Allegion Outlines Growth Momentum in Nonresidential Security Markets

Allegion President and CEO John Stone says the company is entering 2026 with strong momentum in its core nonresidential security markets, driven by steady institutional demand, renewed activity in commercial office projects and rising adoption of electronic and connected locks.

Speaking at the recent Baird 55th Annual Global Industrial Conference, Stone outlined how Allegion’s specification-driven business model, expanding software portfolio and disciplined bolt-on acquisitions continue to strengthen its competitive moat in the physical security sector.

“This is a very resilient, very powerful business model,” Stone told investors, emphasizing that Allegion’s late-cycle position in construction and its focus on education, healthcare, multifamily and commercial projects are helping offset persistent softness in the single-family residential market.

Nonresidential still leads, residential still lags

Allegion continues to lean into its core nonresidential security franchise across North America, Western Europe, Australia and New Zealand. As Stone reminded the audience, “we are a pure play in security and access products,” with brands such as Schlage, Von Duprin and LCN anchoring a business that closed 2024 at “right around $3.8 billion in revenue,” with roughly an 80/20 split between the Americas and international markets.

Within that, the Americas business is heavily skewed toward nonresidential. Institutional verticals such as “health care, education, higher ed” and commercial sectors like “office, multifamily, retail [and] data centers” make up by far the largest share, while “about 20%, 25% of our Americas business is in the single-family res space.”

The growth profile of those segments has diverged meaningfully since COVID. Stone noted that pre-pandemic, both nonresidential and residential were growing at roughly “5% to 7% or a mid-single-digit percent.” Since then, “nonres has continued to grow. It's been a very resilient business for us,” supported by strong operating leverage. Residential, however, “has been decidedly different… it's been soft for the last 3 years… flat-ish to even down low single.”

Looking ahead to 2026, Allegion expects that pattern to persist: “we see market conditions, nonres continuing to grow, resi still being kind of flattish as what you could expect out of Allegion.”

Institutional, commercial and data center demand

Stone described Allegion as “by our very nature, a late-cycle business,” since “the last thing you're going to do is hang the doors, seal the doors and secure the doors” on any project. Within that late-cycle context, institutional work has been “stable growth last couple of years,” without the pronounced boom-bust dynamics seen in other industries. In his words, even a “weak” institutional environment can still mean “low single-digit growth.”

Commercial has been more variable but is showing signs of life. While acknowledging that a typical commercial building “won't be as product dense as an institution like a hospital or a school,” Stone highlighted recent improvement in “spec activity in commercial office… with tenant turnover and tenant fit out in major metro areas that had gone silent for a couple of years with work from home.” He called that “a great tailwind for us.”

Data centers, which he said are “very fashionable to talk about,” are also contributing. Allegion’s spec writers that handle “an elementary school or a commercial office or a multifamily building also have the skills and capabilities to develop and write specs and end user standards for the who's who of hyperscaler data centers.” While still “a small part of our business,” Stone noted that “it's been growing very nicely.”

Spec-writing as a competitive moat – and AI platform

A major portion of the discussion focused on Allegion’s specification capability – a critical but often behind-the-scenes engine of demand in the door hardware category.

Stone called their model “an incredible competitive advantage,” adding: “There are literally only 2 other companies in the world that have a similar business model at the kind of scale that we do.” Because doors and hardware are so complex and subject to constant change orders, he said, “architects just don't want to deal with it anymore. So they literally outsource it to Allegion and to our largest competitor, by and large.”

Building and maintaining that spec-writing engine requires both talent and technology. Allegion runs “a dedicated apprentice program where we bring in highly talented, civil engineers, train them on how to write specs.” On the tools side, the company has invested “enormously in software tools that provide cloud-to-cloud connection from our system called Overtur into Revit,” enabling “real-time data interchange,” plus “AI tools to help automate parts of writing specs.”

Electrification, connected locks and developer ecosystems

On the product side, Allegion sees accelerating adoption of electronic and connected locks in both residential and nonresidential markets.

“Adoption is accelerating, I'd say, in both segments,” Stone said. In the home, Allegion’s Schlage business is helped by close partnerships with “the mega-techs with the smartphone manufacturers,” including Apple, Google and Samsung. “We definitely punch above our weight,” he said.

Beyond hardware, Allegion is selectively building software capabilities where it believes it has a “right to play and a right to win.”

Finally, Allegion’s stepped-up M&A activity remains tightly aligned to its security and access core. Stone noted the company has completed “14 bolt-on acquisitions in the last 2 years,” and will continue to remain disciplined across strategy, returns and cultural fit.

*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy.