Rental rates have not dropped over the past couple of years.
The number of independent rental centers will increase over the next few years.
More than 50 percent of equipment is rented rather than purchased by end users.
Some of you might be wondering if I'm writing this column from the bar down the street from my office. Since I'm writing this in late October, and the Red Sox are playing the Yankees in the American League Championship Series, I might wish I was, but I'm in my office, perfectly sober.
These three concepts, contrary to the current popularly accepted rental wisdom, were opinions expressed by high numbers of respondents in our 2004 RER Industry Survey, sent electronically to more than 10,000 subscribers.
Some of the answers we received were what we expected. But there were a number of surprises, the most unexpected being the question of rental rates. After so many rental owners have complained about the problem of plummeting rental rates, 49 percent responded “no” when asked if rental rates have decreased in their market area over the past two years, while 40 percent answered yes. An additional 7 percent answered they were not sure.
Another surprise was the belief that the number of independent rental centers will increase over the next few years. About 37 percent, when asked if the number of independent rental centers was likely to increase in their market area three years from now, answered it would stay about the same, while 35 percent said the number would increase. Only 25 percent said they thought the number would decrease, flying in the face of the popular wisdom that the independent rental center is on the way out.
Why? The biggest reason cited was the return of former owners. We've already seen that to a degree. I don't think anybody expects this re-entry to be dramatic and industry-transforming but in most markets, the re-entry of one or two former owners, with their contacts and knowledge, access to capital and relationships with customers and suppliers, can have an impact on the dynamics of that market. Many others said their customers were dissatisfied doing business with large companies. That may be true of some, but large companies have their own unique market advantages that cannot be discounted.
Another cause for a potential increase in the number of independent rental centers is basic supply and demand. The economy is expanding. Construction is increasing. The population is growing. Interest in “do-it-yourself” home improvement is burgeoning. Entrepreneurs and capital are still attracted to equipment rental. Although the equipment rental industry lacks the cache of Internet technology or software, it's still a profitable business model that attracts new owners. In addition to returning owners, there are others from outside the industry as well as people who are in management positions with existing rental companies that want to go into business for themselves. This dynamic has occurred in every decade and there is no reason to think it won't happen in this one, even though the capital demands are steeper than in the past.
Of course, every market area is different. Not all are growing, not all are prospering, and some are already saturated with rental centers. But another reason is another area RER's survey goes into — the growth in rental penetration itself. More than 60 percent of survey respondents said the penetration of rental in their market area has increased in recent years and a similar number said they expect that trend to continue in the foreseeable future. And more than a third of respondents believe that already more than 50 percent of the equipment in their area is rented, rather than purchased, by the end user.
We in the media often rely on industry “experts” to tell us about the topics we cover. With this issue the wisdom comes from the real experts — you, our readers, the owners and managers of rental companies. We thank you for your participation and invite you to read for yourselves what your peers have to say.
RER recently added a new staff member, art director Andrea Neasby Porter. This is Andrea's second issue. Of course she is just becoming familiar with the rental market and is mastering our existing templates before injecting her own visual “stamp” on the magazine. But her influence is already being felt and I hope you enjoy her creativity for a long time to come.
