Heavy Equipment Rental Trends

Heavy Equipment Rental Trends

Industry Insight

Date August 2019

Projected Values - Construction Equipment


Current Trends

  • Forced Liquidation Values of construction equipment increased 8.6% in July 2019 over the prior year
  • Volume of equipment sold on the resale market has increased 12% (to date) over 2018
  • Values on the whole remain steady, resulting in slight percentage variations and a more stable market

By the numbers


Global projects continue to drive growth: Heavy equipment serves functions including earthmoving, finishing and material handling, and material transport. Global heavy construction equipment industry growth is directly connected to worldwide infrastructural development and related activities as well as to worldwide mining operations of natural resources. In addition, large global construction projects have helped bolster growth for construction equipment sales as well as rental market growth. The addition of new technologies that include digital services for automated service enhancements, mapping features, and equipment service tracking has been an ongoing trend within the market, and adoption rates have been increasing over time as more and more manufacturers add new technologies to existing equipment. The high cost of, and lead times for, heavy construction equipment is one of the major factors supporting retrofitted equipment, as well as the upgrade of retrofitted equipment to include new technologies.

Research firm GlobalData recently released a report that shows regions of the United States that are reaping the rewards of the current U.S. construction boom. GlobalData tracks over 11,000 U.S. public and private projects in development and under construction, and they calculate that 10 states account for approximately 60 percent of the $3.7 trillion of total projects. California holds the largest share, with over 1,300 projects valued at $524.6 billion. California is undertaking more mega-projects than any other state, with the top 10 projects worth $139.5 billion. Texas has the most energy and utility projects at nearly $153 billion. California and Texas are followed by New York, which has $409 billion worth of construction projects in the works.

The U.S. construction industry remains strong even though it continues to deal with a shortage of skilled labor and rising material costs. It is estimated that the approximately $1.4 trillion spent on U.S. construction every year makes the industry one of the world’s largest. Domestically, the construction industry contributes more than 4 percent to annual GDP and provides jobs for more than 5 percent of the country’s workforce. According to the study, it appears that this confidence level is leading some major contractors to predict an increase in work over the upcoming 12 months. As a result, construction machinery manufacturing industry revenue is forecasted to grow at an annualized rate of 2.1 percent to $37.6 billion through 2023.

Growth continues for rental equipment: In its latest five-year forecast, the American Rental Association expects the U.S. equipment rental industry to continue to grow consistently over the next few years, resulting in total revenue of $60 billion by 2021. Total revenue for 2019 is forecasted to surpass $61.3 billion, with increases of 5.0 percent for both the Unites States and Canada as compared to 2018. Similar steady growth is expected in each of the successive years of the forecast to reach $69.8 billion by 2022 in North America while being expected to outpace the overall economy.

Demand for general equipment rentals continues to outpace new purchases due to the backlog in new equipment orders bolstered by the fact that rental rate pricing has remained steady. Recently, Ralph Petta, Chief Executive Officer of the Equipment Leasing and Finance Association (ELFA), stated that the continued low interest rate environment, coupled with solid fundamentals in the U.S. economy, provide incentive for U.S. businesses to expand and grow their operations. ELFA’s leasing and finance index measures the volume of commercial equipment financed in the United States. Any reading above 50 indicates a positive outlook. The index is based on a survey of 25 members that include Bank of America Corp, BB&T Corp, CIT Group Inc. and the financing affiliates or units of Caterpillar Inc., Deere & Co, Volvo AB, and others. For the month of June 2019, ELFA’s leasing and financing index was a favorable 52.8.

Purchasing construction equipment often requires significant down payments, diverting large portions of capital from operating expenses. Additional expenses include insurance, taxes, licensing, interest on loans, and storage costs. Equipment owners are also responsible for transportation between job sites, whereas rental companies can get equipment to new work sites quickly and efficiently, using computerized maintenance programs and GPS systems to keep tabs on location, status, and service needs. Rental houses also upgrade their inventories on a regular basis, offering access to the newest and most advanced equipment. This makes it easier for customers to comply with changing EPA emissions standards, including Tier 4, which is the strictest requirement for off-highway diesel engines. In addition, if something goes wrong, rental companies have the tools and expertise to correct issues, with mechanics able to be dispatched promptly to fix malfunctioning equipment on site or to provide replacements. Renting equipment can also enable younger companies to better compete for larger contracts.

Leading manufacturer to exit some crane businesses: As recently reported by Globe Newswire, Terex Corp., one of the largest global heavy equipment manufacturers, announced the completion of the sale of its Demag mobile crane division to Tadano Ltd. on August 1, 2019, for an enterprise value of approximately $215 million, subject to customary post-closing adjustments and government regulatory approvals. The Demag Mobile Cranes business manufactures and sells all-terrain cranes and large crawler cranes worldwide. Terex also announced plans to exit the North American mobile crane product lines manufactured in its Oklahoma City facility. The Oklahoma City operation will continue to produce telehandlers and re-manufactured units for Terex’s aerial work platforms segment, sell parts, and offer service and support to customers. Terex will continue to manufacture Terex Utilities products at its Watertown, South Dakota facilities, rough-terrain cranes for the global market in Crespellano, Italy, tower cranes in Fontanafredda, Italy, and pick-and-carry cranes in Brisbane, Australia.

Earlier in 2019, the company completed the sale of its boom truck, truck crane, and crossover product divisions to Load King, a subsidiary of Custom Truck One Source L.P. The associated assets and parts business were also included in the sale. After the boom truck, truck crane, and Demag mobile cranes business transactions, Terex will remain in the rough terrain and tower crane businesses.

Values and volumes mixed: EquipmentWatch, a resource that tracks critical heavy equipment benchmarks, reported that the general price index for construction industries increased in July 2019 year-over-year. Additionally, volumes increased year-over-year for resale metrics (+12 percent) but fell for auction volumes (-0.9 percent). Fair market value trends for the most widely utilized groups of equipment were mixed as follows:

  • General Construction Equipment: +5.6%
  • Lift/Access: -3.0%
  • Agriculture: +3.0%
  • Commercial Truck: -11.8%

Fair market values and forced liquidation values were up 5.6 percent and 8.6 percent, respectively, in July 2019 compared to July 2018, while auction volume was down 0.9 percent.

Global growth expected: Increasing investments in infrastructure among mature markets coupled with the rising demand for smart city projects are expected to fuel the demand for construction equipment. Smart city projects are those that incorporate information and communication technologies to enhance the quality and performance of urban services such as energy, transportation, and utilities in order to reduce resource consumption and waste, and overall costs. The global construction equipment market is projected to grow at a compound annual growth rate of 6.9 percent by 2025.