Global Greed

The global construction equipment rental market is booming as never before, thanks to a vast array of infrastructure mega projects taking shape in countless arenas across the planet.

These huge and complex multi-billion-dollar endeavours are creating jobs, boosting connectivity, driving economic growth and delivering unrivalled returns for lovers of money everywhere. Moreover, each of the power generating facilities, land reclamation programmes, high speed rail links, mass transit systems, expressways, ports, bridges and tunnels that make up these awesome undertakings, require massive amounts of construction equipment to bring them into being.

What this means is that whether they’re invested in India, the Middle East or anywhere else in the world, the owners of that machinery are enjoying the most phenomenal returns by renting it out to contractors on the ground responsible for delivering the projects in question.

India

In India, where some 18 per cent of the world’s population reside, flagship projects include a much-needed second international airport for Mumbai, the country’s most populous city. Considered an essential addition to the city’s infrastructure portfolio, this new super hub will serve to ease congestion to the tune of 90 million passengers annually when it opens in 2023.

Meanwhile, in Hyderabad, a comprehensive new metro rail system is currently under construction. This includes a 31km express link to the city’s airport, with elevated or underground sections making up the majority of its length, meaning an army of specialised equipment is needed.

In fact, across India, the machines are out in force, toiling day and night on projects ranging from power, road, rail and telecoms, to shipping; all part of a strategic decision to prioritise connectivity and enhance business and trading opportunities across the country.

Foundation Capital | Metro commuter train in Doha, Qatar

Middle East

In the Middle East, the world’s richest country, Qatar, is busy crafting a 300km metro at a cost of $36 billion, while an expressway programme spread across 78 major projects will deliver 800km of new road and 200 interchanges; all part of the “Qatar National Vision 2030”.

Elsewhere in the region, Dubai’s Al Maktoum International Airport is being built at a staggering cost of $82 billion dollars, and comes complete with unprecedented demand for material handlers, earth movers and other construction equipment. What’s more, this demand will persist until 2030 at the very least, when the colossal new facility’s first phase is due for completion.

Meanwhile, Dubai International City, a mixed-use development of residences, businesses and tourist attractions, has a $95 billion price tag, while a further $65 billion is being thrown at “Dubailand” to make it the world’s largest retail and entertainment site when it opens in 2025.

Abu Dhabi is also a hotbed of activity, exemplified by the ongoing construction of super-sustainable $22 billion Masdar City, while the $36 billion homage to pleasure that is Yas Island, is sure to keep the machines gainfully employed for many years to come.

Foundation Capital | Skyscraper buildings in the Dubai financial district

Fabulous Fortunes

It is the same story anywhere in the world one cares to look, with big, bold, beautiful building projects dominating skylines from Rio to Riyadh and from Jakarta to Johannesburg.

And, with so many new mega projects coming on stream, the demand for construction equipment has gone through the roof, delivering for the owners of that machinery unrivalled rental income.

Across the globe, throughout history, the smartest investors have understood that fabulous fortunes can be made simply by renting things out. And, today is no different, with construction equipment rental the most lucrative modern-day example of this tradition.

It stands to reason, of course, when one considers that global construction output is set to grow by 85 per cent to reach an awesome $15.5 trillion by the end of the decade! And, with increased automation, growing populations and urbanization combining to drive this rapid growth, the global construction equipment rental market is forecast to reach an almighty $230 billion by 2025!

With figures like that, even those with the biggest appetites for making money are getting in on the act and feasting on the fruits of this bonanza business.

Japan: Land of the Rising Returns

Japan is the country that pioneered high-speed rail travel more than 50 years ago with its legendary bullet train.

Known the world over for its sleek, aerodynamic shape, this iconic mode of transport has come to represent all that’s best about Japanese engineering, while it posts passenger numbers in the billions across the country’s network annually. In fact, so popular has it become, the flagship line linking Tokyo with Osaka is now the busiest high-speed rail service in the world, carrying almost half a million people each working day along the 425 km route in 145 minutes.

Japan says “Konnichiwa” to Maglev

Yet, 145 will soon become a mere 67 minutes, for a new £90 billion Maglev line is currently under construction and will be completed by 2037.

The significantly reduced travel time will help to create a single mega city by binding together Japan’s three principal urban centres of Tokyo, Nagoya and Osaka, with economic benefits projected to be as much as $155 billion during the line’s first 50 years of operation.

Impressive stuff indeed, yet this is just one of numerous infrastructure mega projects funded by the State, as part of Japanese Premier, Shinzo Abe’s massive government spending programme to stimulate the country’s economy, popularly known as “Abenomics”.

Cutting-Edge Locomotion

Maglev means “Magnetic Levitation” and constitutes an energy-efficient, reliable and durable high-speed rail system using magnets to control trains’ stability and speed. And, with friction between wheels and rail eliminated, ultra-high speeds of over 600km/h are achievable, meaning trains will deliver passengers to their destinations quicker than a plane, and with considerably less fuss!

Yet, while Maglev trains are cheaper to build and maintain than conventional trains, since they have no moving parts, the infrastructure itself is hugely expensive and requires a host of specialist machinery.

Endless Work for the Machines

17 more years of construction before the project is delivered may seem excessive, but there are compelling reasons for this timeline.

Firstly, much of the construction area sits within one of the most heavily built up areas in the world. This means 86 per cent of the line will be located deep underground, with tunnels needing to be bored 40m+ below the surface to ensure no conflict with existing land use. One such example is a 25km tunnel currently being constructed under the southern Japanese Alps, and set to be the deepest in the country upon completion in 2025.

Secondly, nature is a force to be reckoned with in Japan, so everything must be built to an extremely high standard to ensure all infrastructure across the line’s length is earthquake, typhoon, flood and even tsunami-proof!

Yet, while these factors may combine to prolong build times and push costs up, there are always winners; not least the owners of the material handling, earth moving and other specialised construction equipment, who rent them out to the Japanese contractors tasked with delivering this feat of engineering. Their machines will be working overtime to keep this mega project on track and on time.

Foundation Capital | High speed maglev train tunnel on the Yamanashi test line, Japan

Boom Time for Investors

So vibrant is the construction equipment rental market in Japan, the country takes bronze medal in the global revenue stakes, punching far above its weight in terms of its land mass and population, helped in no small measure by this glittering new Maglev project.

However, many other factors are helping to fuel the boom in this rental market, including infrastructure requirements for the forthcoming 2020 Tokyo Olympics, as well as ongoing recovery from various natural disasters that have afflicted the nation in recent years. Moreover, such reconstruction efforts are set to run for many decades yet, meaning this boom has long legs!

It all translates to ever rising returns for those investors smart enough to realise that when demand exceeds supply, as it does in the construction equipment rental business, he who holds the asset is perfectly placed to cash in!

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