Over the years, to millions of people who have visited there and millions more who wish to move there, southern California, Arizona and Florida have been magnets for many. The states have benefited from robust economic conditions, unparalleled growth, and great weather — depending on whether you like it humid, dry or somewhere in between. But in the 2008-2009 aftermath of the housing and credit crash, these states were the last place you'd want to be doing business.

While the overall RER 100 (1-100 only) fell only about one-third of a percentage point (0.36 percent to be precise — see graph on page 34), companies based in California and Florida that primarily operate in those states combined to drop 17 and 18.2 percent respectively (see graphs page 42). The aftermath of the inflated housing bubble has turned these growth magnets into the poster children for the housing collapse and the resulting effect on rental companies is no surprise, although some are still doing reasonably well. That said, those areas have always been resilient and as long as human beings are attracted to warm weather, they will continue to flock there and those economies will rebound in the future.

The rental industry — and the RER 100 — is going to have to be resilient given the severe hit it is taking right now. The numbers for 2008, overall, aren't bad. Most RER 100 listees reported decent enough business for the first nine months of 2008. Performance was, for the most part, down from the 2005-2007 boom years, but still respectable. It was in the fourth quarter when the bottom dropped out, in many cases rather dramatically, a drop-off that, for the most part, has continued into 2009.

“In the fourth quarter the slope was pretty steep going downward and it's not getting any better in the first quarter,” Gerry Plescia, CEO of Hertz Equipment Rental Corp. (No. 4) told RER in a recent interview.

“Things have gotten tough since the fourth quarter of 2008,” adds Al Kropp of Kropp Equipment (99). “The first three quarters of 2008 we were even and even a little ahead of 2007, but we dropped in the fourth quarter. 2009 is going to be challenging to say the least; we are experiencing very low utilization for the first two-and-a-half months — 35 percent off of 2008's pace.”

Kropp and HERC aren't alone. This year has started poorly for most companies (with a few exceptions) and for the majority, the unsettling aspect of it is not having a clear sense of when it will turn around, based on extensive querying of their own customer base. The consensus is that there isn't a consensus; the answer is they don't know.

“The core problem is the credit crisis and the consequential lack of private work,” says Jamie Cowin of Cowin Equipment (63). “Many contractors have no work left now. Or will be finishing up jobs in a couple of months and have nothing coming down the pike after that. Whether large or small, developers and entrepreneurs are either getting turned down by their lenders, or are themselves reluctant to take a risk, so there is just not much activity out there.”

Some RER 100 executives say they don't really expect an uptick before 2011. A more common expectation is an improvement some time in 2010. Others say the fourth quarter of this year, or even earlier, suggesting that we've reached bottom or are about to do so. Some say the spring warm weather is already signaling an improvement, with more calls and inquiries. But the most common sentiment is not really knowing, or hoping and wishing. The vagueness reflects customer uncertainty.

“The business climate will only improve when there is stability in the financial markets and credit is more readily available,” adds Mike Rolls of Rolls Scaffolding and High Reach (85) in an opinion voiced by many. And what exactly is the timetable for that stability and resolution? The answer is unclear.

So, what to do in the face of these obstacles? The answers to that were pretty consistent. Start with reducing fleet, complicated by the fact that with everybody else trying to dump used fleet and not a lot of people looking to add inventory, used equipment prices don't always lend themselves to tidy profits for the seller. Another is reducing staff, usually with reluctance but accompanied by the sense that if 10 or 15 percent of the company lose their jobs, it's better than 100 percent. It's happening in all industries and perhaps the bright side is, for those companies that need to hire in particular areas, there is talent available. Continue reading...