA forecast, updated at the end of July, are modified slightly compared to the organization's quarterly forecast from late April, reflecting changes in the marketplace.

ARA now projects industry revenue to increase by 4.9% in 2016 to a record $47.6 billion and to grow another 4.6% in 2017 to reach $49.8 billion.

The new forecast projects that rental revenue will grow between 4.6% and 5% every year from 2016 through 2020.

“This forecast shows the strength of the industry and the ability of those in equipment rental to quickly react to market changes to maintain growth and reinforce the value of renting to their customers,” said Christine Wehrman, ARA’s CEO and executive vice president.

“The ARA Rental Market Monitor service is updated each quarter to provide subscribers with up-to-date information to help manage their businesses, but the updates also have shown over at least the last year how stable the equipment rental industry is today and how it continues to grow by adapting to change,” she said.

“While the forecast has been adjusted to reflect changing market conditions, equipment rental is growing at more than double the rate of GDP growth and that is a good sign for the industry,” says John McClelland, ARA’s vice president for government affairs and chief economist.

Scott Hazelton, managing director, IHS Economics, the economic forecasting firm that compiles data and analysis for the ARA Rental Market Monitor as part of a partnership with ARA and Rental Management, says economic growth in the first half in the United States has not been as strong as previously expected because of uncertain growth overseas and the increasing value of the dollar.

Hazelton said that the situation has been exacerbated by uncertainty surrounding future policy direction from a muddled presidential campaign season, but that construction remains strong, particularly in the residential sector, including both new and home improvements.

"While nonresidential growth is slowing, we remain on track for another year of solid gains and consumer spending also remains strong. The slight adjustment in the forecast growth reflects the weaker view for U.S. energy and manufacturing, while the still strong growth reflects the fact that the economic and construction fundamentals remain positive,” Hazelton said. 

The biggest change to the new forecast concerns Canada.

Instead of projecting a decrease in total rental revenues in 2016, as it did in April, the ARA Rental Market Monitor now forecasts a 0.8% increase to $4.976 billion and total rental revenue in Canada is expected to grow at a compound annual growth rate of 4.2% from 2016 to 2020.

While construction spending in Canada has been weak in 2016, resulting in the near flat equipment rental revenues, real residential and nonresidential construction are expected to rebound in 2017 and beyond, leading to a more positive forecast with equipment rental revenue in Canada expected to reach $5.859 billion in 2020.