ARA forecasts accelerating rental growth

The American Rental Association (ARA) used the first day of the Rental Show in Orlando to release figures that show continued rises of rental penetration in the US and projections of higher rental growth rates in 2014 and 2015.

The ARA and its consultant IHS Global Insight said rental growth this year is forecast to be 8.2% and rising to 11% in 2015, following an estimated 7.3% increase last year. Fuelling the growth are increases in construction and industrial activity in the US, with a recovery in house building activity now underway leading to increased non-residential construction.

The association’s rental penetration index, launched last year, is estimated to have increased from 50.7% in 2012 to 52.9% last year. The ARA measures penetration by looking at the value of rental equipment active during the year compared to the total value of the equipment fleet.

“We think the secular shift towards rental is real”, Christine Wehrman, ARA’s chief executive, told delegates to the show at the opening keynote session.

ARA is also forecasting increased investment by North American rental companies. Total investment in 2013 was US$11.1 billion, but ARA is expecting that to increase to more than $12 billion this year.

John McClelland, ARA’s vice president of government affairs, said; “We would expect investment growth to slow as the market stabilises after the rapid re-fleeting that occurred following the financial crisis. These investment numbers tell us the industry has caught up on the fleet side and is now investing for the future instead of trying to catch up with current demand.”

Scott Hazelton, senior partner of consultant IHS, said the rental revenue growth predictions “suggest that the economic recovery in the construction and industrial equipment market continues at a strong pace.

“The stronger growth in this segment [construction and industrial] is also evidence of the secular shift we have seen in recent years that results in more rental and fewer equipment purchases by contractors and industrial contractors.”