Overview of Construction Equipment Global Rental Market

Enterprises associated directly to the general construction industry globally have moved towards renting equipment such as excavators (all classes), cranes, backhoes, loaders, dumpers, bulldozers, skid steers, trucks, cement mixers and even hydraulic attachments just to name a few. This growing popularity is attributed to a wide range of factors which include among others the provision for on-site maintenance, delivery and pick-up of equipment, repairs, and instant replacement of faulty equipment which companies that offer such equipment for hire include in rental agreements. These provisions effectively reduce the expenses of construction companies as maintenance, logistic, and repair expenses are entirely eliminated. These enterprises are able to offer a skid steer for hire for as low as $150 per day and in most case scenarios are taken for hire by construction companies for only a few days. The growth of equipment rental enterprises is owed to these firms establishing strategic alliances with construction companies by offering the best and newest equipment models that are available in the market. From the perspective of the construction company in turn, purchasing these equipment directly from manufacturers would strain the capital structure of the construction company and potentially stifle cash flow.

Among the drivers that are contributing to the business growth of construction equipment rental niche includes the relative high cost of new construction machines that have a negative impact on the ROA status of construction companies. The provisions provided by rental companies such as free delivery and pick-up to project sites, almost instant parts and equipment replacements are also seen as growth drivers as these elements have a positive impact on cash flow. Rapid urbanisation in Asia Pacific, Latin America and the Middle East coupled with the migration of populations from rural areas to urbanised areas have also caused a rise in project demand which ultimately leads back to rental. Another less defined driver that is often overlooked is the shortage of skilled machine operators that the industry is being faced with attributed to the impact of the COVID 19 pandemic which resulted in skilled construction workers establishing careers with other industries and are less likely to return. This has resulted in most construction companies to render older machines that do not have the latest technological features obsolete (for example: grade assist which allows even inexperienced skid steer operators to grade and finish as well as experienced operators for are currently scarce) requiring them to use newer equipment that come with the latest technological features. Most manufacturers are currently focusing on miniaturisation and electrification of equipment such as skid steers that comply to all environmental regulations and the fact that rental companies are generally first movers and often buy in bulk, they are able to secure such machines at much lower prices and enhance their ROA, whereas construction companies would lower their ROA in contrast due to the high price of these machines and the associated costs of owning equipment.

Most of these rental companies also offer trained operators who trained and familiar with machines that feature A.I and industrial robotics elements that are scarce in the market. These operators are able to offer quicker cycle times, accuracy and higher productivity due to their ability to utilise technological elements effectively. According to market reports the entire rental segment is worth more than $130 billion globally and is constantly growing at an average of 5 % annually since 2020. The industry size is expected to arrive at $500 billion by the year 2030 due to rapid industrialization and urbanisation. The current issues related to supply chain disruptions has increased project costs significantly and one of the approach to ease the pressures of these increased costs is by obtaining equipment such as skid steers for hire.

 

Carol Gilmore

Carol Gilmore