North America

We continuously assess market trends across North America, both in terms of the end markets we serve, but also on a regional, district and local level.  In understanding market trends, we consider our local market knowledge, as well as market forecast data provided by third parties.  We have set out below details of market data for the US and Canada, consistent with the basis of the forecast data provided by third parties.  

The US

Dodge Construction Starts continue to show strength in our end markets.  The outlook for construction growth continues to be underpinned by what we consider to be mega projects and infrastructure work, which continue to gain momentum.  This is a portion of the market where we enjoy outsized share and continue to be positioned extraordinarily well as more of these large projects enter planning and start.  Our cross-functional sellers and solutions experts are highly engaged with these contractors, our customers, and in many cases the owner or developer themselves.  We are well positioned to bring our broad range of solutions and capabilities to bear on these not only large, but complex projects.

At the same time, the local commercial construction space is softer than it was in recent years as the prolonged higher interest rate environment has weighed on local and regional developers.  This predominately impacts some of the small, mid and regional sized contractors, which are a powerful and important segment of our customer base.  It may take some time for this segment to see a meaningful uptick.  However, it will rebound, and when it does, we believe that it will do so quite strongly.  When this happens, we are in a position of strength to benefit, with customer relationships, coverage of products, services and markets and capacity, which are all part of our long-held cluster market strategy.

Canada

Canada is a growing market for us.  The overall rental market is less than a tenth of the size of the US.  But in the same way that the US has experienced structural growth as more and more types of equipment are rented for different applications, we expect similar trends in Canada.  

We anticipate growing more rapidly than the market as we take market share and broaden our offering.

North America market share

We continue to grow our market share in North America and even though we are the second largest equipment rental company, there remains plenty of room to grow. Our major competitors are United Rentals and Herc Rentals and collectively we have approximately 30% market share. In North America, most of the remainder of the market is made up of small local independent rental shops. For example, in the US, c. 50% of the market is represented by rental companies with five or fewer locations.

This market share analysis is based on the American Rental Association (‘ARA’) definition of the rental market, which incorporates a broad range of equipment, much of which is used in non-construction across a wide range of end markets.  These markets include the facility maintenance, repair and operation of the geographic markets we serve, characterised by square footage under roof.  In the US there is more than 100bn square feet under roof with minimal rental penetration currently.  Thus, we believe the size of the rental market is still understated and hence our, and everyone else’s, market share is overstated.  This only serves to increase the opportunities for growth.

We are confident that as the market continues to grow, our share will also increase.  We continue to set ambitious targets with our longer-term market share target of 20%.  The speed at which we increase our market share is in part a function of how quickly we can get new locations up and running.  However, as noted above, our market share growth also comes from continuing to broaden both our end markets and the range of equipment we have available to rent in each location.

The combination of our business model, the continued attractiveness of our markets and the long-term trend to rental, provides the perfect environment for us to achieve our goals.  In addition, our market share gains accelerate as we make the most of our scale advantages. 

Structural change

The rental market continues to undergo structural change.  Rental penetration continues to deepen, with rental now core for customers rather than top up, and those benefitting from this increased rental penetration are the larger, more experienced, more capable rental companies who can position themselves to be there as partners for this increasing customer base, delivering more complex solutions, and capitalising on this larger market.  Our business is more resilient and less cyclical as a result of this structural change.

Rental still only makes up to around 55% to 60% of the North American market compared to around 75% in the UK.  However, this is a broad average with penetration levels ranging from low single-digit percentages to high double-digit percentages.  For example, floor scrubbers have a low rental penetration whereas the rental penetration for large aerial equipment is over 90%.  We like specialty products because they are at the low end of this range, which provides greater scope for growth.  We see the potential market penetration for rental equipment to be well over 60% in North America. 

The drivers of this evolution include significant cost inflation in recent years associated with the replacement of equipment, technical changes to equipment requirements and health, safety and environmental issues which make rental more economical, easier and safer.  Environmental regulations have driven further rental penetration through the reduction in fleet size by those customers who previously may have chosen to own some, if not all, of their larger equipment needs.  Customers and smaller competitors with older fleets are faced with heavier replacement spend causing them to replace less and rent or, in the case of smaller competitors, reduce their fleet size.  Furthermore, the difficulties of getting to grips with new technology and maintenance requirements have also caused more operators to decide to rent.  Maintaining optimally serviced and therefore safe equipment can be a big outlay for a smaller operator.  The diversity of our fleet helps us take advantage of this structural progression and we continue to expand the range of products we rent.

Our development and use of technology is also driving rental penetration.  Our highly sophisticated proprietary customer management, inventory and delivery tracking systems all contribute to Availability, Reliability and Ease for our customers.  Sustainability is also an important consideration.  Renting from us can help customers with their own sustainability aspirations.  They can use the most environmentally friendly equipment available, reduce their own direct and indirect carbon emissions during the operation and transportation of equipment and means that they are not responsible for the disposal of the equipment at the end of its life.  We save customers money by teaching them to use the right product for the right job and using it in the most energy efficient manner possible. 

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