U.S. rental market sees softening growth in Q3

U.S. equipment rental saw softening growth in the third quarter of this year, a trend officials say is a return to “normal” for the industry which has seen a frenzy of expansion over the past few years.

In its updated forecast, the American Rental Association (ARA) indicates the U.S. equipment rental industry’s growth will slow but still grow.

Last quarter, the year-over-year growth was expected to be 7.6% in 2023 and 3.1% in 2024. The most current projections indicate 11.8% growth in 2023 totaling $71.5 billion in construction and general tool rental revenue. As for 2024, a 7.1% revenue increase is now expected.

“Rental is going back to ‘normal,’ but normal means that strategy matters again - geography matters, fleet mix matters, customer type matters,” says Josh Nickell, vice president of equipment rental, American Rental Association (ARA). “In late 2020 to 2022... the conversation was, ‘How much are you up?’ And now, the conversation is changing to ‘What’s my market like?’

“Rental companies are still seeing growth, but at a more moderate level,” he said. 

This forecast includes both traditional and specialty as the new industry measure. Last quarter, the association corrected the forecast that underestimated nonresidential construction spending by at least 20% and ‘specialty rental’ in overall rental revenues.

“We are more bullish this quarter than last quarter,” says Scott Hazelton, managing director at S&P Global. “We are seeing a decent uptick with inflation moderating and our projections are relatively similar — stagnant but strong. It’s important to note that there will be more growth in construction and industrial equipment (CIE) than in general tool.”

Earlier in the year, the forecast predicted a recession that did not materialize. While the first two quarters of the year proved slow, third quarter revenues are very strong, and the quarter four projections appear that way as well.

“The biggest change is in the general tool revenue projection,” Hazelton says. “This is probably a function of timing with manufacturing strikes and that the housing market has been more resilient than we thought it would be. People are renovating homes because they are staying in them and home values are trending upwards, so there is incentive to invest in their homes.”

Canadian equipment rental revenue growth is higher in 2023 compared to last quarter’s projections due to inflation and resilient demand.

The CIE outlook in Canada is slower growth with strong levels of activity in 2024, that is a 3.7% revenue increase, making it a $4.5-billion industry with stronger growth anticipated in outbound years, a 7.2% revenue increase in 2025 and 5.7% in 2026.

There are some very real issues with Canada’s housing market and that is the primary cause of the revenue decline in 2023, totaling $971 million. In 2024, the projected general tool revenue will total $963 million, a 0.9% decline from 2023.

ARA’s quarterly member survey showed conflicting results among members, with half of respondents saying they expect to see a revenue increase in quarter four and half expecting a revenue decrease.

This quarter there was also an increase in members who believe the situation for business is more stagnant.