For the construction equipment rental industry, things are looking up. According to a report organized by Piper Jaffray and Rental Equipment Register, the perception among industry executives is that there will be modest-to-moderate expansionary activity in the construction equipment rental industry ahead.
To gauge the outlook of the industry, industry executives were polled on their “expectations on rental revenues, rates, volumes, utilization, capital expenditures, and the general outlook for the rental industry” using the Rental Sentiment Index. The index is “standardized on a scale of 1 to 10, with 1 signaling significant downturn and 10 signaling significant expansion in the current calendar year.”
February’s index score was 6.1. Although this number is slightly lower than the results in December and January – and down from a 6.5 peak in November – the score signals steady rental expansion, according to Jaffray. One research analyst added that any result in the 6 to 7 range is “the perfect balance” and indicates the industry is “feeling the cyclical tail winds” that likely lead to healthy growth.
In addition to these growth projections, the Rental Equipment Register reports that Tier 4 emissions standards are also prompting more contractors to rent equipment instead of buying it and that the rental rate environment appears to be stabilizing. According to those surveyed, rates are expected to increase 3 to 4 percent this year. So what is the driving force behind the increase in demand? According to the report, “increases in privately funded projects” and “infrastructure work” as well as “overall improvement in nonresidential construction” are driving demand.
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