Pandemic Impact on Heavy Equipment Rental
Renting heavy equipment for building projects is an appealing alternative to purchasing, which has fueled the growth of the heavy equipment rental sector. However, the global pandemic compelled building firms, engineering and contractors to cut down on spending. This ultimately resulted in a decrease in income for the heavy equipment rental sector.
In 2020, United Rentals increased rates by 1% Y/Y. However, the pandemic’s economic impact weakened rate developments beginning in April and lasted until October, when they hit -2.7 percent Y/Y. While tough, the rate decrease was comparable to the 2016 oil collapse and much worse than United Rentals’ 12% Y/Y decline in 2009.
At the start of the pandemic, digital bookings fell 14% below February levels. Even when historical seasonality is taken into account, these reductions were significant and did not recover until June. Fortunately, volume trends improved in the second half of 2020, with Q3 bookings up 2% and Q4 figures up 6%. October was also a busy month.
Following the outbreak, operators cut capital expenditures (particularly in the spring of 2020). Given the current market climate, many fleets have been scaled down to help manage cash flow and equipment usage.
This year, heavy construction equipment rentals will benefit from global infrastructure development and other activities. The ongoing economic recovery from the COVID-19 pandemic continues to support growth in construction equipment sales and rental revenue.
Price decreases have halted since the October low. While year-over-year comparisons are easier, January data showed a sequential increase in earthmoving equipment rental rates (+0.4% M/M), the first sequential gain since H1’20.
Through mid-January 2021, activity was up 2% Y/Y, slower than Q4 but better than December’s flat growth. According to United Rentals, volumes may be subdued in Q1 owing to tough year-over-year comparisons, before picking up later in the year.
United Rentals also observed an increase of $70M in used equipment listings in April, which grew to $950M in July. The rate at which rental firms grow their fleets will be another key factor to watch in 2021. United Rentals expects equipment expenditures to increase 108-135 percent in FY21.
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