Despite concerns about 2012 being an election year, and economic issues such as high unemployment, the slowdown in Europe and the burgeoning costs of equipment, 2012 turned out to be a banner year for much of the rental industry. And, to the relief of many, despite widespread misinterpretations of the Mayan calendar, the world didn't come to an end in late December.
Then, 10 days later, we passed from the end of the world to the fiscal cliff. Last-minute legislation was passed, and we haven't really leapt yet, although the degree of the precipice still requires action and more negotiation. Important issues regarding taxes, spending cuts, the debt ceiling and budgets are still delicate balances that can create economic tidal waves if not handled carefully. But for the most part, it appears to be back to business, with construction markets in varying phases of recovery.
While many rental people say they still have a long upward climb to get back to the levels of 2007 or whenever their peak year was, rental revenues — according to most of the people interviewed for this article by RER — increased during 2012 from 5 to as much as 25 percent compared to the previous year.
Some of the increases must be tempered by the perspective that it is still a time of recovery from a powerful recession, somewhat akin to climbing out of a deep ditch. As California manufacturers' rep Rick Beals, who makes his living selling to rental centers and for whom the bottom of the recession was in 2010, says: “The total drop from top to bottom was probably about 60 percent. 2011 was about 10-percent up from the bottom in 2010. 2012 was another 10 percent from 2011. So we're still down quite a bit, but I like the upward trend.”
While for many areas of the country the drop to the bottom wasn't as severe as in California, nonetheless, many suffered precipitous drops and still are climbing out.
For Rick Dahl of Metrolift, Sugar Grove, Ill., the ditch looks small from the baskets of the aerial work platforms his company rents. “Our revenue is growing at a rate of 8 percent in 2012 after a 22-percent effort in 2011,” he says. “We are very close to being back to our record 2008 levels. In 2012 we had our best rental month ever.”
As 2013 begins, rental people have concerns about the economy, just as people in nearly all fields. In many areas of the United States, residential construction is beginning a comeback, the energy markets are solid, and non-residential is making tentative steps towards recovery. The fear of dropping off the fiscal cliff was prevalent as research for this article was in process, with business people in all sectors greatly concerned about the potential impact of tax law changes. While the fiscal cliff seems to have been averted, there are still major issues that have to be dealt with.
Nonetheless, the outlook for 2013 is, for the most part, far more positive than it has been for years. Most rental companies are expecting an increase in 2013, with expectations ranging from modest to double-digit.
“We are very optimistic about 2013 and expect similar growth to what we achieved in 2012,” says Benno Jurgemeyer, CEO of Phoenix-based Sunstate Equipment. “Our optimism for the most part is based on the opportunities we are seeing in the market place, in both the construction and non-construction business segments. We are seeing a lot of new construction breaking ground and more of these projects are coming from the private sector. We are also seeing evidence that the residential market is turning the corner, a good sign that the general economy is making progress. We have been outpacing the economic forecasts for two years, which is consistent with the theory that rental is increasing its share.”
Part of Jurgemeyer's optimism, in a view expressed by others as well, is that there appears to be a greater variety of projects on the horizon, including solar plants, stadiums, auto malls, distribution centers, hospitals, apartments, healthcare, retail and more.
“Currently non-residential construction has improved significantly, including private investment,” says Bob Kendall, Star Rentals. “Customers are generally more upbeat. Residential is improving as well, which typically precedes commercial expansion. The Pacific Northwest is more of an ‘intellectual economy’ with strong ties to aerospace, biomedical, and high-tech. Our ‘gut feel’ is that we will see those industries expand in future years.”
Graham Hood of Neff Rental agrees with the basic scenario, although Neff's markets range from the Southeast to the Southwest. “Many of the key indicators that we look at are pointing to continued modest growth in most of our markets,” he says. “Dodge is predicting 6-percent growth in overall construction, the ABI has been trending positively above 50 for several months and Global Insight is predicting continued growth performance for the rental industry, aided by the accelerated shift from equipment ownership to rental. These factors along with the ongoing strength of the energy sector and a slowly improving general economy indicate that we should see continued improvement in our business in 2013.”
Dale Leppo of Leppo Rents, based in Tallmadge, Ohio, expects about a 10-percent growth in 2013. “Oil and gas are just beginning to take off in Ohio, residential housing has some life,” he says. “Nothing like 2005-6, but better than the last few years. Many of our customers are making money and buying, fixing and renting equipment.”