Rental revenues to jump 12.5% in 2022 as inflation, supply chain challenges continue
By Belinda Smart and Jenny LescohierAugust 24, 2022
Despite economic indicators described as “mixed and uncertain,” the American Rental Association (ARA) predicts significant growth for equipment rental revenue in the U.S. this year, but remains cautious about the effects of inflation and supply delays which could translate into higher rental rates for contractors.
“Rental revenues grow when the fleet expands or when rates increase,” John McClelland, Ph.D., ARA vice president for government affairs and chief economist was quoted last spring. “Both things are happening today, however, supply chain issues are inhibiting fleet growth while inflation is pushing rates higher.
“In the past we saw a lot of revenue growth that we attributed to fleet growth. Now we are seeing revenue growth that is being driven by higher rates,” he said.
According to the latest quarterly update of its five-year forecast, equipment rental revenue, including the construction and general tool segments, will grow 11.2% to nearly reach $55.9 billion in 2022.
Growth of 6.2% is predicted in 2023, 2.5% in 2024, 3.3% in 2025 and 3.7% in 2026 to total more than $65.1 billion.
For construction equipment rental revenue, the forecast calls for a 12.5% increase in 2022 to surpass $41.6 billion, with growth slowing to 7% in 2023, 2% in 2024, 3% in 2025 and 3% in 2026.
General tool growth is expected to be 7.4 % in 2022 and then remain steady, with 5% growth in 2023, 3% in 2024, 5% in 2025 and 5% in 2026.
“Rental revenue continues to experience significant growth, despite some headwinds in 2022,” said Tom Doyle, ARA vice president for program development. “The longer-term forecast, while showing slower growth than this year, remains bullish. It is generally a good time to be in the equipment rental industry.
“In these times of higher uncertainty, it is prudent to closely watch the driving factors to the forecast for changes that will affect build schedules for original equipment manufacturers (OEMs) or demand for rental companies.
“Depending on how long we have high inflation, supply chain constraints, labor shortages and climbing interest rates, those econometric drivers can have an impact on the rest of 2022 and the outlook for 2023.”
The ARA forecast for equipment rental revenue in Canada, combining construction and general tool revenue, mirrors the outlook for the U.S., projecting growth of 14.4% in 2022 to $4.7 billion, 6% in 2023, 2% in 2024, 3.4% in 2025 and 3.3% in 2026 to exceed $5.4 billion.