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Strong Economy Boosts Optimism Ahead of Florida Auctions

Mon February 19, 2018 - National Edition
Eric Olson

The annual mega-sale of construction equipment at the 2018 Florida Auctions is almost here with the gavels set to drop throughout February in the Orlando-Kissimmee, Fla., area.

Equipment buyers from all over the world descend on Central Florida during the month, looking to add new and used pieces to their yards. Many also stay long enough to enjoy the many attractions within just a few miles of each auction site.

But as the participating companies and attendees get ready for the main attraction, many of them do so with a more hopeful economic outlook for the new year and a feeling that the overall spending on construction and equipment seen in the last year will continue throughout 2018.

The four main auction companies at the Florida Auctions — Ritchie Bros. Auctioneers, Yoder & Frey Auctioneers, Alex Lyon & Son, and Jeff Martin Auctioneers — all predict prosperous days ahead for their industry, as well as for the global construction industry.

The executives interviewed for this story are veteran and experienced professionals in the equipment auction business: Jake Lawson, senior vice president of sales in the United States South of Ritchie Bros.; Peter Clark, president of Yoder & Frey; Jack Lyon, president of Alex Lyon & Son; and Jeff Martin, president and founder of the company that bears his name.

Anticipation High for Orlando Event

A steady increase in construction spending in the United States over the last few years, boosted primarily by private-sector residential building, is at the root of the optimism they all share about 2018.

Another factor is the hope that Congress and the Trump Administration will be able to fund more infrastructure projects in the wake of new tax-reform legislation.

Jake Lawson of Vancouver-based Ritchie Bros. said he and his company believe “there are a lot of good economic tailwinds from an industrial and infrastructure perspective that lead us to believe that the equipment market is going to stay very active for the foreseeable future.”

The same sentiments were expressed by Jack Lyon, who, when interviewed the first week of January, expressed little doubt that all signs point to a robust marketplace in 2018. To punctuate his belief, he noted the fact that from a year ago to today, sales in the equipment market are up more than 10 percent.

“We think President Trump is good for construction — he passed this tax bill and hopefully he can get this infrastructure bill passed,” said Lyon, who founded Alex Lyon & Son in Bridgeport, N.Y. more than 40 years ago. “If those things happen, this country's economy should really take off. There are lots of positive signs pointing upward and people have confidence again. They're spending money and willing to take risks again — whereas under the prior administration, people were scared and really weren't willing to take chances. When they're scared, they stay on the sidelines.”

Jeff Martin, president of his namesake auction firm in Brooklyn, Miss., also believes that President Trump will fulfill his promise to be more pro-business — a stance that, Martin hopes, will incentivize the public and private sectors to fix failing roads, bridges, water systems and other aging infrastructure across the country.

“The new leadership in Washington has opened up lots of opportunities for infrastructure repairs and there are a lot of places across this country where there is a lot of work to do,” he said recently from the Sunshine State, where he is overseeing his company's first venture into the Florida Auctions.

“You can feel that energy building as we head into the future. Every day I can see the progress. When I travel, it seems there is always a new highway project or new development job going up.”

Lawson and Lyon both agreed that the challenge for their companies is to find good, well-maintained used equipment, but even with original equipment manufacturers increasing production, they still forecast a continuation of healthy sales at their auctions.

International Market Expected to Pick Up

Jake Lawson of Ritchie Bros. said Florida has always been a major exporter of equipment to different parts of the world.

“If we pay attention to the currency rate right now that is probably an advantage. The dollar has shifted a little bit lately, but regardless of the exchange rates, it is always a giant international hub and exporter of equipment, particularly in February.”

Lyon also said he expects more foreign buyers to attend the Florida Auctions this year, as well as other equipment sales events throughout the year. His business caters to several Western Hemisphere countries outside the United States, including Mexico, Canada, Peru and Columbia.

“You are seeing them back because the commodities are back — not to a great extent, but not too bad. There is stability in the numbers,” he said. “Oil is selling at $55 to $60 per barrel so their governments can figure 'Here's what we are going to have for the next six months in our treasuries and here's the money we can give out for jobs to contractors.'”

According to Jeff Martin, his company has tracked its marketing and website activity closely and from that has seen a “tremendous resurgence” from interested foreign buyers.

“When the tracking is analyzed, it is not uncommon to see more people and companies looking at our site from outside the U.S., rather than from within.”

Martin's company also does a lot of business with companies in Mexico, Central and South America and Europe. In addition, he reported that he still receives dozens of calls a day from Puerto Rico and other Caribbean islands, not to mention the Houston area, from contractors needing equipment to help rebuild and recover those areas after last fall's devastating hurricanes and flooding.

Peter Clark at Yoder & Frey, with headquarters in Holland, Ohio, said he believes that by and large, the global construction industry is “on a positive footing and has been trending that way in recent times,” a fact that will only increase the number of foreign buyers to the Orlando area for the Florida Auctions.

“We have seen a resurgence in demand in the wider Asia region and demand growing in Australia, particularly in general construction and mining,” he said. “While Brexit has added an unknown factor to the European industry, we don't believe this uncertainty will destabilize the industry too much and expect demand to continue to grow.”

Cost-Saving Innovations to Become Most Popular

Without any prompting, all four company officials point to one dominant trend to watch in the equipment business: the rapid development and integration of cutting-edge technology in construction machinery.

Each executive interviewed for this article also expressed great excitement about where those new technologies will lead the construction equipment industry and what smarter machines will do to help buyers save money and make the workplaces safer, which also saves on costs.

“Without a doubt, technology advances are the biggest trend I see because people are embracing it more than they ever have before,” explained Lawson. “I really think that it is going to remain a strong motivator for buyers in the future, whereas people used to be a little bit guarded about it. In the past, most contractors had no interest in enhancements such as GPS, for example, but now they see the savings that those technologies can give them and recognize them as good investments.”

Jeff Martin echoed the same sentiments by noting that cameras and computer software on everything from excavators to wheel loaders to dump trucks improve operating these machines, while also making them safer to use.

“I met with a contractor recently out of New Hampshire who told me he put GPS on all his machines, saving him $275,000 a year, just on the bottom line,” he remembered. “You can't ignore savings like that. You can see tractors parked side by side, those with GPS and those without, and those that do have it will generally outsell the others.”

Environmental Innovations to Continue

Often, technical improvements are due to new government regulation, both in the United States and abroad. Most often, those requirements have to do with environmental and safety concerns.

For instance, Peter Clark of Yoder & Frey predicted that more electric-powered equipment will come to market in the near-future as environmental laws become more stringent and the push for a reduced carbon output becomes ever stronger. To illustrate his point, he cited the many recent media stories about electric trucks and the development of more reliable battery technology and charging networks.

“However, the downside to these advances in technology is the inability to export to less-developed markets when equipment becomes too old in their local markets,” he said. “Advances like Tier 4 engines depend on fuel quality, making them less suitable for under-developed areas of the world, which will then impact prices as machines become older and equipment is unable to be recycled to other markets.”

Expect More Monitoring Software

Having monitoring software systems integrated onto new construction equipment that can be connected online to their owners' offices has proven to be an invaluable tool in the last few years, Clark continued.

To him, these are the most impressive technological advancements and he sees their use only growing in the coming years.

“These internet technologies impact construction companies by allowing them to know where their equipment is located at all times, what work load they are under, how efficiently they are working,” he said. “Predictive maintenance —what parts are wearing and need replacing — is also going to be routine with these new designs.

“From an auctioneering standpoint this will also help resale values as much more data will be available to the buyer and more precisely inform them as to the condition of the equipment they are buying.”

Tomorrowland Is Almost Upon Us

The consensus among the four auction executives is that the use of other tools in construction that seemed too futuristic just a few years ago are on the near horizon and will soon be standard for equipment sellers. Those technologies include drones and autonomous, or driver-less, trucks and other vehicles.

Although drones are already being used by some construction and development firms, as well as auction companies, they are not yet widely sold at auction.

“We are not selling them now, but we are kind of a barometer for our customers,” said Lawson of Ritchie Bros., mirroring the comments of the other three officials. “When our customers are using them for their regular business purposes, we will probably begin selling them. I would say that it is probably too early in the infancy of the drone just yet for us and our customers.”

As far as autonomous vehicles on the job site, Lawson and Martin each said that technology is still largely in its testing phase and would seem to be several years away from use.

“But, I do see them being used more in the coming years,” Martin added. “I don't think they will be utilized as much in the populous, high-density areas, but more so in the mining sector, for instance.”

Inventory Is Key

Maybe the biggest challenge facing the heavy equipment auction industry is maintaining supply. Sales have remained strong, Lawson said, but providing a healthy inventory of new and used machinery for sale is a demanding task.

He said that the competition for good used equipment is high both in the United States, and on the world market.

“In our case, newer machines sell better, but we still have a tremendous amount of pre-emission machines and for people who still desire that, we are seeing premium prices paid for them, especially if they are good and clean,” said Martin.

Clark of Yoder & Frey said, “The demand for used equipment is global and different regions of the world demand different types and different standards of equipment. However, the more advanced equipment becomes the more difficult it is to recycle to less developed countries, potentially meaning a shorter life span for these machines.”

With all this said, though, seemingly nothing has dimmed the optimism expressed by the four major auction companies about the Florida Auctions. If all goes as planned for both sellers and buyers at the event, the Orlando-Kissimmee area may gain yet another reason for it to be called the “Happiest Place on Earth.”

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