The equipment rental industry stands at a pivotal crossroads as the American Rental Association (ARA) releases its latest forecast calling for a period of moderate but sustained growth. Following two exceptional years of double-digit post-pandemic expansion in 2021 and 2022, the ARA projections signal a return to more measured single-digit increases through 2026. For rental business owners and construction professionals navigating this landscape, understanding the forecast is essential. As explored in How Home Builders Can Leverage the Reo Rental Program for Strategic Growth, creative approaches to equipment access are becoming increasingly valuable in today’s market. This article examines the ARA forecast in detail, breaks down the segment-level projections, and explores what these trends mean for businesses operating in the equipment rental space.
Understanding the ARA Forecast and Its Market Context
The ARA forecast, compiled in partnership with S&P Global Market Intelligence, provides one of the most comprehensive outlooks available for the equipment rental industry. Released in early November 2022, the forecast covers both the United States and Canadian markets, offering projections through 2026 across key segments. Understanding the context from which the industry emerged helps interpret these numbers.
The Post-Pandemic Surge and Its Aftermath
The equipment rental sector experienced a dramatic recovery following the initial shock of the COVID-19 pandemic. After a challenging 2020, the industry rebounded with vigor as construction activity resumed and infrastructure projects ramped up. The numbers tell a clear story:
- Equipment rental revenue surged by 11 percent in 2022, reaching nearly $55.8 billion.
- This followed strong growth in 2021 as construction markets reopened across the country.
- The construction and industrial segment posted double-digit gains in both 2021 and 2022, at 10.2 percent and 12.7 percent respectively.
- The general tool segment saw more moderate but still healthy growth of 4.5 percent in 2021 and 6.2 percent in 2022.
These gains were fueled by pent-up demand, supply chain bottlenecks, and government stimulus. As these temporary factors normalized, the industry needed to recalibrate for a more sustainable trajectory.
What Moderate Growth Means for the Industry
The ARA forecast projects equipment rental revenue to increase by 3.4 percent in 2023 to approximately $57.7 billion. While this decelerates from double-digit growth, it does not signal a downturn. As Tom Doyle, ARA vice president, noted, the forecast does not project negative growth.
Importantly, the forecast extends beyond 2023 with steady single-digit increases expected through 2026. Revenue is projected to grow 2.9 percent in 2024, 3.3 percent in 2025, and 3.4 percent in 2026, reaching nearly $63.4 billion. This pattern of consistent, moderate expansion is actually healthier for long-term business planning than the erratic boom-and-bust cycles the industry has experienced in the past.
Breaking Down the Revenue Projections by Segment
A closer look at the segment-level data reveals important distinctions between different parts of the rental market. The construction and industrial segment and the general tool segment follow different trajectories, reflecting their unique customer bases and end-market exposures. For a broader perspective on sector trends, see our analysis of Construction Equipment Rental Industry Growth Opportunities.
Construction and Industrial Segment Performance
The construction and industrial segment, which accounts for the majority of total rental revenue, experienced the most dramatic swings. After posting double-digit growth in both 2021 and 2022, the segment is forecast to settle into a lower but still positive growth pattern:
| Year | Construction & Industrial Growth | General Tool Growth | Total Rental Revenue |
|---|---|---|---|
| 2021 (actual) | 10.2% | 4.5% | ~$50.3B |
| 2022 (actual) | 12.7% | 6.2% | ~$55.8B |
| 2023 (forecast) | 4.0% | 1.0% | ~$57.7B |
| 2024 (forecast) | 2.0% | 5.0% | ~$59.4B |
| 2025 (forecast) | 3.0% | 5.0% | ~$61.3B |
| 2026 (forecast) | 3.0% | 4.0% | ~$63.4B |
The data reveals an interesting pattern. While the construction and industrial segment leads in the short term with 4 percent growth in 2023, the general tool segment takes over as the stronger performer from 2024 onward, with 5 percent growth in both 2024 and 2025. This suggests that as large-scale construction projects stabilize, the broader economic recovery will benefit the general tool market, which serves a wider range of customers including homeowners, contractors, and small businesses.
General Tool Segment Dynamics
The general tool segment, which includes equipment commonly rented to do-it-yourself consumers and smaller contractors, showed a different pattern throughout the pandemic recovery. Its growth was more moderate in 2021 and 2022 at 4.5 percent and 6.2 percent respectively, compared to the construction and industrial segment. The forecast calls for a notable slowdown to just 1 percent growth in 2023 before accelerating again to 5 percent in 2024 and 2025, followed by 4 percent in 2026.
This pattern likely reflects the normalization of consumer behavior after pandemic-era home improvement booms, followed by renewed confidence and spending as the broader economy stabilizes. Rental businesses with exposure to both segments can use these divergent trajectories to balance their portfolios and manage risk more effectively.
Key Drivers Shaping the Rental Market Outlook
Several macroeconomic and industry-specific factors underpin the ARA forecast. Understanding these drivers helps rental business owners and construction professionals anticipate changes and position their operations accordingly. For additional context on infrastructure spending trends, refer to our piece on Construction Spending in 2026 What Fmis 1 Growth Forecast Means for Builders Across Sectors.
Nonresidential Construction Spending Strength
One of the most significant positive factors cited in the ARA forecast is the continued strength of nonresidential construction spending. Unlike residential construction, which is more sensitive to interest rate fluctuations, nonresidential projects tend to have longer planning horizons and more diversified funding sources. Key areas of strength include:
- Manufacturing and industrial facility construction, driven by reshoring and supply chain diversification initiatives.
- Infrastructure projects funded by federal programs, including roads, bridges, and transit systems.
- Data center construction, fueled by the ongoing expansion of cloud computing and artificial intelligence workloads.
- Healthcare and education facilities, which operate on multi-year capital improvement cycles.
These end markets create sustained demand for heavy construction equipment, from excavators and bulldozers to aerial work platforms and material handling equipment. Rental companies with fleets tailored to these applications are well positioned to capture growth even as the overall market moderates.
Government Stimulus and Infrastructure Investment
Government stimulus programs continue to provide a tailwind for the rental industry. The Infrastructure Investment and Jobs Act, along with other federal spending initiatives, has allocated substantial funding for transportation, broadband, energy, and water infrastructure projects. As Doyle noted, money continues to be spent from government stimulus programs, which is a positive for the rental industry.
These programs tend to favor rental over purchase for several reasons:
- Contractors working on time-limited infrastructure projects often prefer renting specialized equipment rather than purchasing it for temporary use.
- Government-funded projects frequently require specific equipment types or specifications that contractors may not own in their existing fleets.
- The uncertainty around project timelines and funding disbursement schedules makes rental a more flexible and lower-risk option than capital expenditure.
Supply Chain Improvements and Equipment Availability
Perhaps one of the most encouraging developments highlighted in the forecast is the improving supply chain situation. Throughout 2021 and much of 2022, equipment manufacturers struggled with component shortages, logistics disruptions, and labor constraints that led to extended lead times and order backlogs. Rental companies found themselves unable to expand their fleets quickly enough to meet surging demand.
The forecast points to supply chain improvements that can help alleviate the backlog of equipment orders. This has several positive implications:
- Rental companies can expand inventory to meet demand more effectively.
- Shorter lead times reduce the planning uncertainty for both rental businesses and their customers.
- Improved equipment availability supports the positive outlook for the industry in 2023 and beyond.
Strategic Implications for Equipment Rental Businesses
The ARA forecast offers a roadmap for strategic decision-making in the equipment rental industry. While the headline numbers point to moderation, the underlying trends create opportunities for well-positioned businesses. For practical guidance on building industry visibility, see Equipment Rental Profiles Building a Stronger Rental Business Through Industry Visibility.
Investment Timing and Fleet Management
The forecast data on equipment investment trends is particularly instructive for fleet management decisions. Investment in construction and industrial equipment, which grew by an astounding 55.1 percent in 2021 and 40 percent in 2022, is expected to decline slightly in 2023 before resuming growth at a more sustainable pace. This pattern suggests several strategic considerations:
- After two years of aggressive fleet expansion, rental companies should focus on fleet utilization and asset optimization rather than continued rapid growth.
- The projected recovery in investment growth of 4.8 percent in 2024 and 6.4 percent in 2025 suggests that 2024 may be an opportune time for measured fleet refresh cycles.
- Companies should prioritize investments in equipment categories aligned with the strongest end-market demand, particularly those serving nonresidential construction and infrastructure projects.
The Canadian Market as a Parallel Opportunity
The ARA forecast also covers the Canadian equipment rental market, which followed a similar pandemic recovery pattern. Canadian equipment rental revenue showed a post-pandemic boost of 15.8 percent in 2021 and 11.1 percent in 2022, reaching $4.6 billion. The forecast calls for a similar transition to single-digit growth:
- 1.6 percent growth in 2023 as the market normalizes.
- 4.0 percent growth in 2024 as economic conditions stabilize.
- 5.3 percent growth in 2025 representing a modest acceleration.
- 3.5 percent growth in 2026 to reach nearly $5.3 billion in total revenue.
For rental companies operating in both the United States and Canada, or those considering cross-border expansion, these projections provide a useful framework for resource allocation and market prioritization. The Canadian market offers similar growth characteristics with slightly different timing, which can help with portfolio diversification.
Preparing for a Moderate Growth Environment
As the industry transitions from a period of exceptional growth to one of moderate expansion, rental businesses need to adjust their operational strategies. The companies that thrive in this environment will be those that focus on operational excellence, customer service, and strategic positioning rather than relying on tailwinds from a booming market.
Key actions rental businesses can take include:
- Reviewing fleet composition to ensure alignment with the strongest end-market segments, particularly nonresidential construction and infrastructure.
- Strengthening customer relationships through value-added services such as equipment training, maintenance programs, and flexible rental terms.
- Investing in digital tools and rental management software to improve operational efficiency and customer experience.
- Exploring partnerships and collaborations that expand geographic reach or equipment offerings without requiring significant capital investment.
The ARA forecast provides a clear and data-driven picture of what lies ahead for the equipment rental industry. Moderate growth need not be a cause for concern. Instead, it represents a return to a more sustainable and predictable market environment where well-managed businesses can build lasting value. By understanding the segment-level dynamics, monitoring the key drivers, and positioning strategically, rental companies can navigate this transition successfully and capture their share of the nearly $63.4 billion market projected for 2026.