Euro Rents Proves Growth Of Rental Trend

Oct. 1, 2004
Certain cultural phenomena have always seemed quintessentially North American to me. One example is baseball. While it is now played and enjoyed with

Certain cultural phenomena have always seemed quintessentially North American to me. One example is baseball. While it is now played and enjoyed with great passion in many Latin American countries, as well as Japan, Korea and Taiwan, and even to a lesser degree in parts of Europe and Australia, there is something profoundly North American about it, although attending a ball game in a Latin American or Asian country is a great cultural experience as they infuse their own styles into the grand old pastime.

One can draw a similar parallel about certain musical forms. Jazz, rock and roll, and blues are now enjoyed around the world, but they were pretty much born in the U.S.A.

In a way, I've often regarded equipment rental as a peculiarly North American way of doing business, something that developed from our unique brand of entrepreneurship. In fact, however, rental is far from unique to the United States and we certainly don't have the deepest penetration or the fastest growth rate. When it comes to penetration, with more than 80 percent of equipment usage coming from rental, the United Kingdom has far more of a rental culture than we in the States may ever have and the British have probably earned the right to regard equipment rental as being as British as, say, steak and kidney pie. As for rates of growth, customer awareness of rental is growing faster in quite a few European countries than it is in the U.S. And in many third world countries, it is an exploding concept.

This issue features a look at the European rental market in an article penned by Murray Pollok, editor of European Rental News, a magazine well worth looking at whether or not you have any interest in the Euro rental scene.

While rental is growing in most of Europe, other than the U.K.'s remarkable 80 percent penetration rate, few if any European countries seem to have topped the U.S.' roughly 40 percent penetration rate. European countries have gone through similar cycles as we have in the U.S. in recent years — economic slowdown, construction slumps, rate depression and lack of available capital. And just as the U.S. rental industry has been recovering in 2004 along with the economy, so is the trend in most of Europe.

But there are long-term trends, in Europe as well as in North America, that indicate rental is a good bet for the future. European Rental News' research shows that about 70 percent of European rental companies are currently growing their rental inventory. A recent follow-up survey of RER 100 rental companies showed about 90 percent of the larger U.S. rental companies are fleeting up this year. And RER research indicates that more than 75 percent of U.S. rental executives expect demand for rental to increase in the next few years, with the primary reason being the cost versus value of ownership of equipment.

Rates of rental growth are clearly different in different regions of the world, and over the next few months RER will take a look at rentals in other regions of the world. As Pollok's article shows, rental growth is slow in areas where construction is slumping — this is not exactly a surprise — but construction slumps tend to swing many equipment users in the direction of rental in the long run as capital expenditures for equipment becomes cost-prohibitive in a recession.

The growth of rental in former Communist countries and in emerging countries around the world is further proof of what promoters of rental have already discovered, that it simply makes too much economic sense to rent, whatever the language or economic model.

As Pollok's article shows, consolidation is a trend in Europe as it has been in the U.S., with a current trend towards multi-national European rental companies. And while among U.S. rental companies, only Caterpillar and Hertz, and to a lesser degree, Atlas Copco, have entered the European market in a big way, speculation is rife that it's only a matter of time before other U.S.-based consolidators cross the great water.

Speaking of rental rates, if you haven't seen RER's 2004 Equipment Rental Rate Guide, by popular demand we've returned to the old format we've followed for more than three decades and I suggest you acquire one while supplies last. With more than 100 new equipment categories, the Rate Guide offers suggested rental rates on hundreds of equipment categories from small hand tools to large earthmoving equipment, aerial work platforms and cranes. Check RER's Web site at www.rermag.com for information.