What is the outlook for the North American rental market?

Due to weak markets in the United States and Canada, rental income growth for construction equipment rental companies in North America is expected to slow in the coming years.

Industry experts say the rental sector is facing a downturn as strong post-pandemic demand for machines begins to fade.

The Canadian Leasing Association (CRA) says Canada will experience moderate growth in the coming years due to growing demand from the non-residential construction sector.

The CRA also notes that equipment rental revenue in Canada will grow 7.6 per cent to C $8.2 billion (€7.7 billion) in 2024, but the year-over-year growth rate will slow to 6.8 per cent in 2025.

It is expected that this figure could reach $9.5 billion (8.9 billion euros) by 2028. This implies a compound annual growth rate of 2.8% in 2026, 2027 and 2028.

Thanks to "strong non-residential construction growth, industrial production and expanding oil sands investments," rental income in the construction and industrial sector is expected to rise 7 percent from last year to $6.3 billion (€6 billion) in 2024.

By 2028, that figure will reach $7.4 billion (7 billion euros), according to the CRA. This represents a compound annual growth rate of 4.1% over the next four years.

"The outlook for Canada's equipment rental industry reflects a balanced growth trajectory that will benefit from continued strength in the construction and industrial segments," said Melanie Misener, CRA executive Director.

"As the Canadian economy stabilizes, we expect demand for both residential and non-residential investment to remain steady, further fueling growth in equipment rental."

There is no recession in America

Economic data also suggest that growth in the U.S. rental sector in 2025 is likely to come from the residential construction sector, rather than the non-residential construction sector.

The American Leasing Association (ARA) expects U.S. equipment leasing revenue to grow 8.2 percent from last year to $78.2 billion (75 billion euros) in 2024.

The company said the figure would grow 5.7 percent year-on-year in 2025, 4.4 percent in 2026 and 2027, and 4.8 percent in 2028 to $94.4 billion (90.6 billion euros).

ARA said it expects the construction and industrial segment to see the lowest growth in the coming years, while the general tool rental segment will remain stable.

Rental income growth in the construction and industrial sector is expected to slow from 7.9% this year to 3.6% in 2025, the report said. However, it is expected to level off in 2028, growing by 4.3% again.

John W McClelland, ARA's vice president of government affairs and chief economist, told a conference in Nashville on Thursday that the U.S. rental sector is slowing but not falling into negative growth.

"There will be a slowdown [in construction and industry], but there won't be a recession even under our most negative outlook," Mr McLelland said.

He said the decline was partly due to a sharp increase in machine orders after the pandemic, which led to a slowdown in demand.

Housing construction

Data from the US Census Bureau show that since the Federal Reserve raised interest rates in March 2022, new housing starts, which reflect the number of homes started in the US each year, have shown a downward trend.

In October 2024, U.S. housing starts stood at 1.31 million units, compared with a peak of 1.83 million units in April 2022.

On Sept. 18, the Fed cut the federal funds rate by 50 basis points to 5 percent and projected further cuts in 2025.

The Congressional Budget Office, the nonpartisan research unit of Congress, projects that housing starts will increase to 1.68 million units a year between 2025 and 2029, then decline to 1.52 million from 2030 to 2033.

U.S. spending on non-residential construction surged to $768.4 billion (737.3 billion euros) in 2023, up 21.6 percent from 2022.

The American Institute of Architects (AIA), an organization of American architects, predicts that nonresidential construction spending will grow by just 4 percent in 2024 and 1 percent in 2025, following an "exceptionally strong performance" in 2023.

The impact of the Trump presidency on the construction industry

Meanwhile, Oxford Economics said a combination of fiscal stimulus, restrictions on immigration, higher tariffs and other policy decisions could affect the construction industry under newly elected U.S. President Donald Trump.

Its economists predict that U.S. fiscal expansion in the form of tax cuts, interest rate cuts and increased federal spending in areas such as defense will likely support privately funded construction activity in the near term.

Oxford Economics expects smaller rate cuts in 2026 due to rising debt and inflation expectations. It warned that rising interest rates could spread to other economies and weigh on investment and construction activity in the long run.

Economists also say cutting immigration would reduce demand for housing and risk exacerbating labor shortages in the U.S. construction industry.

Nicholas Fearnley, head of global construction forecasting at Oxford Economics, said: "US fiscal expansion is likely to support privately funded construction activity in the short term, but will lead to a slowdown in monetary easing in 2026. However, immigration cuts would reduce the long-term demand for housing and could exacerbate the risk of labor shortages in the U.S. construction industry."