If it’s not already a cliche, it should be. Almost every industry is navigating this “new normal” and defining what that might mean despite high interest rates, high prices for materials and services, and tough employment challenges. And it’s an election year – which always seems to dampen confidence in planning.
Rental We reconnected with a handful of rental business owners profiled in our Rental Snapshot column by Alexis Sheprak and talked to them about their year, challenges, solutions and expectations for 2025.
In February, the American Rental Association (ARA) stated that the outlook for the equipment rental industry was positive, with growth expected to reach 7.9% in 2024. Tom Doyle, ERA Vice President, Program Development strengthened the strength of ERA Rentalytics quarterly forecast. As he explained in the announcement, “Rentals should benefit from tailwinds from interest rates, inflation, improved supply, a preference for rent, and government and private spending.” He added: “Once again, rental space is forecast to increase.” Rentalytics is a paid subscription service of the ERA.
https://news.ararental.org/aras-most-up-to-date-economic-forecast-released
https://ararental.org/ara-rentalytics
In fact, the development was even better than expected; the forecast report for the second quarter indicated an increase of 9.7%.
https://news.ararental.org/aras-us-and-canada-second-quarter-economic-forecast-released
“Business was better than expected. We started the year cautiously optimistic and met or exceeded our goals,” said Meghan Boland, operations manager at BER LLC (Boland Equipment Rentals). BER is based in Hackensack, New Jersey. Rental profiles BER in April 2023.
https://berequipment.com/
On the other side of the coin is Troy Greenleaf, owner of the General Rental Center and board member of ERA of Maine, got off to a slow start revenue-wise. They quit the event business and focused solely on equipment rentals in 2020. Although planned, the pandemic accelerated the change. They also discontinued the snow removal service this year, which they had offered for the past few years to bolster cash flow during the winter months. General Rental Center is located in Maine. General Rental Center decided to discontinue their snow removal service because it was outside of their normal offerings and was not as profitable as they had hoped. Rentals Greenleaf’s profile was published in the August/September 2023 issue.
https://generalrentalmaine.com/
Andrew Heesacker is President and CEO of Arvada Rent-Alls and former Director of Region 7 in the ERA National Board. Arvada Rent-Alls is based outside of Denver, Colorado on what Heesacker calls the “Front Range.” They serve the area, the mountains, and as far north as Wyoming. About 70% of their business comes from small to the largest construction companies in the country, with the rest being homeowners/general purpose tools. Heesacker’s Arvada Rent-Alls has two locations in the Denver area, with a third opening in the summer of next year (2025). Rentals Heesacker’s profile was published in the March 2023 issue.
https://www.arvadarentalls.com/
Still, “2024 is off to a little weird start,” Heesacker says. But he admits, “the last four years have been weird.” As with many others, COVID has turned everything upside down. The general tools sector has been busy with homeowners at home, but the supply chain has been challenging. Anecdotally, though, things are looking up as suppliers now have equipment lying around.
As a small, independent rental shop He explains that at the beginning of these crazy years, they had to be strategic and determined. Whereas they had to place orders almost a year in advance, they now find equipment that is available in the area or arrives within a month. “It was like a rollercoaster ride,” Heesacker describes. “An aggressive descent and then it goes up again and we sit in our positions in a different way. That was a big challenge.”
All three of our rental industry representatives seem to agree: their biggest concerns are the outcome of the election, the economic situation and a possible slowdown in construction due to high interest rates.
“That has given us a mild 2024,” he says. Although the election year brings its own challenges, there is optimism. “I think we are slowly seeing some stabilization,” says Heesacker. “There were rumors that interest rates could hopefully fall in the fourth quarter.”
“Unfortunately, the overall cost of everything combined with continued high interest rates and uncertainty surrounding the presidential election have caught up with us a little faster than I had hoped,” says Greenleaf. “At the halfway point, revenues are only down slightly, but the overall climate feels much slower, and we seem to have a lot of inventory on the property that would normally be leased at this time of year.”
Greenleaf expects the economy to continue to slow for the rest of the year and most likely into next year. “Potential rate cuts by the Fed could help, but only marginally, and most likely won’t make a dramatic difference, if any, until spring 2025,” he says.
Ultimately, it’s the rising cost of doing business. Given the increased average cost of equipment over the past three years and interest rates, acquisition costs have risen even further. Greenleaf has tried to increase rental rates to account for this, but he says they are unable to increase them enough to offset this and remain competitive. He adds: “Managing high overheads and utilising existing inventory is difficult under normal circumstances.— This is even more true in the current economic situation.”
Other challenges
Attitude. Despite being a small shop, Greenleaf is not immune to staffing challenges. He explains that General Rental Center has been fortunate to hire two qualified employees in the past three years. “While that’s a huge accomplishment for us, we could definitely use more help,” Greenleaf says. “I spend a lot of time doing mundane tasks instead of managing my business, which limits progress.”
Wages and salaries also play a role, both elements that pose a major challenge for Heesacker in the Denver area. “Our salaries tend to be high because we believe in compensating our employees as well as possible and sharing in the success of the company,” he says. To remain competitive, he explains, you have almost no control anymore, as the market almost dictates what you can do to find and retain qualified employees.
Delivery and delivery times. All three of our business owners have experienced better lead times recently. This improvement has allowed BER to make decisions much faster and reduce downtime, resulting in higher utilization. Both Greenleaf and Heesacker now see that most manufacturers either have equipment and supplies in stock or have a lead time within a month.– a drastic difference from the previous year.
Culture. Another key issue for Heesacker is company culture and the mental health of its employees. “One of the biggest challenges when it comes to company culture is people’s overall mental health,” he says. With so many potential issues at home, in the country and/or around the world, it can be stressful for anyone. “As employers, the line between our involvement in people’s lives is a grey area… I think it’s up to us, as rental business owners and large rental companies and companies in general, to really look at this more,” he says.
When Rental In conjunction with Heesacker, his company has been conducting one-on-one meetings. Arvada Rent-Alls has just over 30 employees, and executives and management meet with each one for about an hour at a time. “It’s a lot, but it’s very important, especially with younger people, to show career paths and opportunities. We try to give people a roadmap … and make sure those employees have those tools.”
2025
Despite the uncertain economy and all the challenges facing the equipment rental business, Boland is planning for continued growth. “We look at how the economy is doing every month and try to respond as quickly as possible,” she says.
“The best advice I can give any small business owner today is to just be yourself,” suggests Greenleaf. “This industry in particular can be very set in our ways. We tend to do things a certain way or follow industry standards, just normal, and stick with what works. That’s fine, but we should always be looking for a better way, a better product, a better service. Think outside the box. Think critically. What we’ve always done may not even be a good way, let alone the best way.”
Greenleaf points out that the pandemic has been the catalyst for dramatic change for many areas of the rental industry, but change doesn’t have to wait for a crisis. “It’s a choice, we just have to make it. I would strongly recommend putting a system in place that encourages improvement in every aspect of your business.” His suggestions include getting employees involved at all levels, which should encourage empowerment and ownership and increase your chances of success.
“What do you have to lose? What do you have to gain?” he asks. “If you don’t try, you’ll never know.”
