Commercial Equipment Rental and Leasing

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 8,500 companies in the US rent or lease commercial or industrial equipment and machinery directly to businesses. Major categories for rental or leasing revenue include miscellaneous types of commercial or industrial equipment (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating); construction, mining, and forestry equipment; transportation equipment; and office equipment. Firms may also sell new or used equipment, supplies, and parts.

Capital-Intensive Operations

The commercial equipment rental and leasing industry is capital-intensive, and firms typically have significant investment in fleet holdings.

Variable Equipment Market Value

Fluctuations in market value for rental or leased equipment affect a firm’s fleet management effectiveness because companies rely on the sale of used equipment as a source of revenue.

Industry size & Structure

The average commercial equipment rental company operates out of a single location, employs 18-19 workers, and generates $7-8 million in annual revenue.

    • The commercial equipment and machinery rental industry consists of about 8,500 firms that employ 158,000 workers and generate $67 billion annually.
    • The construction, mining, and forestry sector accounts for about 37% of firms and 50% of industry revenue. The miscellaneous (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating) sector accounts for 58% of firms and 46% of revenue. The office machinery and equipment sector accounts for 5% of firms and 4% of revenue.
    • The industry is concentrated; the top 50 companies account for about 55% of industry revenue.
    • Large companies include Aercap Group (commercial aircraft), United Rentals, and GATX. Large firms may have international operations.
                                    Industry Forecast
                                    Commercial Equipment Rental and Leasing Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Nov 22, 2022 - Inflation, Interest Rates Weigh on Equipment Investments
                                    • US equipment and software investment is expected to grow 5.9% for 2022, but demand in some end-use markets may begin to soften due to inflation, higher interest rates, and expectations of more rate hikes, according to a November report by the Equipment Leasing and Finance Association’s (ELFA). Investments in construction machinery are likely to slow, and most other industrial equipment categories will also weaken. Mining and oilfield equipment investments may have peaked but are expected to remain steady. Medical and equipment investments should also be stable. Railroad equipment demand is projected to be strong. Aircraft investments could be poised for a rebound. The ELFA said equipment investment will get modest tailwinds from increased infrastructure spending.
                                    • The Dodge Momentum Index (DMI) increased 9.6% in October 2022 to 199.7 (2000=100), up from the revised September reading of 182.2. The DMI Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component increased by 13%, and institutional rose by 2.9%. An increase in office and lodging projects boosted the commercial planning pipeline. The institutional sector was mixed amid a growing pipeline of recreation and education projects, but the number of healthcare and public planning projects declined. Developers and project owners continue to see healthy demand, despite recession concerns, although continued inflation, high interest rates and materials costs, and labor shortages have the potential to blunt the flow of new projects.
                                    • United Rentals posted strong third-quarter results, suggesting sustained demand for construction machinery in the rental market. Driven by broad-based demand, United Rentals saw its rental revenue jump 20% in Q3 2022 over Q3 2021. The company said that despite mounting economic headwinds, nearly all nonresidential construction indicators are cause for optimism. The company expects demand to get a boost in 2023 from increased infrastructure spending.
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