As 2017 draws to a close, I want to take stock of where Tennessee’s private security industry stands from a regulatory and market perspective. I’ve spent this year consulting with security companies, attending TDCI advisory meetings, and talking to business owners who purchase guard services across the state. The picture that’s emerged is one of an industry straining under its own growth.
TDCI processed approximately 4,200 individual guard registration applications in 2017. That number includes new registrations and renewals. For context, the department processed roughly 3,800 in 2016 and 3,500 in 2015. The trend line is clear: more people are entering the industry, or at least attempting to. Whether enough of them are staying is a different question entirely.
Nashville: The Contract Factory
Nashville generated more new security contracts in 2017 than any other city in the state. The hotel construction pipeline I discussed in an earlier column produced immediate demand for hospitality security officers. Construction sites across the metro area, from the SoBro high-rises along Demonbreun Street to the mixed-use developments spreading through The Nations and Germantown (Nashville’s Germantown, not the Memphis suburb), all required site security during build-out phases.
The Nashville Convention Center’s continued heavy booking schedule created steady demand for event security. Bridgestone Arena’s concert and sports calendar alone generated hundreds of guard shifts per month. Nissan Stadium, with the Titans’ home schedule plus special events, added more.
What struck me about Nashville’s 2017 growth was how little of it was planned. Security companies I spoke with described winning contracts with 10 to 14 days’ notice. A hotel opens ahead of schedule and needs lobby coverage by Friday. A construction firm’s insurance carrier mandates site security as a condition of continued coverage, effective immediately. A property manager at a new apartment complex on Charlotte Pike realizes, mid-leasing, that the building needs a night guard.
This reactive pattern puts enormous pressure on companies to staff positions before they’ve had time to properly recruit, vet, and train. Several Nashville-area managers admitted to me, off the record, that they’d placed guards on posts with incomplete paperwork because the alternative was losing the contract. I understand the business pressure. The compliance risk, however, is real and documented.
Memphis: Armed Guard Capital
Memphis maintained its position as the state’s largest market for armed security services. The city’s crime statistics, while showing modest improvement in some categories compared to 2016, remain elevated enough that armed guards are standard for most commercial accounts.
The Shelby County area accounted for approximately 35 percent of all armed guard registrations processed by TDCI in 2017. That concentration reflects Memphis’s unique security environment: high property crime, significant violent crime in specific neighborhoods, and a business community that has largely accepted armed security as a basic operational cost.
I noted two developments in the Memphis market this year worth highlighting.
First, several companies expanded their service areas along the I-40 corridor between Memphis and Jackson. The logistics boom driven by FedEx, Amazon’s growing regional presence, and the general expansion of Memphis’s distribution sector pushed demand into suburban and exurban areas that historically had minimal security needs. Warehouses and distribution centers in Arlington, Millington, and along Highway 64 in Bartlett’s industrial zones all added guard coverage in 2017.
Second, Memphis companies continued to compete aggressively on price, which has had a visible effect on guard wages. Average armed guard pay in Shelby County held roughly flat year over year at $16 to $18 per hour for standard assignments. In a market where inflation ran close to 2 percent and competing employers raised their starting wages, flat guard pay amounts to a real-dollar decline.
Technology Adoption
GPS patrol tracking crossed a threshold in 2017. The technology has been available for years, but 2017 was the year it became a standard client expectation rather than a premium add-on. Business owners who purchase security services now routinely ask whether the company offers GPS-verified patrol routes, and many include GPS requirements in their contracts.
This is a positive development from a compliance and accountability standpoint. GPS tracking creates an objective record of patrol activity. When a client asks whether the guard actually walked the parking structure at 2 AM, there’s data to answer that question. Before GPS, it was the guard’s word, the company’s assurance, and not much else.
Camera systems also improved in 2017, driven primarily by falling hardware costs. A four-camera IP system with cloud storage that might have cost $8,000 to install three years ago now runs $3,000 to $4,000. This price drop has made camera coverage accessible to smaller businesses that previously relied on guards alone. Several security companies in Nashville and Memphis now offer integrated packages: guards plus cameras plus alarm monitoring under a single contract.
The technology I’m watching most closely for 2018 is body cameras for security officers. Law enforcement adoption of body cameras has created public familiarity with the concept, and a handful of Tennessee security companies began pilot programs this year. The legal framework for body camera use by private security officers is less clear than for law enforcement, and I expect TDCI to address this at some point, possibly through regulatory guidance rather than formal rule changes.
The Guard Shortage: Worse Than January
At the start of 2017, security company owners across Tennessee described staffing as their primary challenge. Twelve months later, the problem has worsened.
Nashville’s unemployment rate dipped below 3 percent by midyear. Memphis’s rate, while higher, dropped as well. Every major employer in both cities raised starting wages during 2017. Amazon opened positions at $12 to $13 per hour. FedEx’s Ground and Express operations in Memphis offered similar or better pay with benefits packages that most security companies can’t match. The new Amazon fulfillment operations in the Nashville area recruited heavily from the same labor pool that security companies depend on.
The result: security company turnover rates, already high at the start of the year, climbed further. Multiple company owners told me they were operating at 85 to 90 percent of their contracted headcount for extended periods, meaning client sites were regularly short-staffed. This is a service quality problem that compounds over time. When one guard calls out and there’s no replacement available, the remaining officer either works a double shift or the post goes uncovered. Neither outcome is sustainable.
TDCI received 47 formal complaints about unstaffed or understaffed security posts in 2017, up from 31 in 2016. These complaints represent only a fraction of actual occurrences, since most clients resolve staffing issues directly with their security vendor rather than filing regulatory complaints.
Regulatory Developments
2017 was a relatively quiet year on the regulatory front. No major changes to the Private Protective Services Act passed through the legislature. TDCI continued operating under existing rules, with emphasis on audit and enforcement activity.
The department did increase its audit tempo for armed guard training records, which I discussed in detail in my August column. Several companies received formal citations for training documentation deficiencies. In one notable case, a Chattanooga-area company was fined and placed on probationary status after an audit revealed that 11 of its 28 armed guards were operating with expired firearms qualifications.
TDCI also began an internal review of the firearms trainer certification process. The current system has gaps that I’ve written about previously: trainers whose certifications lapse without timely notification to the companies using them, and no centralized database that companies can easily query to verify trainer status. Any improvements to this system will be welcome.
The Expectations Gap
The theme I keep returning to throughout 2017 is the widening gap between what security clients expect and what the industry can deliver at current wage levels.
Clients in 2017 want GPS-tracked patrols. They want digital incident reports delivered in real time. They want guards who are trained, professional, courteous, and consistent. They want performance metrics, accountability, and responsiveness.
What clients are willing to pay, however, hasn’t moved in proportion to these expectations. Average billing rates for unarmed guard service in Tennessee increased approximately 3 percent in 2017. The cost of insurance, workers’ compensation, training, technology, and recruitment all increased by more than 3 percent. The math leaves companies with two choices: absorb the margin compression or reduce guard wages. Most are doing some combination of both, and guard quality suffers either way.
Looking Toward 2018
Several specific items bear watching in the coming year.
TDCI’s review of firearms trainer certification procedures may produce new guidance or rule changes. Companies employing armed guards should monitor this closely, as any changes to the certification process could affect their training operations.
Nashville’s growth shows no signs of slowing. The city’s 2018 event calendar includes a Formula 1 race bid (still speculative), continued expansion of the hotel inventory, and early-stage planning for the 2019 NFL Draft. Each of these creates security contract opportunities and staffing challenges.
Memphis crime trends will influence the armed guard market. MPD’s real-time crime center, operational since late 2016, is generating data that helps allocate police resources, and that same data is informing private security deployment decisions. If property crime in specific zip codes improves, some clients may scale back armed coverage. Current numbers suggest that’s unlikely in the near term.
The guard shortage will persist unless wages move. I see no indication that wages will move meaningfully in 2018. Company owners I’ve spoken with acknowledge the problem but point to billing rate resistance from clients as the limiting factor. Until that cycle breaks, the shortage will continue.
As of December 2017, Tennessee’s security industry is bigger, busier, and more strained than at any point in the past decade. The demand is there. The regulatory framework is there. The workforce is not, at least not in sufficient numbers or at sufficient quality to meet the market’s appetite. That’s not a prediction about the future; it’s a description of where things stand right now, on the ground, in Memphis and Nashville and every city in between.