collage of workers in industrial equipment industry

This is a summary of IBISWorld’s Industry Report-53249 “Industrial Equipment Rental and Leasing in the US.

2019-2024 US Industrial Equipment Rental forecast is 2.1% annualized growth over the next five years to 2024. Demand from the nonresidential construction, industrial and healthcare markets will support the continued growth. This industry rents a wide variety of products ranging from generators, pressure washers, saws, pipe cutters; audiovisual equipment, furniture and importantly medical devices and machinery. Consequently, its performance relies on the overall health of the economy.

Key Economic Drivers

1. Value of nonresidential construction. An increase in nonresidential construction is expected to compensate for the significant decrease in residential building going forward. Private construction of commercial, manufacturing and educational facilities not only increases demand for building equipment but the demand for carpentry, floor waxing and sanding equipment.

2. Industrial production. The continued growth of industrial and manufacturing industries will result in the need for operational equipment.

3. Demand from hospitals. Rapid technological advancements in diagnostic and patient-monitoring equipment cause hospitals and care centers to rent rather than purchase. The continual need for updated equipment and the costs associated with purchase, both result in a steady demand for rentals in the healthcare sector.

4. Yield on 10-year Treasury Note. Low interest rates increase financing for construction and renovation projects. This in turn spurs the demand for equipment rentals to undertake and complete these projects. Although low interest rates may cause some contractors to purchase rather than rent equipment, the benefits of renting updated equipment for a fixed period of time often outweigh the option to buy. Importantly, interest rates are expected to rise in 2019 and may constrain the expected expansion in construction projects and demand in rental equipment.

Industry Outlook

The Industrial Equipment Rental and Leasing industry is expected to grow over the next five years to 2024. Nonresidential construction and technological advances in medical and entertainment production equipment, will serve as the two major sources for the industry’s growth.

Consolidation Activity

On the other hand, an increase in consolidation and expansion activity by national operators, such as United Rentals, Inc., and Sunbelt Rentals is expected to hamper the growth of mid-size operators and limit it to small enterprises with local advantage. IBISworld forecasts that the number of equipment rental operators will increase from 5,168 to 5,833 by 2024.

Products and Services

Four major markets and corresponding product segments make up the Industrial Equipment Rental and Leasing industry.

Graphic of product segments in US equipment rental industry
Graphic of four major market in US equipment rental industry

Heavy industry/Manufacturing General Industrial Equipment which includes agricultural and farm equipment, trucks, modular and mobile buildings. In light of the variety of equipment offerings in this category, it is expected to comprise 28.4% of the total industry’s revenues.

Construction Market Light Construction Equipment which includes compressors, generators, scaffolding, carpentry and floor sanding and waxing equipment. This sector of the industry is dependent upon construction activity. With the forecast increase in nonresidential construction, this sector is expected to comprise 25.6% of the total industry’s revenues.

Entertainment/Audiovisual Audiovisual Equipment Rental. This sector includes video projections, tv systems, PA systems and other equipment needed for theatrical productions. This sector is dependent on consumer discretionary spending. Accordingly, a decrease in per capita income results in a less demand for rentals in this segment. IBISworld predicts that this sector will comprise 11.7% of the total industry’s revenues.

Healthcare Market Medical Equipment. These include diagnostic devices, patient monitoring equipment and other machinery. Due to this market’s demand for updated equipment, the expensive costs to purchase this type of equipment, and regulatory benefits for rentals of durable medical equipment under Medicare, this sector is seen as less volatile than the other three sectors of the industry, and a stable source of continued demand. It is expected that this sector will comprise 10.4% of the industry’s total revenues.

Competitive Landscape

Internal Bases of Competition-The fragmented nature of the Industrial Equipment Rental and Leasing industry causes price to be the most important factor in competition. Anticipated consolidation activity will place increased pressure on smaller operators to compete. In addition, availability of equipment and support services will distinguish operators who profit and those that will struggle.

External Bases of Competition– Higher interest rates and consequent less credit opportunities will boost the demand for rental equipment versus purchase decisions. In addition, changes in the new Financial Accounting Standards Board (FASB) rules may cause a decrease in the overall industry’s expected revenues. Operating leases, which account for major portion of all leases, were not counted on a company’s balance sheet. However, beginning on December 15, 2018, all public companies are required to add all operating leases of 12 months or more to their balance sheets. In other words, a company that rents real estate, equipment and/or transportation per an operating lease must report it on its balance sheet as an asset and liability. Prior to this time, companies were not required to share this information. For nonpublic companies the rule concerning leases becomes effective in 2020. This disclosure requirement may affect how lessors and lessees structure leases to meet mutual benefits. Therefore, the new requirement may inhibit equipment rental activity to the extent that companies can efficiently place systems in place to track the details of all operating leases and process all the necessary data.

1. This is a summary of IBISWorld’s Industry Report-53249 “Industrial Equipment Rental and Leasing in the US

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