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Industry Trends

Industry Outlook: A Look at the U.S. Rental Market

Expert Q&A - Oct 21

Industry Outlook: A Look at the U.S. Rental Market

Jennifer Stiansen
Director of Marketing
____
JLG Industries

Despite a very trying 2020, the U.S. rental market and its ecosystem remain healthy and strong. This is a testimony to the U.S. and non-US-based manufacturers, rental companies, suppliers and customers who all worked together to maintain pricing discipline and keep workers employed so that when the time came, the industry would once again thrive. Today, we are seeing the result of those efforts. 
At A Glance Rental Market
We recently sat down with Tim Morris, JLG’s Senior Vice President of Sales, Market Development, Marketing and Customer Support, Americas, to get his perspective on what’s happening in the U.S. rental market this year.

What’s the U.S. rental market like right now?
The U.S. rental market has pleasantly surprised us this year with a strong rebound following the unanticipated COVID-19 pandemic. While we did anticipate a gradual growth in aerial equipment sales as job sites began to reopen and demand for equipment increased, the volume came both earlier and faster than expected across all of our product lines including boom and scissor lifts, telescopic handlers and low-level access equipment. JLG positioned itself throughout the pandemic to ramp up quickly, working hard to retain employees and maintain a healthy inventory. 

That said, there are continued uphill battles we face. Supply chain constraints continue to be a challenge and raw materials costs continue to climb. With the U.S. inflation rate hitting a 13-year high in recent weeks both manufacturers and all those who are part of the rental market ecosystem are experiencing unprecedented pricing pressures. We continue to work closely with both our suppliers and our customers to navigate this period with as little disruption and impact as possible. 

Today, manufacturers cannot build machinery quick enough to meet pent up demand. We expect this will level out over time as supply chain constraints equalize and inflationary pressures dissipate.  

In terms of rental demand, which products or product classes are performing well and why?
All product classes are in high demand at the moment, but there are a few key trends causing specific category growth, including urbanization, the rise of warehouse construction, data center growth and increasing demand for low-level access products.

Urbanization — Population growth and a larger percentage of families gravitating towards city centers is resulting in buildings that are taller with narrower space between them. With that, the demand for compact equipment, higher capacity machines and higher reaching machines is on the rise. 

Warehousing — One only needs to drive down any major Interstate to observe the increase in warehouse construction. Going back even a few years, online shopping was not what it is today, and the pandemic further accelerated online demand. Warehouse construction often requires continuous placement of utilities at a fixed height along the length of a building. To match this application, scissor lifts offer this capability.

Data Centers — The world continues to become more and more connected. That means data center construction is also on the rise. Indoor work at data centers, requires lightweight, environmentally friendly machines that can be operated in confined areas or on suspended floors with weight restrictions and in between sensitive storage systems, servers and application delivery controllers. This is one type of application where electric machines shine.

Low-Level Access — The increasing demand for low-level access products has come as companies seek to mitigate worksite injuries associated with redundant movements and slips, trips or falls from ladders. While so manufactures seem focused on taller, higher reaching equipment, JLG is keeping an eye on both ends of the spectrum to provide people with safer ways to work at every height.

How have supply chain issues affected the U.S. rental market?
Supply chain by far is our biggest struggle today. With businesses around the world closing and/or slowing down production during the pandemic, there isn’t the type of readily available supply on hand we have had in the past. Just like JLG, our supply partners have seen a faster than expected rebound. Combined with the tight labor market and transportation shortages, there are some additional contributing challenges. We anticipate that all three will normalize over time.

How are oil and gas market fluctuations affecting the rental market?
With the pandemic, the U.S. essentially became stationary overnight. Commuting and travel stopped which led to a dramatic decrease in demand for gasoline. However, demand for heating oil and other sources of household energy increased as people began spending longer periods of time at home, so there was a bit of a tradeoff. 

Like many businesses, the oil and gas industries began temporary and intermittent shutdowns of wells and pipelines during the pandemic. As travel and commuting resume, we’ve seen a bit of a roller coaster in supply and demand, which of course impacts pricing and the industry’s that rely on these products as a means to run and/or deliver its products. 

What factors (i.e. economic stimulus and the housing boom) are going positively influence rental demand?
Residential construction growth is a good indicator and precursor for healthy rental equipment demand. The surge in residential housing is certainly helping contribute to the fast recovery in demand for aerial and material handling equipment in this post-pandemic economy. 

To keep up-to-date on how today’s trends will impact tomorrow’s rental market, click here. 

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