Average Rental Revenue Declined 1.5 Percent Y/Y in Q4, Baird/RER Survey Says

Respondents are optimistic enough to forecast an overall 4.9-percent increase in 2021 compared to 2020.

2020 4 Q Rer 08 002 Outlook For Rental Rate Changes In 2021 600f838795c0d
Baird Research/RER

According to respondents for the Baird/RER Equipment Rental Survey, average rental revenue declined 1.5 percent year-over-year in the fourth quarter of 2020. This is a modest improvement compared to the third quarter, when respondents showed a 2 percent decline compared to Q3 of 2019. 

According to the survey, respondents expect a 0.3-percent year-over-year improvement in the first quarter compared to Q1 of 2020 and are optimistic to forecast an overall 4.9-percent increase in 2021 compared to 2020. RER/Baird says that the first quarter improvement is more than the Baird researchers  expected, considering the first quarter of 2020 wasn’t impacted by COVID until the last couple of weeks of March.  

A few participants issued comments after the first quarter: 

  • “Slow recovery … anticipate an upward trend in July and beyond."
  • “Markets are remaining relatively strong considering the negative impact of lockdowns and COVID."
  • "We continue to look at market opportunities to diversify our product offerings."
  • "Jobsites seem to be slower to get started and seem to be progressing at a slower rate."

Many of the survey's participants expect rental rates to do better in 2021. Average rental rates declined 1.8 percent year-over-year for the full year, and respondents expect a 1.4-percent rate hike in 2021 compared to an average 2-percent drop for the past three quarters.

A few participants issued comments regarding rental rates:

  • “Overall, the market has far more supply than demand with respect to rental equipment. It will correct in due time.”
  • “With the COVID disruptions, some ‘niche’ players got literally destroyed. We adjusted our rental prices to be more aggressive on construction sites, and by the end of 2020, we were able to be nearly at the same level of utilization as last year.”

According to the survey, fleet utilization was 63.1 percent in the fourth quarter, a 50-basis-point decline year-over-year. However, demand improved since the second quarter of 2020. On a more generalized level, 39 percent of respondents reported that business was better in the second half of the quarter on a revenue-weighted basis. And the majority of respondents (52 percent) reported fourth quarter activity was better than initial expectations.

When it comes to fleet age, 16 percent reported that their rental fleet is younger than it was two or three years ago and 45 percent have a fleet that is similar in age to two or three years ago. Only 39 percent said their fleets were older. 

Information provided by RER/Baird and edited by Alexis Brumm.