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Rental Market: Riding The Economic Waves
Traditionally, the rental industry has been a primary purchaser of basic underground construction equipment such as loader backhoes, excavators, trenchers and multipurpose skid steer loaders with various attachments.
However, it was clear to exhibitors at the 2009 Rental Show sponsored by the American Rental Association (ARA) that the worldwide recession hasn't excluded the rental market.
"It was the slowest rental show I've seen in more than 30 years," said a sales executive of one longtime equipment company exhibitor. "Attendance was substantially down. The ARA show traditionally is a ‘selling' show, but not this year; rental centers aren't buying and neither are the big chains."
Indeed, many rental companies have publicly expressed their intention to reduce fleets and limit spending. United Rentals, the world's largest renter of equipment, is responding to the recession with a 360 degree fleet management strategy, said Paul McDonnell, United Rentals senior vice president, Trench Safety, Pump & Power.
"Since December 2008," McDonnell said, "we've seen a slowdown in nonresidential construction that appears to be nearly universal, affecting all geographic regions. This appears to be largely due to a lack of credit. From what we can see, the credit markets are still frozen in mid-2009, despite some optimistic press reports."
Commenting specifically on underground utility construction markets, McDonnell said budgetary constraints and tight credit markets have made it harder for many states and municipalities to fund projects, and the slowdown in homebuilding has had a negative impact on rental equipment demand for some time.
Big fleet, big picture
Managing a rental fleet the size of United Rentals' in any economic environment is a complex process, said McDonnell.
"It involves managing capital investment in equipment, utilization, rates, fleet mix and age, and physical location of the assets," he explained. "You also have to manage your markets to the best of your ability, understanding that some external factors are beyond your control. For example, our trench safety business has been able to offset some of the decline by pursuing infrastructure construction and the industrial sector. Right now we have equipment on rent on power plant construction, wind farms and LNG (liquefied natural gas) terminal projects. The energy sector has proven to be more economically resilient than commercial construction."