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APRIL 2013 issue of
Rental Management

Cover story: Rental on the rise
Cover story: Rental on the rise

2012 rental revenue reaches $35.7 billion in North America

Revenue growth for the equipment rental industry in North America is expected to grow another 6.3 percent in 2013 to $38 billion after growing 8.6 percent in 2012 to reach $35.7 billion according to the latest American Rental Association (ARA) forecast from the ARA Rental Market Monitor™ updated in late February.

The U.S. construction and industrial equipment rental revenues are expected to drive the segment’s growth in North America in 2013, rising 8.2 percent.

In the U.S., rental revenue is forecasted to grow another 6.9 percent in 2013 to reach $33.5 billion after growing 9.2 percent in 2012.

The forecasted growth rate for the equipment rental industry in the U.S. — including construction/industrial, general tool/homeowner and party/special event segments — once again this year is projected to be more than four times the forecasted 2013 growth of 1.7 percent in gross domestic product (GDP) in the United States.

Equipment rental industry revenue in the U.S., led by strong double-digit growth in the construction and industrial and general tool segments, is forecasted to grow 10.2 percent in 2014 and 14.9 percent in 2015. Total annual industry revenues in the U.S. are now expected to reach $46.4 billion in 2017.

When combined with Canadian equipment rental revenue over the forecast period, total annual industry revenue in North America is forecasted to reach $51.5 billion in 2017.

“There has been a secular shift to equipment rental. The industry continues to build customer demand, which drives the growth of the equipment rental industry. There is unlimited potential for the equipment rental industry,” says Christine Wehrman, ARA’s executive vice president and CEO.

“The industry enters 2013 in a stronger position than many may have anticipated at the end of 2012, with IHS Global Insight reporting 2012 ending with just under 10 percent growth in the U.S. This industry will continue to grow in 2013. Listening to members from around the country and looking at the forecast of IHS Global Insight, rental opportunities exist for each of the three segments. Individual company situations may differ, but I urge rental companies to take a good look to analyze the growth potential in their market area and then plan to achieve it. Rely on the research and networking available from ARA to help you make your business decisions,” Wehrman says.

“Rental has grown during the anemic economic recovery through increased penetration. As industrial and construction markets continue to improve, rental will see further growth from a larger share of the equipment market, leading to double-digit revenue gains by 2014,” says Scott Hazelton, a senior partner with IHS Global Insight, which compiles data for the ARA Rental Market Monitor service.

According to the ARA Rental Market Monitor, the outlook for rental revenue in North America is positive through 2017.

“Growth is projected to accelerate in all segments through 2015, before tapering off in 2016 and 2017. The general tool segment will
have the highest compound annual growth rate (CAGR) at 9.2 percent,” the ARA Rental Market Monitor states.

“Construction and industrial equipment revenue is forecast to see a CAGR of 7.9 percent between 2013 and 2017, driven by a strong U.S. construction market. The United States is expected to outperform Canada in both the construction and industrial equipment and general tool segments, but both countries can expect a 2.8 percent CAGR in the party and event rental segment. Real consumer spending on recreational services is projected to increase 3.1 percent in the United States and 2.6 percent in Canada for 2013-17,” the ARA Rental Market Monitor states.

The optimism of the industry also was evident at The Rental Show 2013 held in Las Vegas Feb. 10-13, with an extremely active show floor, sold-out seminar and more reflecting an equipment rental industry continuing on an upward trend.

“The Rental Show attendance, participation and sales volume indicate growth ahead for our industry in 2013. Owners are replacing fleet and inventory, knowing that rentals are on the increase in their market,” Wehrman says.

ARA also continues to forecast significant increases in equipment investment by equipment rental companies. More than $10 billion was invested in rental equipment in 2012 and will increase 13.2 percent in 2013 to reach $11.4 billion in 2013. In 2014, the forecast is for $13.6 billion, up 19.4 percent, and in 2015, $17.4 billion, up 28.3 percent.

“Our forecasts show growth in construction spending will be double-digit in 2014 and 2015, so there will be strong demand with a broad-based recovery,” Hazelton says.

According to the ARA Rental Market Monitor, investment in construction and industrial rental equipment is projected to see a compound annual growth rate (CAGR) of 8.8 percent over the 2013-2017 forecast period, with investment expected to accelerate through 2014 and into 2015, when growth is expected to peak at a 32.5 percent year-over-year increase.


Accessing rental-specific data for $100 a year

Those who subscribe to the ARA Rental Market Monitor™ service already know the equipment rental industry is growing faster than the general economy and will continue to do so in 2013 and beyond.

ARA Rental Market Monitor is a subscription-based service for American Rental Association (ARA) members provided by ARA and Rental Management as part of a partnership with IHS Global Insight, one of the world’s most respected economic forecasting firms based in Lexington, Mass.

ARA Rental Market Monitor is designed to help rental store owners and managers with budgeting and forecasting rental revenues, strategically staging or buying equipment, and in securing financing by providing online access to critical rental-specific market information that is updated quarterly.

For ARA associate member manufacturers and suppliers, ARA Rental Market Monitor can be used to help understand where sales opportunities exist, identify trends to forecast sales into the rental market by segment and forecast throughput for manufacturing.

The base annual subscription package to the ARA Rental Market Monitor starts at $100 with data an analysis for North America, including the United States and Canada. Subscriptions can be upgraded to receive regional, state and local information.

For more information or to subscribe to the ARA Rental Market Monitor, contact Tracy Johannsen at 800-334-2177, ext. 270, or tracy.johannsen@ararental.org.


Providing accurate industry information

Why ARA partners with IHS Global Insight

The American Rental Association (ARA) was well aware of a void in credible industry research, identifying the need as part of the association’s strategic planning following the industry’s consolidation of the late 1990s and early 2000s.

“The ARA board of directors wanted this knowledge to define the size of the industry, continue to build professionalism and help guide well-informed business decisions,” says Christine Wehrman, ARA’s executive vice president and CEO. “No comprehensive research existed, so ARA literally had to build an equipment rental industry research program from the ground up.”

ARA then spent time researching companies and analysts to find a partner with the expertise and capacity to undertake such a task.

“While the research need centered first on the United States and Canada, ARA preferred a company that conducted work internationally due to the globalization of the industry. Our standards were set high, needing a firm with a proven research track record that was well-respected among peers and all aspects of the business community, with unquestioned integrity as a company and conduct of its personnel,” Wehrman says.

The extensive search directed ARA in 2005 to Global Insight, which was formed as a result of the 2001 merger of DRI, formerly Data Resources, and Wharton Economic Forecasting Associates (WEFA), creating one of the world’s premiere economic analysis and forecasting organizations with more than 40 years of experience.

Global Insight then became IHS Global Insight, a part of IHS, in 2008 and is considered the leading provider of economic and financial analysis, market intelligence across a wide range of sectors and country risk analysis. The company now has more than 325 economists and analysts worldwide covering 170 industries.

“Our partnership with IHS Global Insight led to the creation of the only rental-specific research available for the three segments of the equipment rental industry, built from reputable econometric models specific to each segment of the industry. These economic forecasts are part of each message the ARA shares with members, the industry and the public,” Wehrman says.

The result is the ARA Rental Market Monitor™, a subscription service available to ARA members that provides economic analyses, revenue and investment forecasts and more updated each quarter by IHS Global Insight. The service allows users to upgrade subscriptions for access to regional, state and metropolitan statistical area (MSA) forecasts.

“The core of our system includes data from several hundred public and private sources; forecasts of national, regional, industrial and international economic and business activity; and expertise and support from hundreds of economists and business analysts,” says Scott Hazelton, a senior partner with IHS Global Insight who works closely with ARA.

“Whether it is via our flagship ‘Model of the U.S. Economy,’ comprising over 1,200 behavioral equations or a single-equation product line forecasting model, IHS Global Insight’s economists are able to harness their econometric knowledge to answer key questions. IHS has a vibrant practice that focuses on developing market sizing estimates and building customized sales forecasting tools that link industry- or company-level sales by product line to our evolving view of the future,” Hazelton says.

“Our modeling skills have been tested and proven not only through hundreds of satisfied clients, but also through professional testimony before courts and various government agencies, including the U.S. Congress. We are dedicated to bringing our clients the very best information and analysis. We seek to extend this advantage to the ARA’s benefit,” he says.

IHS Global Insight also has been consistently ranked as one of the most accurate economic forecasting firms by The Wall Street Journal, Reuters and USA Today.

“The ARA partnership with IHS Global Insight has provided the foundation for further use of research by ARA, such as the recent development of the ARA Rental Market Penetration Index™,” Wehrman says. “The association is committed to development of research that continues to propel the growth of the industry.”




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