July 2011, Vol. 66 No. 7
Features
Underground Rental Industry Shows Improving Conditions
Many involved in various construction markets continue to search for signs that the recession is truly nearing an end and better times are close at hand.
The equipment rental industry is considered by some — including many in the underground utility construction market — to be a key barometer of growth. Backhoe-loaders, trenchers, compact excavators, skid-steer loaders, air compressors, pumps and hand-held compactors and tampers all are widely used in underground construction and are staples of equipment rental centers. If rentals of these machines are increasing, the thinking goes, workloads must be increasing.
Growing demand for rental equipment also is good news for equipment manufacturers and dealers, hard hit by slumping sales.
The rental industry began recovering from the recession in late 2010, and the American Rental Association (ARA) is forecasting construction equipment rentals to increase nearly 7 percent in 2011, said Tom Hubbell, vice president of marketing and communications. ARA is an international trade association for equipment rental businesses and rental equipment suppliers and manufacturers.
Hubbell noted construction equipment rentals were down nearly 6 percent for the year 2010, but research showed revenue rose in the last quarter of the year. The good news continued into the new year.
Many consider ARA’s annual The Rental Show held each February as another indicator of the year to follow, and for them, the 2011 show was encouraging.
“It was a great show for the industry,” said Christine Wehrman, ARA executive vice president and CEO. “Show attendance was up nearly 40 percent, and buying activity on the exhibit floor was significantly up. Rental company attendees demonstrated they were at the show to buy equipment and strengthen their businesses — updating and expanding fleets to ensure availability for customers.”
Rental growth
ARA research estimated a 5.1 percent growth in the first quarter of 2011, followed by 6.3 in the second quarter. “For the rest of 2011, we expect quarterly growth nearing 8 percent,” Hubbell said.
As mid-year approached, rental stores reported strong demand for seasonal lawn, garden and landscaping equipment, including trenchers, mini excavators and skid-steers, Hubbell said.
“As with most construction recoveries,” he continued, “demand for earthmoving equipment comes first, so that is where many rental stores are seeing increased activity, although this varies by region. In addition, lift or high-reach equipment, compressors, generators and other basic construction equipment will see an increase as non-residential construction starts to rebound.”
Momentum through the remainder of 2011 is expected to carry over into 2012.
If, in fact, demand for rental equipment continues to grow as predicted, manufacturers should enjoy healthy sales to the market as rental stores replace older models they kept in service during the worst years of the recession.
“As more contractors and construction companies are exposed to rental,” he added, “they realize the value rental provides of having no long-term maintenance costs, no storage requirements and no large capital expenditures. This is especially important as financing has been a challenge for contractors in some in the construction industries.”
With headquarters in Moline, IL, current ARA membership includes more than 7,500 rental businesses and 1,100 manufacturers and suppliers. Many stores specialize in light construction and inventory walk-along trenchers, compact excavators, skid-steer loaders and attachments and small loader backhoes. Equipment rental centers carry larger equipment, but usually not large excavators, trenchers, and dozers.
Underground construction equipment rentals are not limited to ARA member stores, and ARA rental statistics do not include rentals by equipment dealers and distributors.
Most dealers of equipment used for underground work have active rental operations that include trenchers, excavators, backhoe-loaders, and other equipment, and rentals are an important source of income, especially important during difficult economic times. Dealers often have larger size machines conventional rental sources do not carry. Used inventory also provides opportunities to make rent-to-buy deals.
Equipment dealerships also rent horizontal directional drills, vibratory and static plows, and vacuum excavation equipment which are all rarely available from conventional rental outlets.
FOR MORE INFO:
American Rental Association, (800) 334-2177, www.ararental.org
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