Issue link: http://read.dmtmag.com/i/280096
March 2014 | Construction Equipment Distribution | www.cedmag.com | 41 Forecast (55.4%) believe nonresidential activity will increase compared to last year. Another four in 10 construction executives (38.9%) said they anticipate the level of nonresi- dential construction activity to remain comparable to that of 2013. This survey has never seen so few executives respond that local activity would decrease. Of the 233 executives who said they expect similar or decreased activity compared to 2013, about half (45.5%) said they anticipate some improvement in the industry before the end of 2014. The sentiment for residential construction activity in 2014 is very similar to that of nonresidential activity. In years past, we've seen differences in what executives expect for commercial versus residential construction. This year, however, executives were equally optimistic about housing and nonresidential construction. More than half of respon- dents (55.7%) said they expect increased residential activity. Risks and Regulations The survey also offered a chance for executives to weigh in on risks they considered most pressing and the regulatory issues that were of greatest interest. Close to 82 percent (81.8%) of executives cited "economic uncertainty" as the factor that poses the greatest risk to the U.S. construction industry. "Political uncertainty" (67.6%) was not far behind, while rising interest rates (45.0%) and regulatory uncer- tainty (43.5%) were a close third and fourth. The regulatory issue of greatest interest (69.2%) for the year was related to tax incentives such as bonus deprecia- tion and Section 179 deductions. The highway funding bill (60.2%) and the Affordable Care Act (46.6%) were also among those issues most frequently listed. Equipment Rental Remains Hot Contractors and distributors alike expect the equipment rental market to remain strong in 2014. Almost 80 percent (79.7%) of surveyed contractors said they rented equipment in 2013, and 91.2% said they intend to rent in 2013. In contrast to a year ago, the percentage of contractors who said they will increase their rentals (22.2%) surpassed the percentage who indicated they will decrease their rentals (14.6%). More than 95% of equipment distributors and rental companies said they will increase their rental fleet or maintain it. When asked to cite their reasons for renting versus purchasing, 72.8% of contractors identified "Lack of consistent work" ahead of "Need for project-specific equip- ment" (67.4%) and "Overall equipment costs" (52.5%). Equipment Acquisition Wells Fargo Equipment Finance recently started looking at the impact that the Internet has had on equipment buying. The proliferation of information technologies has created new channels through which equipment buyers can confidently acquire the equipment they need – and get the customer experience they want. One in five contractors said that they have recently acquired equipment over the Internet without having inspected it personally. Of those who acquired equipment without a personal inspection, 80.4% said their purchase amounted to less than $250,000. They also overwhelmingly said they were satisfied (68.6%) or extremely satisfied (19.6%) with the purchase. Sentiment among U.S. contractors is that purchases of new construction equipment in 2014 will remain similar to, or perhaps increase slightly, compared to 2013. One in 10 contractors (11.9%) said they would not acquire new construction equipment in 2014, an improvement from 19.1% in 2013. A quarter (26.1%) said their purchases of new equipment would increase compared to 2013, a 5.3 percentage point increase from a year ago. Distributors remain quite optimistic about realizing year-over-year improvement in sales of equipment. For the coming year, almost two-thirds (62.7%) said that they expected an increase in new equipment sales. A similar but less robust group (57.5%) said they expected growth in used equipment sales. Contractors also shared insight into how they intend to allocate funds for equipment acquisition. Six out of 10 respon- dents (60.3%) said that term lending accounted for 50% or more of their budget allocated to equipment acquisition. Conclusion The numbers are clear that contractors, equipment distributors and other industry executives are anticipating a 2014 that features more construction activity than in 2013 – both in the residential and nonresidential categories. The risk of economic uncertainty still looms, however, and has created a climate that continues to encourage equipment rental and have a moderating effect on long-term equip- ment acquisition. About the Survey The 2013 annual research represented the 38th year in which WFEF and its predecessors have surveyed execu- tives and published their findings. This year, we had the strongest response we've seen since moving to an online format. During a three-week period in January 2014, we collected 522 responses. Half of our respondents were construction contractors and another 27 percent identified themselves as equipment distributors, many of which are AED members. The remainder included equip- ment rental companies, equipment manufacturers and other industry consultants and stakeholders. JOHN CRUM is senior vice president and national sales manager, Wells Fargo Equipment Finance. He can be reached at john.d.crum@ wellsfargo.com.