If you run a security company in Memphis and you spent Q3 doing temperature checks at office buildings, you probably had a decent quarter. If your revenue depended on concerts at the FedEx Forum, conventions at the Renasant Convention Center, or guard posts at Downtown hotels, you’re in trouble.
The third quarter of 2020 split the Memphis private security market into two camps. Companies that adapted to COVID-related demand are busier than they’ve been in years. Companies tied to events, hospitality, and tourism are burning through reserves and hoping for a 2021 recovery that nobody can guarantee.
The local market, which we estimate at roughly $200 to $250 million in annual revenue across contract security, in-house operations, and technology services, just had its most uneven quarter in recent memory.
The Winners: COVID Screening and Healthcare
The companies that came out ahead this quarter share a common trait. They moved fast when businesses started reopening in May and June, offering temperature screening, mask enforcement, and capacity management services that didn’t exist as product lines six months ago.
National firms had the advantage of scale. Allied Universal, the largest security company in North America with over 250,000 employees, launched its “Enhanced Protection” offerings early in the summer. They had the infrastructure to deploy thermal imaging cameras, health screening kiosks, and trained personnel across major commercial properties in Memphis within weeks. Securitas did something similar, packaging COVID screening into its existing contracts.
Regional and local firms had to be scrappier. Their advantage was speed and customization. A property management company that needed guards doing temperature checks at three office buildings in East Memphis by Monday morning could get faster turnaround from a local operator than from a national company running every request through a regional office in Nashville or Atlanta.
Healthcare security is the other clear winner this quarter. Hospitals and medical facilities across Shelby County increased security staffing significantly starting in March and haven’t pulled back. Methodist Le Bonheur, Baptist Memorial, and St. Francis have all added guard hours. The reasons go beyond COVID screening. Emergency departments saw a spike in agitated patients during the early months of the pandemic, and visitor restriction policies required security personnel at every entrance to manage access.
Construction security held steady too. Memphis-area construction projects, including the ongoing development around the Crosstown Concourse area and several warehouse projects in the southeast industrial corridor near the airport, continued through the pandemic with minimal interruption. Construction sites need overnight security whether there’s a pandemic or not, and the companies providing those services saw stable demand.
The Losers: Events, Hospitality, and Retail
Live events vanished in March and haven’t come back. For security companies that depended on concerts, sporting events, festivals, and conventions, Q3 was a disaster.
Memphis in May, the city’s biggest annual event series, was canceled for the first time in its history. Beale Street, which on a normal Saturday night needs dozens of security personnel managing crowds, has been running at a fraction of its pre-COVID volume. The FedEx Forum is dark. The Orpheum is dark. The Cannon Center is dark.
Event security is a high-margin business when it’s running. When it stops, it stops completely. There are no half-measures. A company that staffed 40 guards for Memphis in May and 25 for Beale Street weekend crowds is looking at zero revenue from those contracts with no clear timeline for return.
Hospitality took a similar hit. The Peabody Hotel, the Sheraton on Beale, the Westin on the bluff overlooking the river, all of them cut back on everything in Q2, including security. Hotel occupancy in Memphis dropped below 30 percent in April and has only partially recovered. The security contracts attached to those properties shrank accordingly.
Retail security is a mixed bag. Big-box stores stayed open as essential businesses and maintained their security spending. Malls are a different story. Wolfchase Galleria and Oak Court Mall have reduced hours and reduced foot traffic, which means reduced security needs. Individual retail locations that closed permanently, and there have been plenty across Memphis, represent permanent contract losses.
Guard Wages Are Going Up, and Nobody’s Happy About It
One of the less visible effects of COVID on the Memphis security market is wage pressure. Finding guards willing to work right now is harder than it was in January, and that’s pushing pay rates up.
The reasons stack on top of each other. Enhanced federal unemployment benefits made a $10-an-hour guard job less attractive than staying home. The health risk of working in a public-facing role during a pandemic discouraged some applicants. Guards with childcare responsibilities couldn’t work when schools went virtual. Older guards, many of them retirees supplementing their income, dropped out entirely due to health concerns.
The result is a labor shortage at the entry level that’s forcing companies to raise starting wages. A guard position in Memphis that paid $9.50 to $10.50 an hour in February is now posting at $11 to $12. That doesn’t sound like a dramatic increase until you multiply it across hundreds of guard hours per week per contract.
Security companies are caught in a squeeze. Their costs are going up, and their ability to raise prices is limited by the fact that many clients are themselves struggling financially. A restaurant owner who’s doing half the revenue she did last year is not enthusiastic about a 15 percent increase in her security bill.
The national firms can absorb some of this through scale and corporate resources. Local companies operate on thinner margins and feel the pressure immediately. Some have responded by being more selective about which contracts they pursue, focusing on higher-margin work like healthcare and corporate security and letting lower-margin retail contracts go.
The Big Players Are Getting Bigger
The national consolidation trend that was already reshaping the security industry before COVID is accelerating. Allied Universal, already the dominant player in the U.S. market, has been in discussions to acquire G4S, the London-based security giant with operations in over 80 countries. If that deal goes through (and industry analysts seem to think it will), the combined company would have revenues approaching $18 billion and an employee count north of 750,000.
What does that mean for Memphis? Consolidation at the top tends to push mid-size companies into one of two choices. They either find a niche and defend it, or they get acquired. Memphis has several mid-size security firms that have operated successfully for years by knowing the local market better than the nationals and providing more responsive service. Those companies aren’t in immediate danger, and the post-consolidation integration chaos at the acquiring company often creates opportunities for local operators to pick up clients who feel neglected during the transition.
Securitas, the second-largest global security firm, has maintained its Memphis presence through the pandemic and continues to compete aggressively for commercial contracts. Phelps Security, a known regional name, holds a solid position in its market segments.
What Q4 Might Look Like
Predicting anything right now feels foolish, and I’ll do it anyway.
COVID screening demand will remain strong through the end of the year and likely well into 2021, regardless of what happens with a vaccine. Businesses have committed to screening protocols and won’t drop them until public health authorities give the all-clear.
Events will stay dead through Q4. There’s no realistic scenario where concerts, conventions, and large gatherings return to Memphis before spring 2021 at the earliest. Companies dependent on event security need to find alternative revenue or cut costs dramatically.
Healthcare security spending will stay elevated. Hospitals are preparing for a potential fall surge in COVID cases, and security is part of that preparation.
The labor shortage will persist and potentially worsen as flu season adds another layer of illness-related absences. Companies that haven’t raised wages yet will likely be forced to.
And consolidation will continue. The Allied Universal-G4S deal, whether it closes in late 2020 or early 2021, will reshape the competitive map for years.
For Memphis security companies, the quarter that just ended tested every assumption about how this business works. The ones that passed that test are the ones that treated COVID not as a temporary disruption, with a product line pivot and a willingness to invest in new capabilities. The ones that sat still and waited for normal to come back are still waiting.
Normal isn’t coming back. Something else is, and the companies that figure out what that looks like first will own the Memphis market for the next decade.