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Playing the Devil's Advocate

Feb. 7, 2018
Sometimes downturns are predictable; sometimes we don’t know what hit us until it does and all that iron is in the yard with payments due and no place to go.

There’s no doubt it’s an optimistic time in the world of equipment rental. I’ve talked to quite a few rental people in the past month or two and their customers are doing well and have high expectations for the coming year. You can read our article about rental predictions in The Rental View of 2018 and the sentiment is almost universal.

Also our interview with Baird & Co. economist Mig Dobre reflects an optimistic view as well do the results of the Baird/RER survey that shows strong optimism in the industry. Utilization is up, rates are far from where they should be but they are on the upside, volumes and demand are terrific, and it’s all good. I expect manufacturers will be selling equipment at The Rental Show like cold water in the desert, writing up orders like nobody’s business!

An infrastructure spending stimulus would certainly boost things, but even without it, the fundamentals look good right now.

While I don’t want to be tossing cold water on peoples’ enthusiasm, the word “sustainability” comes to mind. In recent years, sustainability mostly talked about the sustainability of the planet we live on. Don’t forget about that concept now that the economy is more robust. But economists, including Dobre, do question how long the current upswing is sustainable. It is something to keep in mind.

Does anybody remember 2006? Everybody was flying high, right? Was anybody thinking about Lehman Brothers or subprime mortgages? Maybe a few smart people were, but not many. People thought the good times would last a lot longer. They didn’t see the recession lurking beneath the housing bubble.

It may be premature to talk about, and I don’t mean to spoil the party, and maybe it won’t happen, but I have indelible memories of a lot of over-leveraged companies biting the dust and getting into trouble when things slowed down faster than anticipated. So don’t say I’m talking people into the economy slowing down. Sometimes downturns are predictable; sometimes we don’t know what hit us until it does and all that iron is in the yard with payments due and no place to go. But I assume most of you will consult with people a lot smarter than I when you’re thinking about how much money to spend.

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Turning to more positive thoughts, I hope you enjoy the cover picture and cover story about a couple of wonderful people who have done something remarkable. Erica Hackett became branch manager of Able Equipment Rental’s Edison, N.J., location in Dec. 2016 and Kristen Nancoo became assistant manager at the same time. And they raised the branch’s revenue 55 percent in 2017. Yes, the economy was good last year but if your branch raised revenue by 55 percent, please raise your hands and let me know!

The rental industry is becoming more diverse and it’s wonderful to see. Good to see people do well and find out how much they enjoy the rental business. Hackett and Nancoo, like many people I know including myself, discovered the rental industry by accident. Of course a lot of you were born into it, but that seems to be less the case nowadays. Just like society as a whole, diversity in this industry is an extremely positive thing and I hope we see more of it.

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Consolidation isn’t going away any time soon. There were a ton of acquisitions in the rental industry the past couple of months and we didn’t even get them all into Industry News, not even close. Which is a good reason why you should subscribe to RER Reports, our twice-weekly newsletter so you can keep up (and it costs zero!). But I didn’t bring up this topic to plug that. I bring it up because this industry is still relatively fragmented for its size, with the top two companies still amounting to less than 30 percent of the market and a lot of companies interested in expanding their footprints at a time when business is excellent – despite my cautionary reminders – and capital is relatively affordable and available. Larger companies will want to get larger, the upper middle- and lower middle-sized companies all want to expand their market share.

And new independents keep coming along. Something about that entrepreneurial spirit and the belief that it can be done! What is it about that equipment that keeps people coming back for more? The equipment rental business is still a great place to be.