Consistent growth predicted for Canadian equipment rental

Canada heavy equipment rental
Canadian equipment rental revenue is predicted to grow to US$6.125 billion by 2021.

Equipment rental revenue in Canada is expected to see consistent growth, according to the American Rental Association (ARA).

In its latest five-year forecast, delivered during The Rental Show in New Orleans on Feb. 19, the ARA outlined Canadian equipment rental revenue growing to US$6.125 billion by 2021.

This year, revenue is expected to reach US$5.35 billion, followed by a growth rate of 4.1 per cent in 2019, five per cent in 2020 and 4.7 per cent in 2021. The increase is attributed to economic growth and rising oil prices.

“They had a great 2017 in Canada,” Scott Hazelton, managing director of IHS Markit, the company that conducts data analysis for the ARA. “British Columbia and Ontario are leading growth as they have for some time, and Alberta, as it recovers, joins the party.”

yeti-giveaway

Stateside, rental revenue is expected to grow to US$59.6 billion in 2021.
“We do see increasing rates in Canada, but not quite as fast as in the United States,” Hazelton said.

This year, American rental revenue will grow by 4.5 per cent, reaching $51.5 billion. Revenue growth will reach 5.6 per cent in 2019, five per cent in 2020 and 4.4 per cent in 2021.

The Tax Cuts and Jobs Act is responsible for some of the positive growth predicted for revenue, which comes into effect this year.

“Tax cuts generally provide fiscal stimulus to the economy, which can lead to more investment by businesses and higher employment,” said John McClelland, ARA’s vice president for government affairs and chief economist. “This can push wages higher, pushing up consumer spending on goods and services as well as leisure activities.”

The ARA also released its rental penetration index, which shows rental equipment reaching 53 per cent of construction equipment in the United States last year.

This represents an increase of 20 basis points following after declines in 2015 and 2016.

“One of the things we saw then was penetration falling. Now, we’re having a bit of an uptick happening,” McClelland said. “We know that rental, being part of the original sharing economy, is something that’s continuing to grow in popularity.”

McClelland explained falling oil prices in previous years affected equipment rental penetration.

“A lot of the equipment was moved out of the oil patch,” he said. “The equipment that was moved out, that was suitable for construction, was moved into some of the construction markets that were starting to heat up.”

RELATED: Cervus Equipment sells its construction dealership group

This year, rental companies are expected to increase their investment into equipment by 3.1 per cent. Investment growth will climb 8.8 per cent in 2019, 3.2 per cent in 2020 and 0.4 per cent in 2021, reaching $15 billion that year.

“In 2019, we also expect a bump up in energy prices and an expectation of increased demand for equipment in the energy patch,” Hazelton said. “That results in the expectation of a larger bump in investment in 2019, which also reflects the older fleet that will then be in use combined with expected future demand.”