October 7th, 2016
By: Kevin Wilson
According to the Wells Fargo 2016 Construction Industry Forecast, the equipment rental industry is expected to “remain consistent in 2016 and continue to grow.” When it comes to the success and growth of the equipment rental industry, there are a number of factors that have a significant impact. These factors are key indicators that industry experts analyze to forecast the market and influence everything from utilization to rental rates.
The construction market is one of the primary indicators that influence the activity level of the equipment rental market. The recent increase in infrastructure development attributes significantly to the increase in equipment rental. Weather has a significant impact on both construction and rental industry. It’s a logical connection that as the weather climate is more accommodating for outdoor activity and the days are longer, more projects can be completed. As a result, equipment rental rates increase as you enter into the warmer seasons causing rental durations to actually decrease as jobs can be completed sooner. EquipmentWatch’s 2016-Q2 in Review confirmed the impact of the weather on rental rates as construction activity increased from Q1 to Q2 of 2016. “Based on the recent trends from this past quarter, we can likely conclude that after declining rates from Q1, rates increased as the construction market activity picked up in Q2.” This trend should continue through Q3 and then start to decline in Q4.
Fuel and Labor
Much of the heavy equipment rented for construction projects are not known for their fuel efficiency, and many require specially trained operators; therefore, as fuel and labor rates increase, the volume and duration of rentals decreases. Wells Fargo reported that the lower fuel costs today will benefit the industry as 91 percent of companies reported that they expect profits to increase because of lower fuel bills.
The latest, and in my opinion, the most significant influence on the equipment rental market is technology. Equipment rental is a relationship business with handshakes still critical to the customer-supplier dynamic. Despite this, technology is innovating a number of industry processes and becoming increasingly more important to rental operations and the overall customer experience. By embracing technology, efficiency increases and allows more time and effort to be focused on customer service. EquipmentWatch reported, “In terms of the overall economic impact of the advancing technology and online marketplaces, most academic scholars believe these mediums reduce buyers’ search and selection costs and increase price transparency, thereby increasing market efficiency and reducing product prices.” Technology is making the rental process easier and more accessible, which is helping to drive change.
There are a number of other factors that affect the equipment rental industry, from the need to replace outdated equipment to rental rates driven by competition, and the growth of industries such as transportation, power and energy. The growth in construction, warmer weather patterns, lower fuel rates and new technology innovations are positive indicators for the equipment rental industry in the near future. Yet, as many in the industry will confirm, the situation is fluid, and all of these factors should be monitored during this evolutionary period for construction equipment renting and ownership.
BigRentz partners with our suppliers to provide market data and innovative technology to impact their business. We maintain extensive data on the market demand for equipment type, seasonality and area, as well as a variety of other analytics around customer service and technology demand. This provides our suppliers with guidance on fleet planning to meet local or regional demand. We share this valuable information and tools with our network of over 1,300 suppliers nationwide to ensure that, together, we not only maximize equipment utilization, we also meet the rental needs of customers across the country.