Snap Baird /RER Survey Shows Small Rental Improvement in July and August

Sept. 9, 2020
The demand for rental equipment continued its solid improvement relative to the second quarter of 2020, according to a “snap” intra-quarter survey gauging business trends in July and August from 90 respondents.

The demand for rental equipment continued its solid improvement relative to the second quarter of 2020, according to a “snap” intra-quarter survey gauging business trends in July and August from 90 respondents. Fifty-eight percent of respondents reported rental activity strengthen in July with an average of 3 percent sequential improvement. Only a quarter of respondents said activity weakened in July, with more than half of those reporting declines saying the declines were less than 5 percent.

The Southern region saw the weakest net responses, possibly impacted by the recent surge in new COVID cases.

August demand improved again, but at a much more moderate pace than July and June. Almost half of respondents reported sequential improvement with an average sequential improvement of approximately 1 percent. The number of respondents who said activity levels remained flat sequentially almost doubled from 17 percent in July to 31 percent in August.

Midwestern and Western net responses moderated significantly compared to July. Midwest COVID cases continued to climb, and Western cases increased in early July before continuing to moderate. The region was most likely negatively affected by widespread wildfires in California.

“Rental industry continues to see activity improvements through August, although the pace of recovery has slowed as COVID-19 spikes have pressured activity in the South and Midwest,” said Baird research analysts. “We do not think recent case spikes have derailed industry recovery, and we expect overall rental business in 3Q has trended in the range of low- to mid-single-digit declines. COVID spikes slowed but did not derail the industry’s recovery: about 60 percent of respondents (both revenue-weighted and equal-weighted) reported that the recovery in business trends (utilization, revenue, etc.) was impacted by the recent spike in COVID infections.”

 Here are a few anecdotal comments from respondents:

·      Base business is down 10-20% but COVID support for testing has generated a net positive!

·        COVID has disrupted multiple jobs due to them being shut down because of the virus. I still believe that the rain we experienced in the first two quarters is also responsible for the late ramp up of utilization.

• Although July and August have seen improvement compared to Q2 2020, we are down approx. 10% from 2019 levels.

·       Market is very flat; the worst is the lack of energy companies not working for us.

• Many contractors we work with still not working to full capacity.

·       While the decrease this month to last seems stark, it is more because of the fire restrictions in our market. When fire season hits here, equipment utilization outside city limits is drastically reduced. Instead of having a single seasonal revenue chart, ours has turned into a double hump revenue chart. It will pop beck up when Fall rain ends fire season, but that is a short-lived hump. Once the ground gets too wet to work, things will slow dramatically again.”

·       2020 looks to be stabilizing, big worry as it pertains to 2021. Future work doesn't seem to be in the pipeline as of now.

·       Business has shifted to more homeowners than contractors. People are home doing projects. It has made our work harder because they are less experienced with equipment. Overall our numbers are slightly higher than last year.

·       An extremely upbeat take: “Business was substantially up in March, April, May, and June as we are an essential business and we had much of the inventory people wanted. Masks, gloves, hand sanitizer, cleaning supplies, wipes, etc. Many business were closed and large companies like Home Depot and Walmart were limiting the number of people in the store at one time and had long waiting lines to enter the store. So many people left and came to a smaller local business in their neighborhood. Our business has been up month over month 30% to over 100%. We have been fortunate to have the inventory and equipment customers need during this pandemic.”

·       Long-term rentals being replaced by short-term rental. Lack of skilled labor and or any labor slowing economic recovery down.

·       Jobs are getting postponed, canceled or re-bid.

·       Certain parts are busy like mining and quarrying. Most highway and bridge jobs are ongoing. We normally see dips in business around this time. The good news is that are customers are paying.

• Contractor slow down but Homeowner DYI is holding steady.

• The market has been busy with 90% utilization of rental equipment.