While the debate rages about whether or not the United States is in a recession , the American Rental Association (ARA) is predicting equipment rental growth in 2023. Following a steep two-year increase in revenues following the pandemic, the equipment rental industry expects increases through 2026—though less than 10%. These numbers come from an American Rental Association (ARA) forecast released in early November 2022.
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Smaller Equipment Rental Growth Expected in 2023
Equipment rental revenue covers construction and industrial equipment and tools. They estimate the 2023 increase to fall around 3.4 percent, or more than $57 billion. Compare that to the steep 11% growth seen in 2022 ($55.8B).
After this, the ARA predicts somewhat smaller annual growth in equipment rental revenue. How small? Between 2.9 and 3.4 percent through 2026 until it reaches over $63 billion.
“In the current forecast we see a definite softening in rental revenue growth, but we do not see negative growth…The segment is forecast to show a 4 percent increase in 2023, 2 percent in 2024, and 3 percent in 2025 and 2026. On the general tool side, revenue growth was a more moderate 4.5 percent in 2021 and 6.2 percent in 2022 and is forecast to be 1 percent in 2023 and then 5 percent in 2024 and 2025 and 4 percent in 2026.”
John McClelland, Ph.D., ARA vice president for government affairs and chief economist
How This Affects Construction Investments
S&P Global Market Intelligence added some additional information regarding investments in construction and industrial equipment. They believe these investments will decline significantly in 2023. This matters after seeing astounding growth numbers of 55.1% and 40% in 2021 and 2022 respectively. They are forecasting the investment growth for 2024 and 2025 to fall around 4.8% and 6.4%.
“There is variability in the forecast, depending on the end markets rental companies serve. However, nonresidential construction spending will be strong, and money continues to be spent from government stimulus programs, which both are positives for the rental industry. In addition, the supply chain is improving, which can help alleviate the backlog of equipment orders, allowing equipment rental companies to expand inventory to meet demand, which adds to the positive outlook for the industry in 2023 and beyond.”
Tom Doyle, ARA vice president, association program development
Final Thoughts
Looking at these numbers, it does seem that while the equipment rental industry outlook remains largely positive, an economic slowdown due to a recession should yield a notable reduction in demand. While no one can truly predict the future, keep this in mind as you plan your projects moving into the next several years.
The The American Rental Association (ARA) is the largest international trade association for owners of equipment and event rental operations and manufacturers and suppliers of rental equipment. As an association, they seek to advance the equipment and event rental community. With equipment rentals continuing to evolve, ARA employees and members work to build a strong future for the industry.
