When UBS analyst Steven Fisher upgraded United Rentals from Neutral to Buy on January 5, 2026, Wall Street took notice.
The equipment rental giant’s stock jumped on expectations of a construction rebound in the second half of 2026.
But beneath the surface of this single upgrade lies a more revealing story about where America’s infrastructure spending is actually heading—and which sectors will drive growth while others stall.
The Equipment Rental Industry: Construction’s Leading Indicator
Equipment rental companies like United Rentals occupy a unique position in the construction ecosystem.
They see demand shifts weeks or even months before those changes appear in housing starts data or government infrastructure reports. When contractors rent excavators, aerial platforms, or power generators, they’re placing bets on projects they expect to begin soon—not ones already underway.
UBS projects that United Rentals will achieve 5.0% year-over-year EBITDA growth in 2026 and 7.2% in 2027, compared to approximately 3% in 2025.
This acceleration matters because it signals a fundamental shift in construction activity patterns. The company’s revenue trajectory depends almost entirely on project pipelines across commercial construction, infrastructure, and industrial development.
According to the Dodge Construction Network, non-residential construction spending is expected to rise 3.7% by the end of 2025, and another 1.3% in 2026.
Those modest figures mask dramatic variations beneath the surface—variations that explain why United Rentals might be positioned for stronger growth than the overall market suggests.
The Data Center Phenomenon: Infrastructure’s New Gold Rush
The most striking component of the upgrade centers on a sector that barely existed a decade ago at this scale: data center construction.
The global data center sector is estimated to grow at a 14% CAGR over the next five years, with approximately 100 GW of new capacity anticipated between 2026 and 2030.
This isn’t incremental growth—it’s an infrastructure supercycle. Hyperscaler capital expenditures for Amazon, Alphabet/Google, Microsoft, Meta, and Oracle are forecast to exceed $600 billion in 2026, a 36% increase over 2025, with roughly 75% directly tied to AI infrastructure.
For equipment rental companies, data center projects represent ideal customers. These facilities require massive earthmoving equipment during site preparation, extensive aerial platforms for electrical and cooling system installation, and backup power generation throughout construction.
Unlike residential projects that might rent a single piece of equipment for a few weeks, data center builds demand dozens of machines for 18 to 24 months.
Following a substantial 55.7% spike in 2024, FMI forecasts data center construction will increase 24.9% in 2026, following a 33.4% increase in 2025.
However, industry analysts note this growth may be approaching its peak, with some states and municipalities eliminating tax incentives for data center development.
Manufacturing’s Plateau: The Post-CHIPS Act Reality
While data centers surge forward, another major construction category shows signs of maturity.
Manufacturing construction is expected to reach $225 billion by the end of 2025, a major contrast to 2020’s $75 billion, but spending in the sector is expected to stay largely flat when compared to recent huge spikes.
The manufacturing construction boom, driven largely by the CHIPS Act and reshoring initiatives, created substantial demand for construction equipment over the past three years.
Semiconductor fabrication plants, battery factories, and advanced manufacturing facilities all require specialized equipment throughout lengthy construction timelines.
But the initial wave of these megaprojects is now moving from construction to operation. Policy uncertainty around tariffs and trade relationships is causing companies to adopt wait-and-see approaches to major capital commitments, tempering the manufacturing construction outlook for 2026.
For United Rentals, this creates a portfolio challenge. The company must replace declining manufacturing-related rental revenue with growth from other sectors—hence the importance of data center and infrastructure projects filling that gap.
The Residential Construction Void
The elephant in the construction room is residential building, and it’s largely absent from bullish forecasts for equipment rental demand.
Single-family starts are expected to decline approximately 3.0% in 2025 and 0.5% in 2026, with a strong rebound not anticipated until 2027 as economic uncertainty fades and lower mortgage rates improve affordability.
In January 2025, single-family starts decreased 8.4% to a 993,000 seasonally adjusted annual rate, while the multifamily sector decreased 13.5% to an annualized 373,000 pace.
High construction costs, elevated mortgage rates around 6.4%, and challenging affordability conditions are causing builders to approach the market with extreme caution.
United Rentals derives only about 5% of its revenue from residential construction, focusing instead on commercial and industrial projects.
This positioning shields the company from residential weakness but also means the residential recovery—whenever it arrives—won’t significantly boost their business.
The residential slowdown matters for the broader construction equipment rental market because it represents lost utilization across entire equipment categories.
Smaller contractors who typically focus on home building aren’t renting excavators or concrete equipment, keeping overall industry utilization rates subdued even as megaprojects boom in select sectors.
Infrastructure Investment: The Bipartisan Bridge to 2027
Traditional infrastructure—roads, bridges, utilities—provides steady baseline demand for equipment rentals.
Highway and bridge construction is the strongest within the non-building construction sector and will continue to grow due to funds from the Infrastructure Investment and Jobs Act through 2026.
Power generation infrastructure presents a particularly compelling growth driver. Rising demand for power generation, especially from data centers and high-tech manufacturing, will sustain activity in this sector.
Data centers alone are creating unprecedented electricity demand, with some facilities requiring hundreds of megawatts of power capacity.
This creates secondary infrastructure opportunities. Every new data center needs upgraded electrical transmission infrastructure, backup generation facilities, and often entirely new substations.
These projects require different equipment mixes than the data centers themselves—more utility construction equipment, trenching machines, and specialized electrical installation platforms.
However, not all infrastructure sectors show strength. Funding cuts to the EPA and U.S. Army Corps of Engineers, along with the expiration of renewable tax credits, will drag on the clean energy construction sector.
This creates a mixed picture where some infrastructure categories grow while others contract.
The Regional Reality: Where the Actual Building Happens
Geographic patterns reveal which specific markets will drive equipment rental demand growth.
The Southeast, Southwest, and Midwest regions are attracting the highest construction investment due to large-scale infrastructure projects and industrial expansions.
Data center development shows pronounced regional clustering. Speed to power access is the primary criterion driving site selection, followed by community support and proximity to existing fiber infrastructure.
This concentrates new projects in states like Virginia, Texas, Ohio, and Georgia—all states with relatively friendly regulatory environments and available power capacity.
United Rentals operates nearly 1,600 locations across North America. Their ability to serve these emerging hotspots without overinvesting in slowing markets will determine whether they achieve UBS’s growth projections.
What the Upgrade Really Signals
The United Rentals upgrade isn’t a broad bet on construction recovery—it’s a targeted thesis on sector rotation within the construction economy. UBS believes non-residential construction will rebound in the second half of 2026, but “rebound” doesn’t mean all boats rise together.
Winners will be companies and regions positioned to capture megaproject demand: data centers, select manufacturing completions, power infrastructure, and continued traditional infrastructure work.
Equipment rental companies benefit from this trend because megaprojects require extensive equipment fleets for extended periods, generating higher revenue per project than numerous smaller jobs.
Losers include markets heavily dependent on residential construction, commercial office development, and renewable energy projects facing reduced government support.
The residential sector alone represents hundreds of billions in annual construction spending that remains essentially frozen by affordability challenges.
The timing element matters significantly. UBS expects construction activity improvements in the latter half of 2026 and into 2027.
This suggests the first two quarters of 2026 may remain challenging, with the meaningful acceleration not arriving until Q3 or Q4. Investors betting on United Rentals are effectively betting that sector rotation will overcome overall market weakness.
The Broader Economic Context
Several macro factors complicate the construction outlook for 2026. Uncertainty around tariffs and trade policies represents what one analyst called “the biggest threat” to economic projections.
Construction materials, from steel to lumber, face potential cost increases from trade restrictions, while immigration policy changes threaten to worsen existing labor shortages in the construction industry.
Labor constraints already represent a significant bottleneck. The construction industry has struggled with skilled worker shortages for years, and restrictive immigration policies could exacerbate this challenge.
For equipment rental companies, labor shortages create both headwinds and tailwinds—projects may proceed more slowly, but contractors may rent more equipment to compensate for limited labor availability.
Interest rates, while expected to decline gradually, remain elevated by historical standards. The Federal Reserve’s cautious approach to rate cuts means construction financing stays expensive, keeping some projects on hold indefinitely.
Commercial construction, in particular, depends heavily on financing conditions that remain challenging.
The Verdict on 2026 Infrastructure Spending
United Rentals’ upgrade reflects genuine strength in specific construction sectors, not a broad-based recovery.
Data center construction, power infrastructure, and remaining traditional infrastructure projects funded by federal legislation will drive growth. Manufacturing construction plateaus after extraordinary growth, while residential remains weak.
For the construction economy overall, 2026 looks like a year of transition and sector rotation rather than blanket expansion.
Total construction spending may grow modestly, but the composition of that spending shifts dramatically toward capital-intensive megaprojects that favor large equipment rental companies over smaller, regional operators.
The equipment rental industry’s role as a leading indicator suggests construction decision-makers see enough project visibility in the second half of 2026 to justify optimism.
But that optimism applies primarily to commercial and industrial segments, not to housing markets that affect millions of Americans directly.
Investors, contractors, and policymakers should watch several key indicators through the first half of 2026: data center permitting trends, utility infrastructure spending, federal infrastructure fund disbursement rates, and mortgage rate trajectories.
These variables will determine whether the construction sector rotation story plays out as forecast or whether broader economic headwinds overwhelm sector-specific strengths.
The United Rentals upgrade tells us that construction spending in 2026 won’t be uniformly weak or strong—it will be radically uneven, concentrated in technology infrastructure and megaprojects while traditional sectors struggle.
For an economy that depends on construction for employment, GDP growth, and community development, that concentration represents both opportunity and risk.
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