By the end of the year, rental revenue in North America is expected to set a new financial milestone by surpassing $60 billion for the first time, according to the latest forecast by the American Rental Association (ARA).
The combined equipment and event rental industry in Canada and the United States is expected to finish the year with total revenue up 5.35 per cent to $61.56 billion.
As well, the ARA’s five-year forecast calls for continued growth for American rental revenue through at least 2023, reaching $64.1 billion that year, and Canada is expected to generate $6.35 billion.
Canadian rental revenue forecast
In Canada, equipment and event rental revenue is expected to increase 2.4 per cent in 2019 to reach $5.54 billion, with growth of 3.4 per cent in 2020, 4.6 per cent in 2021, 3.2 per cent in 2022 and 2.7 per cent in 2023 to reach $6.36 billion.
Although the outlook calls for slightly slower growth rates than the previous quarterly forecast in August, the industry continues to outpace the general economy in the United States where gross domestic product (GDP) growth slowed from a 3.1 per cent annual growth rate in the first quarter to 2 per cent in the second quarter.
The third quarter GDP growth estimate is 1.9 per cent.
According to IHS Markit, the forecasting firm that compiles data for ARA and its ARA Rentalytics subscription service, new tariffs on U.S.-China trade flows and diminishing fiscal stimulus could contribute to a slowdown in annual real GDP.
“Despite signs of a slowing economy, the equipment and event rental industry continues to perform well. The most important thing for rental companies to do is continue to execute their business plans and aggressively manage their operations,” said John McClelland, Ph.D., ARA vice president for government affairs and chief economist.
“With chances of a recession in the next 12 months relatively low at 35 per cent, rental businesses should be able to continue to grow revenues and maintain strong balance sheets.”
Scott Hazelton, managing director of IHS Markit, explained the next 12 to 18 months will feature significant uncertainty around trade and fiscal policy, compounded by elections in the United States.
“Rental firms are well positioned for uncertain times. The reluctance of construction and industrial companies to invest in new equipment under these circumstances, combined with a still expanding economy, suggests that the opportunities for equipment rental will continue to grow, albeit at a slower pace than the past few years,” Hazelton said.
According to the ARA, construction equipment rental in the US is forecast to grow 5.2 per cent in 2019, with growth rates of 2.3 per cent in 2020, 3.0 per cent in 2021, 3.7 per cent in 2022 and 3.1 per cent in 2023 to reach $43.9 billion.
Investment in equipment by rental companies in the United States is expected to remain relatively flat each year with small declines in spending in 2020 and 2021, followed by slight increases in 2022 and 2023 to reach $14.55 billion.