Rental Equipment Register

Those of you who regularly read RER Reports, our weekly electronic newsletter — which you can access at www.rerreports.com and subscribe for free — may have noticed in our most recent edition there were two articles about new equipment rental companies that started up recently.

One was a young man who recently graduated college who acquired a small rental business in the Carolinas (see http://rermag.com/trends_analysis/headlinenews/a-1-acquires-greensboro-052209/index.html). The business had apparently stagnated some as the owner looked forward to selling out and retiring, and the new owner is investing money in new equipment, upgrading his fleet. I spoke to the young man, William Duke, and he seemed not terribly concerned about starting his new venture in the middle of a terrible recession. His view was that things will turn around and that already — he’s owned the business for a few weeks only — things were looking up and people in the community were already noticing the new look of the business as they put on a coat of fresh paint and brought in some new machines, updating and upgrading an old fleet. Evidently the new energy in the business is somewhat of a magnet, bringing in people and customers.

Another new business is a start-up called Hi-Reach Group (see http://rermag.com/trends_analysis/headlinenews/modern-pera-hireach-052209/index.html) headed by Chris Pera, former president of Modern Group who decided to go into business for himself, with several partners and backers.

I find this new blood in the industry a good sign. Obviously for those who must compete with them, especially a new start-up, I’m sure you’re thinking “terrific, we’ve got more equipment competing for not enough work, with rates at rock bottom, just what we need, another competitor bringing in more machines.” Well, I certainly understand that point of view and I’d probably be sharing it if I owned a rental business in that area.

But viewing the larger picture as one who isn’t out there competing with you, it’s a positive sign that investors are still attracted to this industry, and judging by the fact that I still receive regular calls from potential investors who are considering investing in the rental market, not everybody thinks the sky is falling or at least if they do, they have the feeling that it can be lifted back up again (perhaps with a telehandler?) New blood brings new ideas, attracts more investment into the industry, will buy equipment from OEMs almost desperate for sales, and bring in fresh ideas and vision. They might also provide some employment for people who unfortunately were let go in recent months.

So to those of you who are concerned, we all share your concerns and the understandable anxiety you feel. At the same time, let’s be glad that new people will bring new ideas and vision and innovation, keep the industry from stagnating and feeling like it’s declining. Have you ever driven through the downtown of a fading city full of boarded-up storefronts? It doesn’t make prospective business owners feel eager to start a new espresso and sandwich shop in the area, does it? In a way there’s a similar dynamic at work and when fresh new blood enters an industry or starts a business, it can stimulate everybody to make theirs better.

Yes, business is tough right now and for most rental companies, probably will decline in 2009. Still there is a lot to be hopeful for and a fresh positive enthusiastic confident outlook will help us all recuperate a little faster.

Thoughts From an Investor About Rental Rates

A lot of people have asked me to write about the current rental rate situation, which is, by many accounts, one of the most brutal rate wars in this industry in a long time. This is nothing new or surprising; people have been feeling it developing for a long time. A 60-horsepower backhoe loader, which according to the 2008 RER Rental Equipment Guide should rent for a suggested $2,200 per month, was going for less than $800 a month in south Florida, one source told me. Mason Bailey of Max Equipment in the San Diego area, says rental rates in his area are down anywhere from 20 to 60 percent. Dave Griffith of Modern Equipment on the East Coast says rental rates are down 15 to 30 percent in his company’s market areas. more

Since people are always asking me about how everybody else is doing across the country, in advance of the publication of the RER 100 report — which you’ll soon be able to read at www.rermag.com — I’ll tell you a few clear and obvious trends. With the exception of a few niche players, the responses were pretty universal. Business dramatically slowed down in the 4th quarter of 2008 and the 1st quarter of 2009 was one of the slowest periods most people can ever remember. Most rental companies have responded similarly — letting go of, usually quite reluctantly, 10 percent or more of their work force, selling off underutilized fleet, and cutting costs wherever possible. more