As 2014 continues to roll on, so does recovery in the utility construction market. And with the hopes of new work, comes the need for equipment. Luckily, contractors have the option to turn to rental if their fleet is lacking a necessary piece of machinery to get the task at hand done. Over the past few years, there’s been a significant surge in equipment rental, and this year is certainly no different.
“We agree with the majority of forecasts for the equipment rental industry, which are for year-over-year improvement in the high single digits this year, and double-digit growth in 2015,” says Blake Smith, Trench Safety Sales and Marketing Director for United Rentals Inc. “We survey our customers frequently, and they report optimism as well. We also see continued signs of secular penetration — meaning an appreciation for the economic benefits of renting — that helps demand for equipment rental outpace growth in non-residential construction spending.”
What’s for Rent?
As equipment rental continues to grow in 2014, companies are seeing certain trends within the industry. According to Bryce Puckett, Texas Division Rental Manager for Kirby-Smith Machinery Inc., it’s out with the old and in with the new as renters are looking for machines that boast the latest and greatest technological developments.
“Intelligent machines are making their way into the market,” he says. “Whether that means a service tech can diagnose the problem from 500 miles away via computer or that a dozer can get you to within a few inches of final grade automatically. Most likely the machines you are renting today are more like your smartphone and less like the flip phones of old.”
Safety and interest in staying in compliance with industry regulations are also big concerns with customers. In utility construction work, trench shoring and shielding is typically an important aspect of a project.
“We continue to see a high demand for engineered trench safety products and solutions,” says Smith. “Anytime a contractor provides a protective system for workers, it must be in accordance with the OSHA Standard, manufacturer’s tabulated data and a site-specific engineered plan — so there are regulatory drivers of the trend toward these systems, as well as business drivers. Contractors are becoming much more educated about the costs of an unsafe work environment.”
Ready to Rent?
If rental fits the bill for your equipment needs, it’s important to start the process by finding a reputable dealer who has a large and newer inventory. This will ensure they have the machines you need and the ability to replace a broken unit if needed during the rental period.
“Partnering up with a trusted and reliable rental organization or dealer is essential to expand your company’s horizons without taking on large equipment debt,” says Puckett. “Most rental companies have 80 to 90 percent of equipment you might need to complete a project. From air compressors to dozers, you can find them all at your local friendly rental house.”
A dealer’s service staff and their ability to repair a machine if needed are paramount to avoiding costly downtime if something fails. To help with this, Puckett offers these three questions to consider when searching for a rental partner:
- Service — If and when something goes wrong, do they have the capacity and parts on hand to handle the situation?
- Footprint — Is my job inside the “normally serviced” territory of the rental company?
- Downtime — If all else fails and I need a replacement unit, will they have one?
After you find the right fit with a dealer, next comes renting the actual equipment. When it comes to rental agreements, Puckett mentions that there are three main types of renting available:
Pure rental. This type of rental is the most common and is basically an agreement to pay for usage of a machine for a period of time. Since the time extends into perpetuity until a unit is returned, a renter is going to pay fees — whether it’s a day, week or even longer.
Rental-purchase option. This option is similar to pure rental except that during the rental, the contractor has the option of purchasing the unit with a portion of the rental fees applied to the purchase price. However, Puckett warns that the amount that’s applied varies by company, so it’s something a perspective buyer should know up front.
Leasing. Although often confused with rental, a lease is a set agreement typically between a bank and a contractor to pay for equipment usage for a certain period of time. Most contracts are for a 24-month minimum lease period, and at the end of that lease, a contractor can purchase the machine for a certain price. The benefit of a lease is off-the-books “ownership” for bonding purposes and the downfall compared to a rental is being locked into a specific term.
Rental continues to be a viable option for contractors looking to tackle work, but may not have the necessary equipment in their yard. When the time comes to rent, partnering with a good dealer who has the equipment you need and the staff to service it equal success in the rental process. As the construction industry pushes forward, the trend for rental grows.
“The trend in the United States is following trends we see in other parts of the world,” says Puckett.
“Ownership becomes an option when utilization for a machine is above 60 to 70 percent, before that [except for specialty items] rental is a better option. Rental keeps liabilities [debt] off the books and provides greater flexibility to bid projects.”
Pam Kleineke is Associate Editor of Utility Contractor.