Rental Industry Struggling, But Still On Solid Footing

By Jeff Griffin, Senior Editor | July 2010 Vol. 65 No. 7

“Many rental companies,” she said, “suspended or reduced capital expenditures last year because of the economy. As their equipment ages, it needs to be replaced and that’s part of what’s happening now, coupled with much more optimism that business will improve this year and continue to grow in 2011, 2012 and 2013. What often needs to be replaced in inventory first is compact equipment that usually has a shorter lifespan than larger machines. We are not yet seeing as much activity related to buying large construction equipment, which requires more capital expenditure, but ARA surveys indicate more optimism from our construction members. They expect revenues to start to build in 2010 and to continue on an upward trend. We continue to have opportunity for growth.”

Wehrman said ARA estimates that rental revenues for construction and industrial rentals declined about 21 percent in 2009 and may show a further decline through the end of 2010. However, she said equipment rental is expected to be one of the first industries to recover and build volume because construction companies and contractors may be inclined to rent equipment rather than purchase equipment as they bid and win jobs.

ARA does not yet have specific information about what types of equipment are most in demand this year, Wehrman said.

“Anecdotal evidence we get from ARA members is that seasonal lawn, garden and landscaping equipment did well in the spring,” she continued. “With the flooding in the Northeast, many rental stores were renting a lot of pumps and dehumidifiers. We do believe that continued broadband deployment can result in more use and rentals of underground utility equipment like trenchers and excavators. The stimulus bill provided funding for expansion of broadband, and certainly this work can increase rental volume.”

Wehrman said ARA’s research partner IHS Global Insight says the federal stimulus package offers much larger injections in 2010 compared to 2009.

“It is hard to quantify if stimulus funds have increased demand for rental equipment yet,” Wehrman said. “Anecdotally, comments we hear from members indicate that any benefit has been limited, at best, and disappointing to date. While more dollars will go into construction, their use is still to be defined. Long-term, funding for the highway bill is critical in this matter.”

2011 turnaround
When it comes to construction, Wehrman said IHS Global Insight doesn’t expect to see a turnaround until early 2011. However, she believes that doesn’t mean prospects for equipment rentals are less.

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