The equipment rental industry stands poised to set an industry
record for revenues in 2015 according to the latest updated
industry forecast from the American Rental Association (ARA),
despite reduced demand for equipment in oil patch drilling
sites.
Rental companies historically are able to adapt to changing
market conditions, shifting inventory and moving equipment to where
demand is greater and today is no exception as lower oil prices are
leading to greater consumer spending and fueling increased activity
in construction as well as party and event market segments,
offsetting the decline in opening new sites for drilling.
The new quarterly ARA forecast from its ARA Rental Market
Monitor™ subscription service has been modified slightly from
February and the numbers remain very positive with total revenue
growth of 7.9 percent expected in 2015 to reach a record $38.5
billion in the U.S., including all three industry segments —
construction/industrial, general tool, and party and event.
ARA’s current five-year forecast calls for steady growth of 7.2
percent in 2016, 8 percent in 2017, 7.9 percent in 2018 and 6.8
percent in 2019 to reach $51.3 billion.
“Those in the rental industry have learned how to thrive in
different economies and customers continue to learn that renting
equipment is a smart move as market conditions today can change
rapidly,” says Christine Wehrman, ARA’s executive vice president
and CEO.
“Even as several forces, including harsh weather, held back U.S.
economic growth in gross domestic product (GDP) to 0.2 percent in
the first quarter, total rental revenue was up 4.9 percent in the
same time period and is expected to exceed 9 percent in the second
half of the year,” Wehrman says.
Construction/industrial rental revenue is now forecast to
increase 8.2 percent in 2015 to $25.9 billion, with general tool
projected to grow 7.9 percent to $9.8 billion this year and party
event to show a 4.7 percent increase to $2.7 billion.
“The equipment rental industry will achieve its new peak level
as a the result of a prolonged gradual improvement in the economy
as a whole, and construction, industrial and consumer markets in
particular,” says Scott Hazelton, managing director, IHS Economics
and Country Risk, the respected global forecasting firm that
compiles data for the ARA Rental Market Monitor.
“There also was some lift from energy markets, which are
slowing, but the majority of the growth has come from solid
fundamentals. Given a current level of activity based on solid
ground, an economy that continues to improve will lead to rental
revenues that are achievable and lasting,” Hazelton says.
“The significant price reductions in oil are over and they will
likely drift upwards over the year. Major cuts in new well drilling
already have occurred and production will begin to taper off
soon. We made the adjustments to the rental outlook for energy
prices in February and we have not made any further adjustments as
events are playing out approximately as anticipated,” Hazelton
says.
“While low oil prices have reduced growth prospects in the oil
and gas area, that situation affects primarily production at this
point. We still are seeing strong growth in downstream facilities,
such as refineries and petrochemical processing plants. However,
low oil prices have increased demand for other goods. For example,
the U.S. is expected to demand 200,000 more light motor vehicles
than previously expected, which creates rental opportunity within
auto plants,” Hazelton says.
“Lower energy costs also translate into improved consumer
spending power and corporate profits, so the party and event sector
also gets a boost,” he says.
The construction/industrial rental penetration also was up 100
basis points in 2014, from 52.9 percent in 2013 to 53.9 percent for
2014, according to the ARA Rental Penetration Index™.
ARA released the 2014 ARA Rental Penetration
Index in February at The Rental
Show 2015 in New Orleans.
“Rental penetration continued to increase in conjunction with
strong growth in rental revenues in 2014,” says John McClelland,
ARA vice president for government affairs and chief economist.
ARA’s Rental Penetration Index measures the
proportion of the total fleet of construction machines that are
owned by equipment rental companies. The index is value-based and
uses original equipment cost as the primary weighting factor to
calculate the ratio of rental equipment value to total fleet
value.
Sales into the rental channel by equipment manufacturers also
continue to grow, meaning the penetration rate could climb higher
this year. In addition, ARA is forecasting an increase of 8.3
percent in investment in equipment by rental companies this
year.
About ARA: (www.ARArental.org) The American
Rental Association, Moline, Ill., is an international trade
association for owners of equipment rental businesses and the
manufacturers and suppliers of construction/industrial, general
tool and party/event rental equipment. ARA members, which include
more than 9,400 rental businesses and nearly 1,000 manufacturers
and suppliers, are located in every U.S. state, every Canadian
province and more than 30 countries worldwide. Founded in 1955, ARA
is the source for information, advocacy, risk management, business
development tools, education and training, networking and
marketplace opportunities for the equipment rental industry
throughout the world.
About IHS (www.ihs.com) IHS (NYSE: IHS) is
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areas that shape today’s business landscape. Businesses and
governments in more than 150 countries around the globe rely on the
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since 1959 and became a publicly traded company on the New York
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IHS is committed to sustainable, profitable growth and employs
about 8,800 people in 32 countries around the world.
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Copyright © 2015 IHS Inc. All rights reserved.
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ARA Contact:Tom Hubbell, 800-334-2177, Ext. 248;
309-277-4248tom.hubbell@ararental.org
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