By Megha S Anthony
The value of the global construction equipment rental market is expected to pass $75bn by 2024. A report published by Global Market Insights predicts that the sector will hit $75.18bn within the next 6 years. Factors such as lower administrative overheads reduced maintenance costs, and the need to comply with stricter regulations are expected to drive growth within the market. Improved leasing options have also served to enhance overall customer service by ensuring high product quality, shorter response periods, timely delivery, and scheduled pickups, the researchers added.
The equipment rental segment is on a high in the Middle East, driven by demand from the local construction and FM sectors. Offlate equipment rental options – a combination of machines, technical know-how, and safety credentials – are gaining traction with FM operators.
FM today talks to service providers on this fast and convenient trend that is slowly growing in the industry. Among them is high-access cleaning specialist Grako’s managing partner, Alain El Tawil, who prefers to rent out machines based on numerous factors, such as equipment quality, price, and most importantly project needs. “Whether we purchase or rent depends on the project, because every machine has a certain height and weight, uses diesel or electric power, and can be used for indoor or outdoor applications,” he says. He goes on to add, “Every site in the UAE, with its architectural features, requires a different kind of machine. Accordingly, we assess the project's access requirements versus our stock of machinery, if we do not have a suitable machine free for use then we find bigger benefit in renting the machine from a major supplier who would provide 24/7 support and reliability at competitive rates rather than buying it. In general any given machine might be suitable for use on three out of 30 sites, so it makes more sense to rent than buy in most cases.”
At Emrill, they look at their suppliers as solution providers and partners and not purely as suppliers. With ever-changing requirements and demands in the FM industry, they collaborate with their supplier partners to introduce new technology, equipment, and methods on a regular basis. “When the need develops for new technology and methods to be introduced, the most effective way for us to move forward is to initially rent or lease equipment on a trial basis before looking to roll it out on a larger scale throughout the wider business,” says Shyam Karunanandan, Senior Facilities Manager, Emrill.
Leasing has been a favoured option for many years now at Emrill, for a large number of their supplier contracts. Emrill has successfully delivered its services by leasing the majority of its vehicle fleet, lifting equipment and some of the major operational equipment. “The most important factor for us is to completing a detailed cost-benefit analysis comparing both the leasing and buying options on a case-by-case basis and this is absolutely crucial in our decision-making process,” adds Shyam. A key criteria, Alain says is the ability of a machine supplier to support the project over a long-term period. “Ongoing technical and customer service support from suppliers to meet any urgent need is essential especially when we are looking at the leasing option for our longer-term contract,” he adds.
Another reason they like to rent is maintenance. “Machines do break down and when that happens, then the supplier will typically within an hour get to wherever the machine is,” Alain continues, citing our night time and weekend operational hours are critical factors in such cases. “Secondly, if a machine we own breaks down then the cost implications on us are huge. The repair process is tedious; manufacturers timeline to collecting the unit, waiting for weeks to receive the needed spare parts, repairing it, and returning it – means we loose days of work and incur additional cost of renting a replacement machine with the same specification. The impact is therefore financial for Grako but on the other hand it also impacts our customer's work schedules which we minimize by always trying to find immediate solutions. However, with rental agreements this is not the case, two hours downtime would be reasonable.”
When it comes to advantages, Shyam says that ideally as an FM service provider, they are aiming to concentrate on their core activity, which is IFM and infrastructure service delivery while leaving the equipment maintenance and upkeep to specialist suppliers. This enables them to optimise their resources and efforts. “Renting equipment provides us with the ability to bring in new technology seamlessly and to improve the quality of services and increase customer retention. Obviously, renting also reduces upfront capital investment requirements for an FM Service provider and this is an added incentive,” he adds.
Agrees Alain. Cost-saving also plays a huge role in renting out machines. “If you buy equipment, then you’re using up a huge amount of capital upfront; any bank loans taken for the purchase would come with an interest rate; equipment maintenance, storage, and transportation costs must also be considered and added to our proposals which makes our pricing less competitive,” adds Alain. However, the question does arise if renting out eventually leads to purchase of the equipment? “Typically, when Emrill initially enters into a rental or leasing arrangement this can often lead to the eventual purchase of machinery later if it proves to be fit for purpose. However, if we are able to work on a mutually beneficial long-term leasing model with suppliers, we could see an increase in the percentage of equipment on lease in the future compared to what is the case today,” says Shyam. While Alain goes on to add, “Broadly speaking, equipment purchase might lead to a 2% saving over rental, but the latter is hassle-free and more economical when a project is varied.”
The leasing module is yet to pick up speed in the FM domain and is presently limited to only a few areas, opines Shyam. “Having said this, it has tremendous potential and scope. I would expect that more equipment suppliers are developing a competitive leasing strategy to meet the service and financial demands of customers, as it has growth potential. With the UAE FM industry expected to exceed $6 billion by 2022, considerable opportunities exist for both FM service providers and equipment suppliers to capitalise on synergies and to align their efforts for mutual benefit. Currently, the considerable emphasis is placed on trialing and implementing new equipment and innovative technologies that can improve FM processes, service quality and reduce costs. As such, equipment providers are in a strong position to make major contributions in this area.”