All lined up with nothing to build

Scissor lifts, forklifts, backhoes and bulldozers lined up along Bonanza Road in Ahern Rentals' storage yard stand as an ominous indicator of Southern Nevada's construction industry.

Equipment that was busy building 15,000 new homes and $30 billion in Strip development a year ago is now idle, adding nothing to the bottom line for Las Vegas branches of National Construction Rentals, Atlas Construction Supply and United Rentals.

Every segment of the construction industry, from contractors and engineers to equipment rentals and material suppliers, has been hit by the economic malaise that started with a downturn in housing and grew into financial crisis on Wall Street.

"It's much more challenging," said Fred Bratman, vice president for Greenwich, Conn.-based United Rentals, which has four branches in the Las Vegas Valley. "The market has gotten much tougher. Many projects have just stopped. It's been very difficult."

Some 10,000 construction jobs have been lost in Las Vegas during the past 12 months as major commercial projects and new housing starts have ground nearly to a halt.

Cashman Equipment, which recently moved into new headquarters in Henderson, laid off 70 sales and collection employees statewide in early December, about 10 percent of its work force.

"Unfortunately, with the way the economy is, that's the reality of our business," said Kate Graziano, marketing communicator for Cashman Equipment. "Basically it comes down to, business has to be the right size to serve the customer base and our customer base has shrunk."

Cashman started building the new headquarters three years ago after losing seven acres of its North Las Vegas property to eminent domain for freeway interchange improvements at Craig Road. The economy was in better shape then, Graziano noted.

Jake's Crane and Rigging, another longtime Las Vegas company, was operating a record number of construction cranes across the valley last year and is now going through a shake-up in management, an office assistant said.

The $32 billion construction rental industry has slowed across the nation, said Michael Roth, editor of Rental Equipment Register magazine.

"Overall, yeah, business is down," he said. "I would guess 2008 rental volume is down 10 percent across the board and I think 2009 is going to be worse."

Some areas have been hit harder than others, including Las Vegas, Southern California, Florida and the Southeast, Roth said.

Bratman said construction activity has weakened overall, but he's still seeing pockets of strength. Alberta, Canada, and the U.S. Gulf Coast have several energy-related projects, he said.

Acquisition activity has been relatively quiet in 2008 but could intensify in the coming year as struggling companies become more vulnerable to takeovers, Roth said.

Hyde Park Acquisition Corp. last week agreed to acquire privately held Essex Crane Rental Corp., which owns the largest fleet of lattice-boom crawler cranes and attachments in North America.

Earlier in December, AmQuip Crane Rental announced the acquisition of Powell Equipment Co., resulting in the formation of the Powell AmQuip division.

Las Vegas-based Ahern, which has 48 branches in 11 states, reported a 13 percent increase in equipment rentals and related revenues to $89 million for the third quarter. The increase in revenues came from more equipment available for rent. Overall revenues, including sales of new and used equipment, were up 11 percent to $101.4 million.

Bratman of United Rentals said 60 percent of the company's rental business is nonresidential construction such as schools, shopping malls and hospitals. The slowdown that started in residential is working its way into commercial, he said.

"Our business is a cyclical business," Bratman said. "Obviously the environment is challenging, but we look beyond the immediate and recognize that we've seen this before and we firmly believe sometime during the cycle, it turns around."

United closed branches and sold off a large fleet in response to current economic conditions, Bratman said.

Deerfield, Ill.-based NES Rentals closed three satellite branches in Michigan and Louisiana and reduced its work force by about 100 people.

"Obviously, everybody is looking at the same ugly construction and industrial forecasts for 2009 and planning accordingly," said Mike Disser, NES' vice president of marketing.

The outlook for construction is dimming, said Jeremy Aguero, a principal at Applied Analysis, a Las Vegas-based business advisory firm.

Office, retail and industrial vacancy rates are rising in Las Vegas and the amount of space under construction is rapidly falling from its peak. Few if any of the projects on the drawing board are likely to proceed in 2009, Aguero said.

Major commercial projects such as the $4.8 billion Echelon by Boyd Gaming Corp. have been suspended or canceled. Last week, the $350 million ManhattanWest mixed-use development suspended construction.

Commercial building permits fell to 609 through the third quarter, down 32.2 percent from the same period a year ago, the Center for Business and Economic Research at University of Nevada, Las Vegas reports. The valuation of those permits dropped by nearly $750 million, or 46.5 percent, to $864.1 million.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.