According to a new study conducted by Cleveland-based market research firm The Freedonia Group, demand for private contracted security services - including systems integration, alarm monitoring, security consulting, and guard services among others – in the U.S. is expected to increase 5.4 percent annually to $64.5 billion in 2016.
The research firm said that this increase in demand, which had been stymied somewhat by the recession, will be driven by a gradually improving economy and a growth in both residential and commercial construction.
David Petina, an industry analyst with The Freedonia Group, said that systems integration will be one of the largest growing segments of the security industry throughout the country as the construction industry begins to rebound.
"That (market) is going to grow real well because there is going to be a lot of building rehab coming out of the building market downturn, so you’re going to get a lot more systems being installed and put together," he explained. "You’ve also got some older systems that are starting to show their age and people are going to upgrade to new capabilities and do some redesigns."
Specifically, Petina said he expects there will be more integration of video surveillance networks with access control systems and intrusion alarms. He believes this work will be outsourced more to systems integrators moving forward.
"As a lot of (these security devices) have moved toward the information technology realm, that idea is more common, the idea of outsourcing that work is very, very common in that industry where maybe firms that may have been reticent to outsource security operations are more comfortable outsourcing things that seem like information technology to them," Petina explained.
With an increasing number of states passing regulations that focus on businesses having better trained security officers, Petina said that will also have a big impact on the guard services market.
"When you have better trained guards, they can be priced a little bit more at a premium, so you start to avoid a race to the bottom where people say 'oh, I’m going to take the cheapest contract,'" he said. "That has been the general trend there and from the guarding company’s perspective, they’re trying to sell value-added service on that - whether it’s someone manning the front desk and viewing monitors or whether it is a guard who is monitoring access control systems and maybe doing some walks to monitor the perimeter or areas within the building."
While the construction industry hasn’t exactly returned to what it was prior to the housing market crash in 2007, Petina said that the study’s projections take into account how things are expected to do in the longer term, which in this case bodes well for the private security industry, especially alarm installers and monitoring companies.
"Five years out, you’re going to have a rebound in the housing market. There it’s demographic, it’s people - whether it’s continued immigration, household size continuing to decline, people moving from bigger houses into smaller houses as they become empty nesters – you have all of those factors that are going to start benefitting the construction market once the economy really starts to improve," he said.
Commercial construction, particularly of retail and office developments, as well as healthcare facilities, is also expected to increase, which will subsequently create more opportunities for security firms, according to Petina.
Though they didn’t take the recent election into account in the study, Petina said that the area of the private contract security industry that could potentially be impacted by politics include lawmakers’ positions on the outsourcing of guard services at federal buildings and the privatization of correctional institutions.
"The fact that we’re going to be building more is a bigger deal long term. Just because you have more buildings means you will have upgrades to facilities, you have rebuilding of things or repurposing of a building," he said. "Those underlying trends are going to be where a lot of your market is and some of these other things… it’s not something you can really predict."