It isn't ever apples to apples, but a survey of rental rates across the country shows there are definitely lemons amid all the differing market conditions, company standards, customer demands and equipment categories.
“Rental rates are usually all over the place, doing different things in different places,” United Rentals CEO Brad Jacobs says. “Some regions are up 7 percent on the same day that another region is down 2.5 percent.” The presence of industrial and commercial markets, in addition to the number of contractors, in the area determines the demand of the market, while the number of local centers determines the supply of equipment.
For example, in Seattle, aerial lifts are the main target. “Supply far outstrips demand,” Bob Kendall of Star Rentals says. When asked to explain the worst rate scenario he has seen, he remembers, “How about a 20-foot scissor, a staple of the industry, renting for $250 a month.”
Dave Lytle, manager of the Eugene, Ore., branch of Sunbelt Rentals, explains customer concerns in that market: “Big-ticket items are the ones where people really scrutinize the cost. Someone renting a cutoff saw isn't going to worry so much, but on a month rental of a big boom or forklift, rates will be a concern.”
Things differ for the Chico, Calif., market, where “smaller units are most affected [because] not every rental house can afford to carry the larger pieces of equipment,” says Jim Lynch, northern California rental manager with Peterson Rents, a division of Peterson Tractor.
Trish Cereda, manager of Meridian, Idaho-based Cesco (Contractor Equipment Supply Co.), identifies backhoes as the hardest-hit product category because “everybody thinks they can do something with it.”
Some rates have been cut nearly in half in Cedar Rapids, Iowa. According to Doug Schumacher, owner of A-1 Rental West, the consolidators “are cutting prices across the board on lifts, Bobcats and trenchers, renting ones that usually go for $900 to $1,100 a month at $550 a month.”
Steve Carpenter, rental coordinator of Albuquerque, N.M.-based Rust Rentals, says “rates have been slashed on forklifts. Five years ago, a reach forklift rented for $2,500 a month; now it goes for $1,500.”
On Long Island, N.Y., “the category that's been hit hard is emergency road equipment like light towers, message boards, etc.,” says Steven Durante, owner of Able Supply, “because they are used on high-exposure jobs and are very in demand.” In another New York market, a 20-foot scissor lift rented for $600 a month 15 years ago, and now the same machine averages $350 a month, according to a general manager in the area.
“In the 5,000-pound pneumatic forklift class,” says David Griffith of Bristol, Pa.-based Modern Group, “I see some rates that aren't going to get it done. Maybe you're trying to get market share or get into an account. But once a price is that low, it's very hard to get it back.”
Fact or fluff?
Rates are region-specific and often change daily. “There are also different trends between short-term and long-term rentals,” Jacobs says. All factors, including economic stability, consumer spending, construction starts, weather, competition and service, need to be considered when defining the equation for setting rates.
“Most of what you hear about rental rates is anecdotal — Wayland (Hicks, United's chief operating officer) calls it popcorn,” Jacobs says. “The only people who really know what's going on with rental rates are people who use sophisticated software.”
That might be true, but across the country, people have noticed plummeting rates. “It's extremely competitive, and it's not going to change until some of these inventories get smaller,” Kendall says. Lytle adds, “Rates have been steadily declining for the last three or four years. There is a lot more equipment out there, and everybody's hungrier and chasing customers with rates.”
