The equipment rental industry has seen steady growth in recent years as companies in the construction, infrastructure, energy, and other industries increasingly choose rental over purchase for their heavy equipment, access, crane, lighting, generation, and storage needs. In addition to capturing growing market share, fundamental trends in most industries that rental equipment providers serve have been healthy. Owning equipment comes with upfront CAPEX, maintenance costs, tax implications, insurance costs, transportation, and a lack of flexibility compared to rental. Ownership and increasingly long-term leases due to changes in GAAP, also require liabilities to be accounted for on balance sheets.
A number of factors are impacting the continued growth in the equipment rental market beyond global economic conditions. As equipment becomes more complex, the cost of new equipment continues to grow higher, maintenance is costlier, and manufacturers’ backlogs result in longer lead times. Equipment users prefer to rent to access the newest, most efficient, and safest equipment with the latest technology integrated to allow operators to work more efficiently.
However, despite the positive track record in recent years the equipment rental industry does face several challenges. Even more so than many other industries, the industry relies on the strong performance of the overall economy, and a recession’s impact, especially on construction, will lead to reduced performance. Some end users, particularly in the energy industry, are already facing activity reductions, and companies with specialized equipment will always be more at risk due to an inability to redeploy equipment and lower recovery values. While rental companies have benefited due to rising equipment costs and equipment lead times, rental rate increases have not kept up, squeezing margins. The industry is also faced with a shortage of qualified labor and increasing pay rates for both skilled and unskilled workers.
New technologies including online bookings, mapping features, and equipment service tracking have seen increased adoption rates as both equipment rental companies and equipment manufacturers focus on new technology to grow revenues and profits. New technologies provide a variety of benefits to rental companies, automation can lead to fewer picking errors, while intelligent online stores reduce customer inquiries and thus labor costs, and sensor data allows companies to easily locate equipment, reduce, predict and track service needs.