According to a report released last week by Cleveland-based market research firm The Freedonia Group, U.S. demand for private contracted security services is expected to grow 4.2 percent annually through 2019 to $66.9 billion. The report, which includes both the nonresidential and residential security markets, covers a large swath of the industry including guard services, systems integration and management, alarm monitoring, private investigations, correctional facility management, and armored transport.
While the overall forecast for the market is positive, Katherine Brink, an industry analyst for The Freedonia Group, said that when comparing this year’s study to those compiled over the past several years, growth seemed to be a bit slower that what she had originally anticipated.
“A big part of that was really tight corporate and other budgets. Even as the economy started to pick up, companies and other organizations were really leery to make major investments in things such as security,” she explained. “That was something toward the later years of the period, more in 2013 and 2014, where we started to see some loosening up (of budgets) and more demand.”
Of the sectors covered in the report, systems integration is forecast to see the greatest increase in demand from 2014 to 2019, growing at 7.3 percent annually to $2.7 billion. During that same time period, guard services are expected to grow 3.9 percent annually to $23.5 billion, while alarm monitoring is forecast to grow at 3.7 percent annually to $20.5 billion.
Brink added that anticipated growth in the rebounding construction market is also expected to have a substantial impact on the market for security services in the U.S. along with crime risks – both real and perceived.
“Going forward, we are expecting to see a lot of growth in the construction side of things and that is what we’re thinking is going to be the major driver moving forward for a large number of security services, especially as companies and other organizations begin to expand at a faster rate picking up from that slower 2009 to 2014 period and primarily from the very beginning of the period in 2009,” said Brink. “One of the major things in security, especially for services, it relies on both the end-users – whether they are commercial or consumer – their real risks from crime, as well as their perceived risks of crime. Even though crime rates have been falling, with the media a lot of people feel they are more vulnerable because there is a lot within the news and the media about events that are occurring.”
Another significant factor contributing to the market’s growth, according to Brink, is the advancement in various technologies and their increasing sophistication which not only affects the products side of the business, but also has residual implications on services.
“In some cases, particularly with guarding and in some places alarm monitoring, the more that you have sophisticated technology and technology that is able to do more or be more efficient, sometimes that works with the services – you can make a guard better or help a guard out – but sometimes it can have a detrimental effect on the demand for guarding in that maybe companies feel that, ‘Well, we have a better video surveillance system so maybe we don’t need as many guards as we previously employed,’” said Brink. “But again, as with systems integration and management and security consulting, the two (sectors) that are expected to see the fastest growth, both of those are really benefitting from how much the technology has been advancing because as the technology becomes more complex, their jobs become even more integral. Customers want to make sure their systems are interconnected and that’s where the consultants and the integrators really come into play.”
The research firm said that while the non-residential (commercial, government, industrial, institutional, etc.) market accounts for the vast majority of private security demand (74 percent in 2014); both the non-residential and residential markets are expected to see similar gains. Through 2019, demand for private security services in the non-residential market is expected to grow 4.2 percent annually to $49.5 billion, while the residential sector is expect to grow by 4 percent annually to $17.4 billion.
One area where growth has slowed is in the area of armored transport, which is expected to grow be less than 1 percent over the next five years. Brink said the reason for this stagnation is due to the increased role that e-commerce plays in the economy today and the subsequent decrease in demand for cash logistics services.
“The more that e-commerce has become important in the economy, the less that people have been relying on cash transactions,” said Brink. “It has really had an effect on the traditional armored transport side of things and there has been more growth on the ATM servicing and other non-traditional, back office-type of services.”
The evolution of smart home and smart building technology will also play a role in the industry in the years to come and it has already played a key role in the growth of alarm monitoring. From 2009 to 2014, alarm monitoring experienced an annual growth rate of 3.9 percent compared to just 0.3 percent for guard services during that same time period.
“Alarm monitoring has been seeing faster growth than guarding and will see similar growth as guarding going forward,” she said. “As the video surveillance side of things grows, it can have a negative effect on guarding demand – usually just lessening the number of guards that are needed. Alarm monitoring also does face some competition, primarily on the residential side of things where the technology has advanced as well. The technological advances, on the other hand, can be beneficial to alarm monitoring because as homes become more integrated and you’re looking at the entire home itself, alarm monitoring companies are adding on value-added services, so it’s not just alarm monitoring but more the total home-type of things.”
For more information about the “Private Security Services” report, visit www.freedoniagroup.com.
