If you’ve visited a major metropolis like New York City lately, you can’t help but be amazed at all the new commercial construction going on. While workers occupy scaffolding along with supervisors and project managers, heavy equipment moves the earth and cranes heft long pieces of structural steel that weigh many tons up great heights.

According to new research data titled Global Heavy Construction Equipment Market 2021 that focuses on equipment financing, market size, competitive commercial construction landscape, supply and demand, and other key economic and market factors, the next 7 years promises to be a banner period for the heavy construction equipment industry.

Heavy Construction Equipment Industry

Industry experts, however, are also said to be cautiously optimistic.

Current Trends in Construction

Industry data crunchers point out that in recent months, residential construction has bolstered the market to an almost 9 percent increase in total construction spending for the U.S. Also, the ongoing but slow recovery in the economy continues to elevate some confidence, especially when it comes to the construction equipment finance market.

Says the Monthly Confidence Index for the Equipment Finance Industry, September 2021 earned a 60.5 percent confidence level compared with the historic low of 22.3 this past April. Both existing and pending infrastructure legislation are also expected to boost growth in construction equipment sales, plus construction jobs, theoretically speaking.

The data further suggest economic recovery efforts will fuel auction sale prices for used “standard yellow iron” construction equipment.

Construction Spending

Commerce Department data points to an increase in private residential construction spending as moving the market. In August 2021, private construction spending was said to have increased by 13 percent year-over-year to $1.24 trillion. While private residential construction spending rose 24.3 percent, private nonresidential (commercial) spending fell 2.3 percent.

The total “public spending” that occurred in August 2021 was up from July but was down when compared to August of the previous year by 4 percent. As public spending for street and highway construction realized an increase of 2.7 percent year-over-year, the public education sector realized a significant 6 percent tank.

Public residential (affordable housing) spending also dropped close to 4.5 percent while public nonresidential spending also fell by 4 percent during the very same period.

The Effects of COVID-19

Of special importance is the lasting negative effects of the COVID-19 pandemic and the supply chain issues it has contributed to. These “supply chain challenges” combined with issues in current federal administration economic policies and divisions, threatens to stop the private residential growth in its tracks.

The chief economist for the Associated General Contractors of America was recently quoted as saying, the rapid spread of the coronavirus delta variant has caused a pullback in travel and business re-openings. This led many owners to postpone or even cancel projects indefinitely. These cancelled projects vary from state to state.

Heavy Construction Equipment Industry

At the same time, limited supplies of crucial materials taken together with massive increases in material prices plus gasoline inflation, is resulting in both long and even uncertain delivery times. This is having a devastating effect on the construction industry’s overall recovery.

Construction progress prior to the pandemic is said to be a key factor in determining the success to continue with new and existing construction projects. What this means is, projects that “broke ground” prior to the shutdowns may have resumed, but they have been slowed down by new regulations, plus restrictions in material delivery, and the skyrocketing price of fuel which was not accounted for during the original project bidding process.

New constriction has commenced, but on an inconsistent basis at best. This trend (which again, varies state by state) is said to likely continue for the bulk of the next year.

Equipment Auctions

Despite the pandemic, strong construction equipment auction results in 2020 fueled positive projections for equipment market activity and sales. This includes used equipment which makes up a major portion of the overall marketplace. For example, secondary market equipment sales and demand increased in the second half of 2020 immediately following “the initial pandemic-related shock to the market.”

Also, value and demand increased for equipment that were most heavily affected by the supply shortages. As of mid-2021, construction data proves that auction sale pricing increased for standard yellow iron construction equipment. Existing equipment pricing exceeded 2020 expectations as a direct result of the supply shortages combined with increased demand for construction in both the private and commercial sectors. A simple case of supply versus demand.

Due to the overall challenging economic climate, construction firms aren’t taking any chances. They are said to be opting to lease major assets rather buying new equipment. This “renting” trend is likely to continue well into 2022, past the November congressional elections.