North American rental rates on the rise

By Helen Wright10 March 2016

Data from EquipmentWatch has revealed quarter-on-quarter rate increases in North America in the final three months of 2015, and forecast further improvements for 2016.

EquipmentWatch tracked 113 rental companies across North America, including 116 types of rental equipment, and collected a total of 41471 examples of rental rates for the fourth quarter of 2015.

It said the strongest retail rate increases were seen in the crawler excavator category, which saw 13.3% quarter-on-quarter rental rate growth to an average of US$7287 (€6647).

This was followed by electric self-propelled scissor lifts, where rates were up 10% in the final three months of 2015 compared to the third quarter to an average of US$1047 (€955). Single drum vibratory compactors also saw growth of 6% to US$4234 (€3862).

Dozers, wheeled loaders, compact tracked loaders, telehandlers, compact excavators and forklift trucks also saw rental rate increases, while the only category tracked by EquipmentWatch that saw a quarter-on-quarter decline was skid steer loaders, where rates dropped 0.68% to US$2332 (€2127).

EquipmentWatch said that, based on the trends it had observed over the past three quarters, it credited increases in average rental rates to improvements in the housing market, which caused an increase in demand for heavy construction equipment.

“Throughout 2015 much of the heavy equipment rental industry demonstrated increases in rental revenue and rental volume, but increased competition—especially from growing peer-to-peer networks—led many rental houses towards volatility for the first time in years,” the company said.

“These two supply-side elements are generally indicative of an increase in consumer demand. However, there are also many other factors that one should take into account when looking at the average national rental rates, such as competition, climate, labour rates, and the local market of each metropolitan area.”

Outlook for 2016

EquipmentWatch said it expected monthly rental rates to continue rising slowly throughout the first quarter of 2016.

“Most rental houses update their rates in the first quarter of the year, so we should see a significant bump in rates in our next update. In terms of equipment that is insulated from the housing market, such as forklifts, we should see the majority of those rental rates remain steady. As long as the housing market continues to rise and the economy stays strong, we should continue to see rental rates increase.”

It pointed out that historically low energy prices were creating a double-sided effect for heavy equipment rental houses in energy-intensive regions.

“On one-hand, oil exploration and investigation efforts were projected to decline over 2014 and 2015. This trend obviously hurts equipment rentals for rental houses whose customers rely on them to help avoid the capital expenditures necessary for equipment purchase.

“On the flip-side, however, many experts have also stated that lower oil prices can have a muted effect on equipment rental volume, since energy extraction does not immediately cease when prices decline,” EquipmentWatch said.

The company pointed out that this uncertainty over the impact of changing energy prices would likely restrain major rate changes over the next quarter, especially as the economy approaches the two-year mark since the price of crude oil peaked in June 2014.

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