The second quarter of 2019 is in the books. For the Memphis private security industry, it was a period of strong demand and persistent headaches. Contracts grew. Revenue climbed at most firms I talk to regularly. The problem was finding enough people to do the actual work.
Here’s my breakdown of what happened in Q2, what it means, and what to watch for as we head into the dog days of summer.
Construction Security: The Biggest Story of Q2
If you’ve driven through downtown Memphis in the past three months, you’ve seen cranes. The construction boom that started picking up in 2018 accelerated through the spring of 2019, and every active site needs security.
The FedEx Logistics headquarters project on Front Street is the most visible. The old Gibson Guitar factory building is being converted into a major corporate campus, and the construction zone has required round-the-clock security since work began. That’s a multi-year contract for whichever firm is handling it.
The renovation work along Union Avenue has created demand for overnight guards at multiple sites. Same for the new development near the medical district, where several parcels are being cleared for what developers describe as mixed-use projects. Construction security is straightforward work. Watch the site, make sure nobody walks off with materials. The catch is that it requires staffing at hours that most people don’t want to work.
Crosstown Concourse, which opened in 2017, continues to generate adjacent development. New residential and commercial projects near the old Sears building on Cleveland Street have added to the pipeline. The entire Crosstown area has been a security opportunity since the renovation began, and it’s still producing contracts.
I estimate that construction-related security accounts for 15 to 20 percent of the Memphis market right now. That’s a rough number based on conversations with company owners, not hard data. Nobody publishes reliable market-share breakdowns for private security at the metro level. Take it as directional.
Festival Season: Done and Done
Memphis in May is behind us. The Beale Street Music Festival, the World Championship Barbecue Cooking Contest, and the Great American River Run all went off without major security incidents. That’s worth noting because large events are where bad things happen publicly, and public incidents create regulatory and political pressure on the industry.
Security staffing at Memphis in May events was stretched thin again this year. I heard from two companies that provided event security about last-minute scrambles to fill posts. One firm told me they pulled guards from regular commercial accounts to cover Beale Street Music Festival shifts, then had to deal with angry commercial clients who discovered their sites were unmanned.
That’s the tradeoff during festival season. Events pay well, $18 to $25 an hour for uniformed guards at large outdoor events, but they’re short-duration and require dozens of bodies at once. Companies staff up for the festival, and their regular clients suffer. It happens every year.
The Beale Street Entertainment District absorbed the festival crowds without anything worse than the usual drunk-and-disorderly arrests. MPD and private security worked the crowds cooperatively. Whatever you think of how Memphis handles large events, the coordination between public and private security during Memphis in May has gotten better over the past few years.
Staffing: Still the Industry’s Biggest Problem
I wrote about the staffing crunch three weeks ago, and nothing has changed. If anything, it’s gotten worse as summer temperatures arrived.
The numbers remain ugly. Guard turnover in Memphis runs well above the national average. Companies are competing for hourly workers against FedEx, Amazon, Nike, and every other warehouse and logistics operation in the metro. Starting wages for unarmed security guards sit in the $10 to $13 range, which is $2 to $5 less than what the same worker can make loading packages.
Allied Universal, Securitas, and GardaWorld are all hiring aggressively in Memphis right now. Check any job board and you’ll see dozens of open security positions. That tells you everything about the supply-demand imbalance. When the biggest companies in the industry can’t fill their posts, the smaller firms have no chance.
Some companies are trying creative solutions. Phelps Security has been running retention bonuses. Walden Security is investing in career development programs. Imperial Security has been recruiting from the military veteran community and retiree population. All of these approaches help at the margins. None of them solve the fundamental problem, which is that the pay isn’t competitive.
I had a conversation last week with a security company owner who told me flatly that the industry model is broken. “We bid contracts at a rate that lets us pay guards $11 an hour,” he said. “Nobody good is going to work for $11 an hour in 2019. We need to raise our bid prices, which means clients pay more, or we accept that we’re going to keep losing guards to warehouses.”
He’s right. The question is whether clients will accept higher prices. Some will. Many won’t.
Homicides and Crime Trends
I covered the homicide numbers in detail two weeks ago. The short version: through mid-June, Memphis homicides are running ahead of 2018’s pace. The mayor’s office says overall violent crime is down 6 percent, which is true, but homicides are the metric that people care about and politicians fear.
The neighborhoods absorbing the worst of it (Frayser, Whitehaven, Orange Mound, Raleigh) are the same neighborhoods that always absorb the worst of it. Businesses in those areas are increasingly turning to private security, which is driving contract growth for companies willing to work in high-crime zones.
There’s also been a string of carjackings across the city since late May. MPD announced arrests this week: three suspects, including two 15-year-olds. The juvenile element makes these cases especially concerning. Carjackings involving armed teenagers create a level of public fear that goes beyond what the crime statistics capture. People change their behavior. They avoid certain gas stations after dark. They think twice about where they park. That anxiety, whether it’s statistically justified or not, generates demand for security at commercial properties.
The Tennessee Legislature
The state legislature wrapped up its session earlier this month. A few items worth flagging for the security industry.
Governor Bill Lee signed legislation expanding gun rights in several contexts. The Tennessee Permitless Carry debate has been ongoing, though the full permitless carry bill hasn’t passed yet in 2019. The political direction is clear: Tennessee is moving toward fewer restrictions on firearms. For private security companies, this creates a complicated environment. More armed citizens means different calculations about how guards interact with the public. It also creates confusion about who’s authorized to do what.
On the licensing front, the Tennessee Department of Commerce and Insurance continues to administer the Private Protective Services program that governs guard licensing. No major changes came out of this legislative session, which is probably fine. The licensing process works, even if it’s slow. The background check and training requirements filter out the worst candidates, and the registration system gives companies a way to verify that their guards are legal.
Company-by-Company
Here’s a quick look at how major players in the Memphis market performed in Q2, based on my reporting and conversations with industry contacts.
Allied Universal remains the dominant player in Memphis by volume. They handle the lion’s share of large commercial contracts: corporate campuses, healthcare facilities, shopping centers. Their challenge is the same as everyone else’s: staffing. Allied has been running signing bonuses and referral bonuses to attract guards, with mixed results. Their corporate size is both an advantage (benefits, training programs) and a disadvantage (bureaucracy, slow decision-making at the local level).
Securitas maintains a strong Memphis presence, particularly in the corporate and financial sectors. They’ve been steady rather than aggressive in growth. Guards I’ve talked to at Securitas posts generally describe the company as better-organized than average, which might explain their slightly lower turnover.
GardaWorld has been expanding in Memphis. The Canadian company has been picking up apartment complex contracts and industrial site work, particularly in North Memphis and the Frayser area. Their growth strategy seems to be going after the contracts that bigger firms consider too small or too risky.
Phelps Security continues to be one of the most reliable local operators. They’ve been in Memphis for decades, and their reputation for showing up and doing the job carries weight with clients who’ve been burned by larger companies that over-promise and under-deliver.
Walden Security has been growing their Memphis footprint from their Chattanooga base. Their investment in guard career development is a smart long-term play, though it’s too early to say whether it’ll meaningfully impact retention.
Imperial Security is a smaller player that’s carved out a niche in specialized security work. They’re not trying to compete with Allied on volume. They’re going after accounts that need specific expertise.
What to Watch in Q3
Summer isn’t kind to the security industry. Here’s what I’m tracking through July, August, and September.
The homicide pace. Summer months historically produce more violent crime in Memphis. If the current trajectory continues or accelerates, the political and media pressure will intensify. That pressure translates into more demand for private security, which is good for the industry’s revenue and terrible for its staffing problems.
Back-to-school security. Shelby County Schools will be gearing up for the new school year in August. School security is largely handled through the school district’s own security force and MPD’s school resource officers, but private companies pick up contracts for after-school programs, school events, and the construction projects that seem to always be happening at one campus or another.
Hurricane season. Memphis isn’t on the coast, but the city is a critical logistics hub. When a major hurricane hits the Gulf or the Southeast, FedEx and other logistics companies ramp up disaster-response operations, and those operations need security. Memphis-based security companies have deployed guards to hurricane-affected areas in past years. If a significant storm hits this summer, expect some local companies to divert resources southward, which would worsen the staffing situation here at home.
FedEx hub modernization. The ongoing construction at the FedEx superhub in Memphis is a multi-year project that generates security demand both at the construction sites and at temporary facilities being used during the renovation. This is a steady baseline of work that won’t go away anytime soon.
Heat-related attrition. Every summer, guards quit because the outdoor conditions are unbearable. A few weeks of 95-degree days will thin out the ranks at companies that do a lot of exterior post work. Construction sites, parking lots, gated communities, any post where the guard is standing outside for eight hours. Companies that don’t have covered posts or guard shacks with air conditioning are going to lose people.
The Bigger Picture
Memphis’s private security industry is in a familiar position: more work than it can handle, not enough people to handle it. The construction boom and rising crime are pushing demand up. The tight labor market and low wages are keeping supply down.
Something has to give. Either the industry raises wages to compete for workers, or clients accept degraded service: slower response times, unfilled posts, less experienced guards. There’s no third option.
I’ve been covering this market for years, and the same conversation happens every summer. Companies complain about staffing. Guards complain about pay. Clients complain about no-shows. Then fall arrives, demand cools slightly, and everybody forgets until the next June.
Maybe 2019 is the year something changes. The labor market is tighter than it’s been in decades. Unemployment in Shelby County is around 4.5 percent, which means anybody who wants a job can get one. That gives hourly workers options they haven’t had in years, and they’re exercising those options by leaving security for better-paying work.
The companies that figure out how to pay more and charge more will survive. The ones that keep trying to run $11-an-hour guard services in a $15-an-hour labor market are going to struggle through the summer and into the fall.
Q3 will tell us a lot. I’ll have the next recap in late September.