Improvement driven by heavy equipment rental, acquisitions
Construction
contractors and equipment
distributors have continued optimism about local, nonresidential
construction activity in 2015 and expect a strong rental
market and increasing equipment acquisitions, according to a survey from Wells
Fargo Equipment Finance, a subsidiary of Wells Fargo & Company
(NYSE: WFC).
Wells Fargo released the findings of its 2015
Construction Industry Forecast today. The survey’s primary
benchmark for measuring construction industry contractor and equipment
distributor sentiment is the Optimism Quotient (OQ). The OQ reached an
historic high of 130, up six points from 124 in 2014 and up considerably
from the survey low of 42 in 2009. This reading is a strong indication
that construction contractors and equipment distributors are optimistic
that local nonresidential construction activity will improve in 2015
compared with 2014.
“The timing of this survey is particularly significant because it
coincided with a period of sharp decline in crude oil prices at the
beginning of 2015,” said John Crum, senior vice president and national
sales manager of the Construction Group at Wells Fargo Equipment Finance.
“We thought the predictions of lower capital expenditure related to
construction in the energy sector might impact more of our survey
population and dampen enthusiasm about the year ahead,” Crum added. “Yet
contractors and equipment distributors indicated that the trajectory of
the broader construction industry is still going in the right direction:
up.”
A larger percentage of executives (63 percent) said they expect activity
levels in nonresidential construction to increase in 2015 compared with
55 percent who expected it to increase in 2014.
This year’s increase in the OQ marks the third time in four years that
it has reached a new high, which signals confidence that growth has been
accelerating over that time. Coinciding with the higher optimism reading
is anticipated growth in rentals and increase in new and used equipment
acquisition.
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Survey Year
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Optimism Quotient
(surveyed in January)
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2015
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130
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2014
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124
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2013
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106
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2012
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114
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2011
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96
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2010
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66
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2009
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42
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Wells Fargo Equipment Finance annual Construction Industry Forecast
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Equipment rental remains strong
The multiyear trend in equipment rental growth is set to continue in
2015. The majority (62 percent) of responding equipment distributors and
rental companies said they are renting more equipment to contractors
than a year ago, and 60 percent said they plan to increase the size of
their rental fleet in 2015. Contractors who said they rented heavy
construction equipment in 2014 said they will increase rental activity
in 2015. Thirty-seven percent said they would rent more than last year,
compared with 17 percent who said they would rent less. Contractors
cited the need for project-specific equipment most frequently (70
percent) as the reason why they choose to rent rather than buy.
Equipment acquisitions expected to increase
Ninety-two percent of contractors surveyed said they purchased new
and/or used equipment in 2014. Ninety-two percent said they plan to
purchase in 2015. More contractors than a year ago say they will
increase new and used equipment acquisitions.
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34 percent of contractors said they plan to increase new equipment
purchases this year, up from 26 percent in 2014.
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30 percent of contractors said they plan to increase used equipment
purchases this year, up from 22 percent in 2014.
Distributors are more optimistic about sales increases in new and used
categories than in either of the previous two years. Most (70 percent)
distributors said they expect new equipment sales to increase
compared with 2014 and 73 percent of distributors expect their used
equipment sales to increase compared with 2014.
Cost concerns in 2015
Contractors and distributors were asked what their top three concerns
were among several cost categories. Contractors said they are most
concerned with Employee Wages and Benefits (69 percent) followed by
Healthcare Costs (58 percent) and Taxes (53 percent). Distributors are
most concerned with Healthcare Costs (68 percent), Equipment Costs (67
percent) and Employee Wages and Benefits (59 percent).
To learn more, including key opportunities and risks for the industry,
download the complete report, here.
About Wells
Fargo Equipment Finance
Wells Fargo Equipment Finance provides competitive fixed- and
floating-rate loans and leases covering a full range of commercial
equipment for businesses nationwide as well as floor planning and
inventory financing, and vendor programs in selected industries in the
United States and Canada. Wells Fargo Equipment Finance is a leading
provider of equipment leasing and finance solutions in the United States
and Canada with more than 130,000 customers, and 1,100 team members.
Wells Fargo Equipment Finance is the trade name of the equipment finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Canadian
business is transacted by Wells Fargo Equipment Finance Company.
About Wells
Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.7 trillion in assets.
Founded in 1852 and headquartered in San Francisco, Wells Fargo provides
banking, insurance, investments, mortgage, and consumer and commercial
finance through more than 8,700 locations, 12,500 ATMs, and the internet
(wellsfargo.com), and has offices in 36 countries to support customers
who conduct business in the global economy. With approximately 265,000
team members, Wells Fargo serves one in three households in the United
States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014
rankings of America’s largest corporations. Wells Fargo’s vision is to
satisfy all our customers’ financial needs and help them succeed
financially. Wells Fargo perspectives are also available at Wells
Fargo Blogs and Wells
Fargo Stories.