I’ve been watching the Tennessee security market for the better part of fifteen years, and I can’t remember a January that felt quite like this one. The numbers tell a story of a state pulling in two directions at once: record investment in Nashville’s skyline on one end, record crime in Memphis on the other. Both create demand for private security. The question for 2016 is whether the state’s 800-plus TDCI-licensed security companies can keep up.
Let’s start with what’s driving the money.
Nashville’s $2 Billion Construction Problem
“Problem” might sound strange when you’re talking about two billion dollars in new development, but that’s exactly what it is for general contractors who need to protect half-finished high-rises overnight. Nashville issued more building permits in 2015 than any year since the city started tracking them. Cranes now crowd the skyline from The Gulch down through SoBro, and every one of those job sites represents an open target after the crews leave at 5 p.m.
The National Equipment Register pegs construction site theft at roughly $1 billion per year nationwide. Tennessee isn’t immune. Last fall, a site off Charlotte Avenue lost $140,000 in copper wire over a single weekend. That kind of loss gets the attention of project managers fast.
What’s being built? Four major hotel projects in the downtown core. Five Class A office buildings, three of them along Korean Veterans Boulevard. Eight high-rise residential towers at various stages of permitting and site prep. The Gulch alone has enough active development to keep a mid-size security company busy through 2017.
For security firms, this translates to contracts for overnight watchmen, access control at perimeter gates, equipment monitoring, and in some cases mobile patrol routes that cover multiple sites in a single shift. The companies winning this work tend to be the ones that can staff a site with twenty-four hours’ notice, which favors firms with deep rosters and flexible scheduling.
Memphis: Crime as a Market Driver
On the other end of Interstate 40, Memphis closed 2015 with a violent crime rate north of 1,740 incidents per 100,000 residents. That number, drawn from the FBI’s preliminary Uniform Crime Report data, puts Memphis well above the national average and ahead of every other Tennessee city by a wide margin.
Some context: the national violent crime rate sits around 373 per 100,000. Memphis is running at roughly 4.7 times that figure. Nashville, for comparison, clocks in around 1,100 per 100,000, which is already high by most standards.
What does this mean for the security business? It means Shelby County has more active armed security guard registrations than any other county in the state. It means commercial property managers along Poplar Avenue and in the Hickory Hill corridor are signing multi-year contracts rather than month-to-month agreements, because they can’t afford a gap in coverage. It means the demand for armed guards in particular continues to outstrip the supply of qualified, TDCI-registered personnel.
Memphis PD has roughly 2,000 sworn officers for a city of 655,000 people. That ratio, about 3.1 officers per 1,000 residents, falls below the national average for cities of similar size. Private security fills the gaps that public law enforcement can’t cover, and in Memphis, those gaps are significant.
The Statewide Picture: 800+ Licensed Companies
Tennessee’s Department of Commerce and Insurance, through its Private Protective Services division, licenses every security company operating in the state. As of late 2015, that number crossed 800 active licensees. Some of those are one-person operations running residential patrol routes in rural counties. Others are regional firms with 200-plus employees covering multiple metro areas.
The Bureau of Labor Statistics reports approximately 18,000 security guards employed in Tennessee as of the most recent data. That figure includes both armed and unarmed personnel, contract and proprietary. Tennessee ranks in the top 15 states for total security guard employment, driven primarily by the Memphis and Nashville metro areas.
Here’s what’s interesting about the competitive picture: Tennessee doesn’t have a single dominant regional player the way some states do. Atlanta has a handful of firms that control a large share of the Georgia market. Texas has several firms with statewide footprints. Tennessee’s market is more fragmented. The national companies, Allied Universal and Securitas chief among them, hold significant market share in the big metros, but local and regional firms still win a substantial portion of the business, particularly in the mid-market.
That fragmentation creates opportunity for companies willing to specialize. Firms that focus on healthcare security, construction site protection, or event security can carve out profitable niches without competing head-to-head with the nationals on price.
Chattanooga’s Quiet Expansion
Nashville and Memphis get the headlines, but Chattanooga deserves attention in any 2016 outlook. The city’s tech corridor, anchored by EPB’s municipal fiber network and a growing cluster of startups near the Southside district, is driving commercial real estate development that’s bringing new security contracts online.
Volkswagen’s manufacturing plant in Chattanooga, which employs roughly 3,500 workers, maintains one of the larger proprietary security operations in the state. The facility’s expansion, announced in late 2015, will add production capacity and, with it, additional security staffing needs.
Hamilton County’s crime rate is lower than Shelby or Davidson County, but it’s not negligible. Property crime in the downtown area and along the Brainerd Road corridor has pushed some commercial tenants toward contracted guard services for the first time. The security companies working the Chattanooga market tend to be smaller, locally owned operations, though Allied Universal maintains a regional office there.
Workforce Challenges: The Staffing Problem Nobody Talks About
Here’s the issue that keeps security company owners up at night, and it’s not crime rates or construction permits. It’s finding enough warm bodies to fill the posts.
Tennessee’s unemployment rate dropped below 5.5% at the end of 2015. That’s good news for workers, bad news for security companies trying to recruit at $10-12 per hour for unarmed positions. The math is simple: when Amazon’s fulfillment center in Murfreesboro is hiring at $12 an hour with benefits, a security guard post at $10.50 with no benefits looks less attractive.
Armed guard positions pay better, typically $14-18 per hour, but they require a larger investment in training and licensing. TDCI mandates 48 hours of firearms training for armed guard registration, plus a qualifying score on an approved firearms course. That’s a real barrier for companies trying to scale quickly.
The turnover rate in the contract security industry nationally hovers around 100-200% annually, depending on the market. Tennessee is no different. Companies that can reduce turnover to 80% or below have a genuine competitive advantage, because they spend less on recruiting and training, and their clients get consistent personnel who actually know the property.
What to Watch in 2016
Three things will shape the Tennessee security market this year.
First, Nashville’s construction pipeline. If those projects stay on schedule (and Nashville’s permitting process suggests most will), the demand for construction site security will remain strong through at least Q3. Companies that can staff overnight posts reliably will have steady revenue.
Second, Memphis crime policy. New MPD leadership has signaled interest in community policing models and technology investments, including expanded camera networks. If those initiatives gain traction, they could shift some demand away from traditional guard services and toward technology-integrated solutions. Or they could fail to materialize, as previous initiatives have, leaving private security as the de facto supplement to understaffed police precincts.
Third, wage pressure. The national conversation about minimum wage is filtering into state legislatures. Tennessee doesn’t have a state minimum wage (it defaults to the federal $7.25), but market forces are pushing security guard wages upward regardless. Companies that haven’t adjusted their billing rates to account for higher labor costs will find their margins squeezed.
The Numbers That Matter
For anyone evaluating the Tennessee security market in 2016, here are the figures I’d keep on a whiteboard:
- 800+ TDCI-licensed security companies statewide
- 18,000+ security guards employed in Tennessee (BLS)
- Memphis violent crime rate: 1,740 per 100,000 (FBI UCR, 2015 preliminary)
- Nashville building permits: record high, $2B+ in active projects
- Armed guard hourly rate range: $14-18 (contract billing: $22-30)
- Unarmed guard hourly rate range: $10-12 (contract billing: $16-22)
- Industry turnover rate: 100-200% annually
Tennessee’s security industry is entering 2016 with more demand than it can comfortably meet, which is a good problem to have if you’re running a security company. The hard part is execution: staffing the posts, retaining the people, and delivering consistent service across a state that stretches 440 miles from Memphis to the Tri-Cities.
The companies that figure out the workforce piece will own this market. Everyone else will keep scrambling for guards on Thursday night to fill a Friday morning post.