Underground Rental Market Bounces Back Strong

Rentals of equipment in the United States are expected to exceed $38 billion in 2013 says the most recent quarterly forecast of the American Rental Association (ARA). The report projects that equipment rental growth compared to 2012 will reach 7.9 percent by the fourth quarter of 2013.

ARA is an international trade association representing the rental industry.

The ARA report cites the construction market and consumer spending as the most important drivers of equipment rentals during 2013.

“The U.S. equipment rental market is expected to continue its upward trajectory and show significant growth through 2017,” says the report. “Strong growth in real residential construction through 2015 will fuel the construction and industrial equipment segment, which is projected to grow 9.8 percent in 2014 and 11.8 percent in 2015.”

In Canada, the equipment rental industry is forecast to generate nearly $4.6 billion in revenue in 2013, a 3.1 percent increase.

The ARA report does not include details about rentals of specific types of equipment or the customers who rent them, but many member stores inventory equipment used in underground construction. Stores specializing in homeowner rentals often carry walk-along trenchers, skid-steer loaders and attachments and compact excavators. General rental centers carry larger equipment such as loader/backhoes and riding trenchers. Larger models, including mid-range excavators are stocked by businesses specializing in equipment rentals.

Trench shielding/shoring and pumps for bypass systems and dewatering are in high rental demand.

Typically, landscapers, plumbers, and electricians are renters of compact trenchers, skid-steers, and excavators. Rental customers for larger equipment include contractors, municipalities and utility companies.

“Rental has grown during the anemic economic recovery through increased penetration,” says Scott Hazelton, a senior partner with IHS Global Insight, which compiled data and analyses for the ARA.

“Residential construction,” he continues, “is strong and that brings demand for new water and sewer services. Because most power and communications cables are placed underground, these areas also create demand for rental equipment.

“Commercial and industrial was strong in 2012, but has leveled off this year. It still is good and is expected to improve soon. Work in gas shale fields also is driving rentals of pumps and other equipment. As industrial and construction markets continue to improve, rental will see further growth from a larger share of the equipment market, leading to double-digit revenue gains by 2014.”

Additional details about markets for rentals of specific types of underground construction equipment are provided by United Rentals and Sunbelt Rentals.

“The investment in infrastructure is still slower than it should be, due to fiscal stress at the local, state and federal levels,” says Brett Sondergard, sales and marketing director for United Rentals Trench Safety. “However, this is being offset by an uptick in gas distribution repair, upstream oil and gas pipelines and gas transmission pipeline activity.”

It is also the high season for road and bridge work in many parts of the country, which often requires the rerouting of utility lines to accommodate expanded roadways,

“All of this contributes to a steady pipeline of project-based trench safety activity that’s in line with the construction recovery as a whole — that is, a moderate but genuine improvement,” Sondergard concludes.

Strong recovery
Ladd Gould, strategic account manager for Sunbelt Rentals, describes the equipment rental market as “coming back strong.” At the end of Sunbelt’s fiscal year in June, Gould says revenues were up 21 percent, posting the company’s strongest growth in years.

“Currently,” he continues, “we are seeing a higher utilization on what we call the general rental lines: skid-steers, backhoes, compressors and small pumps. In addition, our specialty business has been seeing an increase in large pumping projects and big air compressor rentals.

“We rent compact walk-along trenchers and 45 horsepower riding models. They are rented by utility contractors, including large ones, landscape, service market segments, golf courses, municipal agencies and homeowners for small models.”

Gould said Sunbelt was established to rent equipment to utility contractors.

“We focus on specific market segments with the goal of providing specialty tools and equipment to meet the needs of each segment,” he explained. “Our goal is to have all the equipment needed for individual market segments.”

Historically, vibratory plows, horizontal directional drills and vacuum excavators never have been widely accepted by the rental industry. However, Sunbelt does stock pneumatic piecing tools for making short compaction bores under drives and sidewalks and now carries vacuum excavators as well.

“There has been a boom in demand over the last two years,” Gould said. “The compact, trailer-mounted models are used to pothole to uncover buried pipe and cable, to keep directional drilling job sites free of drilling fluids escaping from bore holes and for general clean-up work.”

Gould said many in the industry believe the strength of the rental market is primarily linked to the economy bouncing back.

“However, it has become more difficult for smaller to medium-size utility contractors to purchase new equipment, so equipment rental becomes the best option,” he said. “And when a project is completed, contractors return the equipment.”

Tier 4 impacts
Another factor, Sunbelt believes, is that new equipment costs have risen dramatically with regulated Tier 4 diesel engine requirements.

“As an example,” says Gould, “a 1,600 cfm compressor’s pricing has risen over 40 percent in the last few years, making rentals that much more affordable for contractors. During the economic downturn, many large contractors performed cost-cutting analysis on rentals versus purchasing, and many found that rentals, from an overall cost perspective, actually saved money.”

Based in Moline, IL, ARA is an international trade association composed of 8,600 equipment rental businesses and nearly 1,000 rental equipment suppliers and manufacturers.

United Rentals Inc. is the largest equipment rental company in the world, with an integrated network of 830 rental locations in 49 states and 10 Canadian provinces. The company’s approximately 11,400 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent approximately 3,300 pieces of equipment with a total original cost of $7.24 billion.

Sunbelt Rentals, Fort Mill, SC, identifies itself as the second largest equipment rental company in the U.S. and operates more than 400 rental locations throughout the United States serving a wide variety of customers, including ranging utility, commercial, residential, municipal markets, specialized service industries and do-it-yourselfers. All facilities are full-service rental locations complete with dispatchers, mechanics and service and delivery vehicles and 24-hour, seven-days-a-week emergency service. Sunbelt is a wholly-owned subsidiary of Ashtead Group.


United Rentals, (203) 622-3131, www.unitedrentals.com
Sunbelt Rentals, (800) 667-9328, www.sunbeltrentals.com
American Rental Association, (800) 334-2177, www.ararental.org

Related Articles