Construction industry downturn hitting equipment rental companies too

Cramo construction containers.
Cramo construction containers. Source: Priit Mürk/ERR

The downturn of the construction market has hit construction equipment rental companies as well, and according to them, a decline can be seen both now and in the near future in general as well as road construction. To help mitigate the situation, companies are looking into new lines of business as well.

Anyone moving around Tallinn who happens to pass by the storage lot of construction equipment and tool rental company Cramo on Tähetorni tänav may notice that the lot is currently filled with a considerable number of construction containers.

Weigh this up against recent news about the downturn in the construction sector and one may get the impression that work at construction sites has halted altogether.

Cramo Estonia CEO Remo Holsmer says that this year is indeed much harder than previous years, but the situation can't be called very bad yet either.

"The amount of work is about the same, but customers are definitely counting their money more, and considering their options at greater length," Holsmer said.

"Our construction market hasn't yet reached the state seen in Finland, for example, where the market is essentially frozen, businesses have gone bankrupt and the state is allocating public funds to rescue the sector," he continued. "Things have also gotten more difficult in Sweden, and since we as a state are rather closely connected with our closest neighbors, then it's likely there are more difficult times ahead for the construction sector in Estonia as well."

Construction container rental volumes specifically, however, have remained more or less steady on year, he added.

You have to put in the effort regardless of whether the market is on the rise or down, Holsmer acknowledged, because thankfully there is good competition on the construction equipment market, which doesn't allow for one to just stress.

The CEO said that as the construction market dries up, companies have started seeking new business opportunities, including sanitary equipment rentals such as toilets and handwashing stations.

One of Cramo's competitors, Ramirent, is likewise seeing a decline, however this isn't generic to the construction sector as a whole.

"In real estate development, particularly in terms of residential housing, the decline in the market is clear," Ramirent CEO Heiki Onton told ERR.

"Road construction volumes have dropped significantly, but from our perspective, this is being compensated by sites connected to Rail Baltica, infrastructure construction Estonian Defense Forces (EDF) investments," Onton said. "Moreover, Ramirent equipment is currently in operation at major industrial sites, such as in the construction of wind farms, Narva, Kiviõli, the VKG oil refinery and others. Nor has any decline been noted in the agricultural sector."

The repair and renovations market hasn't declined either, and private customers are still renting equipment at the same rate as before, he added.

"Ramirent's clientele is very broad," the CEO highlighted. "On top of construction, we also have clients in industry, among local governments and so on. Therefore we on our part cannot confirm a general downward trend."

The company likewise hasn't noticed a tendency by clients to be more careful with their money, he added.

Road construction bleak outlook troubling

Onton said that the biggest downturn can be seen in road construction, and the future in that sector is looking bleak right now.

"Road builders are forecasting a steep drop next year," the Ramirent CEO noted. "The situation is seriously grim, because state investments have dried up."

According to his information, the Transport Administration is currently planning only three kilometers of road construction next year — between Sauga and Pärnu. Additional state investments are vital, he said.

"That would inject money into the economy, and would help restart the Estonian economy in general, enabling better connections for business development," Onton said. "The climate minister's position that Rail Baltica will solve all of Estonia's connection problems with Europe and that investments in road construction therefore aren't a state priority is naive."


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Editor: Aili Vahtla

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