Residential Construction Propels Demand for Rental Construction Equipment – if Labor Shortages Can be Resolved

Last year at this time, the US government released its Housing Supply Action Plan, a plan to help reduce the cost of housing and make more affordable, quality homes across the country. The plan aims to help renters who pay high rent costs by building new homes for families with low or medium incomes. In 2022, around 1.4 million houses were finished in the US, which is 3.8% more than the previous year. But in December 2022, building permits were recorded at 1.3 million, 1.6% less than in November 2022.[4] Residential slowdowns have occurred throughout the spring of 2023. With some tightening of immigration laws around the country, this could lead to an increased shortage of available, short-term workers needed to finish out those residential projects.[5]

Rising Costs of New Equipment (Plus Continued Backlog) Lead to Favorability for Rental Market

With the global slowdown in the availability of new heavy equipment over the last two years due to the pandemic, chip shortage, and supply chain issues, prices for new equipment have risen. In fact, many manufacturers have announced across-the-board price adjustments for their new equipment, such as Hitachi announcing an 8% price increase for all products of construction and mining machinery directly citing “the impact of rising energy costs such as electricity and gas, continuous raw material price hikes due to disruptions in the global supply chain, and increasing logistics costs.” [6] While this may cause headaches for equipment managers looking to source high-quality machines, it bodes well for the equipment rental market which stands ready to fulfill that backlog of demand.

Why else might equipment managers rely more on renting this year?

There are several reasons why equipment managers may rely more on renting equipment in 2023:

• Increased demand: As demand for heavy equipment increases in the construction industry, contractors may not have enough equipment to complete their projects. Renting equipment provides a flexible solution for contractors who need equipment urgently for short-term projects.
• Cost-effective: Renting equipment can be cost-effective for contractors, especially for short-term projects. Renting equipment eliminates the need for maintenance costs and the initial investment in purchasing equipment.
• Up-to-date equipment: Renting equipment provides access to the latest equipment available in the market. This can be particularly advantageous for contractors who need specialized equipment that may be too expensive to purchase.

As demand for heavy equipment increases in the construction industry, equipment managers will be relying on renting equipment more than they have in the previous five years. Renting heavy equipment provides a flexible, immediate solution for contractors who need equipment to finish out projects. This trend is in line with a global trend where the equipment rental market is expected to grow due to an increase in demand for rental equipment from the construction and manufacturing industries.

In conclusion, the equipment rental market is experiencing slow but steady growth in 2023. The increased demand for heavy equipment in the construction industry may lead to equipment managers relying more on renting equipment. As the equipment rental market continues to unfold, smart equipment managers are looking to stay up-to-date with the latest trends and adapt their strategies accordingly.