Nevada’s rapid population growth, robust economy, new job creation and low unemployment rate are fueling an unprecedented statewide building boom. Nevada will see $12.3 billion worth of construction spending this year, a $312 million increase from 2005, said Cliff Brewis, senior editorial director for McGraw-Hill Construction. Roughly $4.8 billion will be spent on new homes, $629.9 million go toward schools and libraries, and $468 million will be invested in commercial development.
Construction is now the state’s second fastest-growing employer, trailing only the hospitality sector, according to the Nevada Department of Employment, Training and Rehabilitation. The industry currently employs roughly 130,000 people, or 15,900 more than a year ago. But manpower alone isn’t enough to get the job done. It takes a variety of construction machinery, ranging from excavators and scissor lifts to motor graders and wheel loaders, to meet the state’s many project demands.
Owning or Leasing?
“We’ve had two record-setting years, and we’re on track to surpass 2005 this year,” said Mary Kaye Cashman, chief executive officer of Cashman Equipment Company, the state’s exclusive Caterpillar dealer. “Availability of equipment is a challenge, especially when it takes six months or longer to get new pieces from the factory.”
If a particular item has a long delivery time, Caterpillar will often provide the buyer with a used machine until the new one arrives. It enables companies to keep working without any downtime, a move that has led to loyal, repeat customers. Low interest rates, meanwhile, are prompting many larger firms to buy rather than lease machines. However, many newcomers and start-up firms see leasing as an attractive, cost-effective alternative.
“Right now, we are seeing a pretty equal mix of rentals, sales and lease-to-own activity,” Cashman said. “But we are concerned that rising interest rates could impact business.”
Cashman is one of Nevada’s largest privately owned businesses, with roughly 600 employees, including 250 certified technicians. The company was founded in 1931 by James “Big Jim” Cashman to provide Caterpillar tractors to the crews building Hoover Dam. Today, Cashman owns hundreds of pieces of equipment at 10 locations in Elko, Henderson, North Las Vegas, Reno, Mesquite, Winnemucca, Round Mountain (near Tonopah) and Mammoth Lakes in California.
“The economy is so robust that demand for machinery remains high nationwide,” said Cashman. “Managing an inventory flow and keeping it stocked to anticipate the needs of our customers remains a challenge, since equipment demands vary widely from one end of the state to the other.”
Cashman’s Elko office, for example, stocks parts and equipment for the state’s $5.89 billion-a-year mining industry. The state ranks third in the world in gold production, after South Africa and Australia, employing 11,690 people with an average salary of $67,652. Cashman’s customer relations and quick response time recently led to a no-bid contract for a new $60 million haul truck for a local gold mining operation. Cashman also maintains a parts and service facility for the Round Mountain open-pit gold mining operation, 40 miles north of Tonopah.
“Mining operations run 24/7 so there can be no downtime,” Cashman said. “It’s key to have a working knowledge of our customers’ business. And time is money in the mining and construction industries, which is why we try to provide one-stop shopping and availability for all our customers’ needs.”
Yet Nevada’s hearty level of construction activity can keep equipment at job sites longer than anticipated, depleting rental inventories. Many dealers, as a result, offer lease-to-purchase options. Companies will initially rent a machine for a specific job, but as the job progresses, they often decide to apply rental payments toward the machine’s purchase. However, rising equipment costs and lengthy delivery times have some dealers refusing to sell.
“Some manufacturers have extremely long lead times of 12 to 15 months for a new piece of equipment,” said Charlie Thompsen, general manager of Inquipco Inc., a North Las Vegas construction equipment rental and sales company. “One of our manufacturers, Terex, had three price increases totaling 18 percent last year.”
And while the dealer may get top dollar on an equipment sale, it costs that much more to replace an item. Construction machinery is seeing a worldwide crunch due to high demand from rapidly industrializing nations, such as China, India and the United Arab Emirates. Those countries’ booming economies have fueled a massive build-up in recent years that has strained global steel, concrete and rubber supplies, driving raw material costs higher. The end results have been reduced availability of new equipment, higher prices and slower delivery times. The Hurricane Katrina rebuilding effort is also impacting domestic equipment supplies as construction work on the Gulf Coast begins to ramp up.
Maintenance a Challenge
Maintenance and upkeep of existing machines, as a result, is critical for the survival of rental companies. “A crane may require a staff of 10 to 25 people onsite, depending on the model, make and size of the piece,” said Thompsen, whose company carries rough terrain cranes, boom trucks, aerial lifts and manlifts, among other pieces.
For most companies, maintenance demands require an extensive in-stock parts inventory, as well as trained mechanics available around the clock. Time is money, and a broken piece of machinery can delay a project and prevent workers from performing critical job-related tasks. Some dealers will import machines from other branches of the company to fill a shortage. Outlet branches in cold-weather regions often see seasonal slowdowns during winter, and have equipment available to send to the sunny south end of the state, where the climate enables work to occur year-round. Other dealers may actually rent pieces from rival companies in order to re-rent them to a customer.
Mega-Projects Pressure Market
And nowhere is machinery’s role more apparent than on the Las Vegas Strip, where “the crane” reigns supreme as the city’s unofficial bird. Currently, $24.26 billion worth of resort expansions are on the books for 2006 to 2009, including 34,639 more hotel rooms, 886 timeshare units and 1.3 million square feet of added convention space. An additional $6.45 billion worth of tentative projects have been proposed through 2009.
Current mega-projects include: Las Vegas Sands’ $1.6 billion, 3,025-room Palazzo hotel-casino; Steve Wynn’s $1.8 billion, 2,000-room Encore at Wynn Las Vegas; the $2.5 billion, 3,000-room W Las Vegas; Ian Bruce Eichner’s $1.8 billion, 3,000-room Cosmopolitan Resort & Casino; and Donald Trump’s $500 million, 1,282-room Trump International Hotel and Tower, among many others.
But MGM Mirage Inc. tops them all with its Project CityCenter development. The $7 billion, 18 million-square-foot hotel, condominium, casino and entertainment complex is the largest privately financed construction project in U.S. history, according to company officials. It will be larger than Rockefeller Center, SoHo and Times Square combined. Situated on 66 acres between Bellagio and the Monte Carlo, the mammoth mixed-use development will require no less than three tower cranes and 7,000 trades to reach completion by November 2009.
It’s the type of monster-sized job that Jake’s Crane & Rigging International lives for. The 60-year-old Las Vegas-based firm offers 115-ton and 230-ton tower gantry cranes with self-jacking systems that can handle the biggest projects imaginable. It’s the type of heavy-duty equipment that owners turn to when time means money.
“When casino resorts want to get a project done quickly, they come to us,” said Sam Hawkins, company president. “Tower gantry cranes have more than triple the lifting capacity and line speed of hammerhead cranes, which are cheaper and slower.”
Yet one of Jake’s biggest projects, at the moment, is the $234 million Hoover Dam Bypass project, under construction 20 miles southeast of the Strip. The firm is supplying two 230,000-pound-capacity, 200-foot-tall tower gantry cranes to assist in the excavation of the bridge abutments, approach columns and footings. The cranes are so massive that it took a 400-ton truck crane just to lift them into place. The bypass, which includes a 1,905-foot-long, four-lane bridge spanning Black Canyon, is scheduled for completion by June 2008.
Future Looking Bright
“Demand has been up across the board,” said Mike Bellino, area manager for Cate Equipment’s North Las Vegas office. “The hard part has been keeping enough equipment in store to fill our customers’ need.”
Founded in 1937, Cate Equipment has six locations in four states. It offers over 150 pieces of construction machinery, including the full Ingersoll-Rand line. The North Las Vegas branch has seen a 33 percent increase in business since 2001, especially in rentals of road-construction machines, such as rock crushers, soil compactors and asphalt pavers, Bellino said.
The Nevada Department of Transportation currently has a record $1 billion statewide road and highways construction program underway, including the $94.8 million U.S. 95 widening between Valley View and Rainbow boulevards in Las Vegas. It’s the largest single-road job in state history.
“We stock specific products catering to the earthmoving and roadwork industries,” Bellino said. “It has helped establish us as a niche dealer, which has led to five years of consecutive year-to-year growth.”
According to Inquipco’s Thompsen, “A number of different market forces are currently at play, but Nevada is still a very good market.”
