Wells Fargo Survey Indicates Construction Activity Still Climbing

MINNEAPOLIS (Oct. 1, 2014)—Activity in the construction industry continues its multiyear improvement trend with a notable change in 2014 compared to 2013, according to the latest Construction Executive Survey from Wells Fargo Equipment Finance, a subsidiary of Wells Fargo & Company. A much larger percentage (70.7 percent) of contractors and equipment distributors report seeing “somewhat higher” or “much higher” activity over the past year, compared to 57.7 percent in 2013, 47.8 percent in 2012 and 38.4 percent in 2011. Conducted Aug. 13 through Sept. 2, the survey recorded the responses of 355 construction industry executives from across the U.S.

“Signs of a business environment in which construction companies can thrive are becoming more apparent,” said John Crum, senior vice president and national sales manager of the construction group at Wells Fargo Equipment Finance. “Construction activity is on the rise, rental rates are increasing, and upward pressure on materials and equipment prices all suggest a more active and competitive business environment.”

Highlights of the 2014 second half Construction Executive Survey:

Rental conversions: Even as they acknowledge the increase in activity and rental rates, contractors expressed a hesitancy to convert rented equipment into an owned asset. About six in ten (61.3 percent) contractors said they planned to purchase less than 25 percent of the equipment they are currently renting. About one in five contractors (20.4 percent) said they are uncertain what percentage of equipment they will change over from a rental to an owned asset.

Rental rates on the rise: Construction equipment rental rates continue to climb and have reached a four-year high with 58.7 percent of respondents saying they saw “somewhat higher” or “much higher” rental rates this year, compared to 44.6 percent in 2013. Approximately four in ten respondents (38.5 percent) said equipment rental rates were “about the same” as the year prior – the lowest in the last four years.

Highway funding: Industry executives overwhelmingly see value in a multiyear Highway Trust Fund solution. When presented with an array of funding options that would benefit the program in the long-term, these executives overwhelmingly favored use-based solutions. Each of the top three choices – gas tax (60.2 percent), mileage driven (19.9 percent) and toll ways (13.4 percent) – place the burden of paying for infrastructure resources on those who use those resources.

Tier IV Equipment Impact: Technological advances and the arrival of Tier IV equipment seem to be changing the makeup of fleets across the country. More than three-fourths (76.9 percent) of construction executives said the new Tier IV equipment is performing as well or better than previous generations of equipment. Sixty-four percent (64.5 percent) of contractors agree that the price point for this new equipment is “much higher” than that of previous equipment. Of those who expressed an opinion on resale values, 73.8 percent said that Tier IV equipment is comparable to or better than other equipment.

The 2014 second half Construction Executive Survey continues the longstanding practice by Wells Fargo Equipment Finance and its predecessors to publish primary research findings for the construction industry. To access the complete report, visit wellsfargo.com/com/financing/equipment-financing/publications.