US Product Rental and Leasing Sector NAICS 532

May 7, 2025 - Construction Growth to Slow in 2025

• North American construction and engineering spending in 2025 is expected to grow by 3% after increasing an estimated 7% in 2024, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. Nonresidential building construction spending is forecast to be flat in 2025 as growth in amusement and recreation (+7%), transportation (+3%), public safety (+3%), and educational (+3%) is offset by weakness in commercial (-7%), lodging (-5%), and manufacturing (-1%). Amid high mortgage interest rates and a lack of affordability, single-family construction spending is forecast to rise by 3% in 2025. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 12% in 2025.
• US manufacturing activity contracted in April 2025 for the second consecutive month, according to the Institute for Supply Management (ISM). In March, the ISM’s Purchasing Managers Index (PMI) was 48.7%, down 0.3 percentage points from March’s reading. A reading above 50% indicates manufacturing expansion. April’s New Orders Index increased by two percentage points to 47.2%. The April Production Index fell 4.3 percentage points to 44%. Eleven of the 18 manufacturing industries tracked by the ISM reported growth in April. In verbatim responses to the ISM survey, several respondents expressed concerns about increased uncertainty and higher costs brought on by US tariff policy. Manufacturing activity is a leading demand driver for commercial equipment rental and leasing.

• The total value of construction put in place decreased 0.5% in March compared to February, according to the US Census Bureau. Spending on nonresidential projects fell 0.5%, and residential spending declined by 0.4%. Within the nonresidential segment, 11 of 18 construction subcategories saw spending decline, including healthcare (down 1.8%), lodging (-1.3%), office (-1.2%), commercial (-1%), and educational (-0.8%). Spending was also weaker for power, highway and street, sewage and waste disposal, manufacturing, and communication. Pockets of spending growth included transportation (up 1.2%), public safety (+0.7%), conservation and development (+0.5%), water supply (+0.3%), and amusement and recreation (+0.1%). Associated Builders and Contractors Chief Economist Anirban Basu said, “Data center investments, which accounted for more than 70% of the increase in private nonresidential construction spending between March 2024 and March 2025, are perhaps the only remaining source of industry momentum. Manufacturing construction, while still elevated, has wavered in recent months. Most commercial segments remain subdued under the weight of high borrowing costs and tight lending standards. Residential construction continues to slide.”
• Tariffs, waning consumer and business confidence, and signs of weaker travel demand are clouding the outlook for the rental car industry, according to Auto Rental News. At the International Car Rental Show in Las Vegas in mid-April, Northcoast Research’s industry analyst John Healy provided an outlook for fleets, rental rates and pricing, and the state of the used car market. TSA screenings at airports so far in 2025 are above pre-pandemic levels but are flat compared to the same period in 2024, suggesting that consumers and business travelers may be pulling back. Healy noted that recent stock market volatility may also put downward pressure on travel demand. Car rental rates and pricing at the top 25 US airports, a proxy for the wider industry, were down in the first quarter of 2025 compared to the same period in 2024. Pricing and rates moving lower could suggest that rental fleets could be oversized. Healy suggested that rental firms obtain more visibility into the supply chains of automotive OEMs to assess the impact tariffs might have on vehicle pricing.