The typically steady fire and life safety industry saw growth in 2019, with overall global revenues surpassing $7.5 billion, according to David Gonzalez, research analyst, physical security and critical communications, Omdia, London.
Indeed, an overwhelming majority (89 percent) of respondents to SDM’s 2020 Industry Forecast Study found that the fire alarm and emergency communications market was excellent/very good or good in 2019. Many manufacturers and integrators noted either increased overall growth or flat revenue compared with 2018.
Mark Hillenburg, vice president of marketing at DMP, Springfield, Mo., says 2019 growth in the fire space was “better” overall for their company when compared with 2018. He points to continued adoption of cellular and network or dual communication fire communicators as factors for growth, along with the opportunity for upgrades.
Last year, Mountain Alarm, Ogden, Utah saw its best year ever for fire sales in 2019, according to CEO and President Eric Garner. The company does approximately 60 percent of its revenue from fire systems — including installation, monitoring and inspections. Garner says that thus far in 2020, even with an impact from the coronavirus pandemic, the company’s sales are very close to even with where they were at the same time last year.
Mircom Group, Toronto, a manufacturer of life safety hardware and software, saw double digit growth in 2019. Carl Pelaez, senior national business development manager, attributes that growth to a strong economy and an increase in business, hospitality and mixed-use residential space construction and renovations. “It was a great year,” he says. “We saw a lot of growth in live-work-play projects with residential high-rises, and restaurants and businesses requiring complex building requirements for those spaces — particularly shared spaces [among commercial and residential such as stairwells].
In the fire and life safety space, Bosch Security and Safety Systems also performed well in 2019, according to Christopher Miers, regional marketing manager for the Fairport, N.Y. company. “I think the market performed as expected, which is generally an increase over the previous year,” he says. “Especially in 2019, we focused on attracting new relationships and investing in new opportunities.” For example, according to Miers, the company recently re-engaged in selling its products through distribution with ADI in the U.S., an avenue Bosch explored several years ago and decided to focus on again.
For installers and inspection companies in fire and life safety, many are focusing on new avenues for recurring revenue.
In the Seattle area, Shannon Woodman, president and CEO at Washington Alarm, saw a lot of growth in new construction over the past two years. To continue to capitalize on the growth there, Woodman says that the company is looking at expanding testing capabilities to further services such as smoke detector sensitivity testing.
In 2019, Custom Alarm of Rochester, Minn. — which sees roughly 50 percent of its sales from fire installation, modifications and inspections — saw an uptick in new partnerships with electricians and other technicians in the field. “We were successful creating some new opportunities by working with electricians on big projects to help provide the design and equipment installation of field devices,” says Brandon Clig, sales manager at Custom Alarm.
The company is also demoing a product they hope to offer in Q4 that will offer life safety system software connected to the cloud for remote connectivity, troubleshooting and system modifications.
“The idea is that it will lessen the amount of people in the field in a particular inspection, which helps us with reduction of labor and recurring revenue from the end user,” adds Melissa Brinkman, CEO of Custom Alarm.
Standards, Adoption & Opportunities
Cloud features or cloud-based programming is something that Judy Jones-Shand, vice president, marketing, at Napco Security Technologies Inc., Amityville, N.Y. has seen demand for from dealers and installers in the fire market for easier installations and labor savings.
In addition, the continued retirement of POTS or copper telephone landlines still remains an opportunity for installers to upgrade older fire systems, and for new projects to include cellular or other system technologies, Jones-Shand says. “[POTs] are no longer required by the government to maintain them; we see a large shift of the millions of fire alarms in the market transitioning to cellular communications.” She adds that another opportunity is the upgrade and replacement of current cellular alarm reporting systems to meet the deadline for 3G and CDMA cellular sunset cut-offs over the next year and a half or so.
“The approval of cellular has really been a big game changer for the industry,” says Robert Vezina, president, Life Safety Engineered Systems Inc., Buffalo, N.Y., a fire alarm integrator focused on national accounts with multiple locations. He says one of the benefits to the installer is just how simple cell dialers are to install.
The acceptance of sole pathways of communication with cellular technology by more AHJs gives fire alarm companies the ability to drop the landlines and increase their recurring revenue.
“Cellular technology has enabled the dealer to have full control over the installation, eliminate the cost of the telco and increase that recurring revenue for themselves,” says Daniel Rosales, senior director, technical services, Telguard, Atlanta. “As the trend continues to be increasing recurring revenue for the industry, there is certainly an opportunity there.”
Life Safety Engineered Systems, which does about 80 percent of its business in fire, has noticed a trend, particularly from multi-location customers to invest in recurring revenue maintenance and health checks of their fire systems to ensure code compliance — a space that has been a great opportunity for the company, according to Vezina. “More companies really love the concept and it has started to take off for us,” he says. “We have an all-inclusive plan where we do testing, guarantee compliance and even pay any fines from the AHJ or fire marshal, along with repairing anything that needs fixing, all for a monthly fee.” Vezina adds that interest in such plans has also seen an increase for the first half of 2020, as companies or spaces that have been closed begin to reopen and want to guarantee compliance without adding to their workload.
Another area of growth in 2019 was the replacement of carbon monoxide detectors, and those in the industry expect to see that demand continue through 2020 and into the next couple of years. “Carbon monoxide detectors became commonplace between six to eight years ago in the U.S. and the carbon monoxide sensing element in these has a typical lifespan of less than 10 years … so a lot of these installations are coming up for renewal and that’s definitely an opportunity and it’s definitely new for the industry,” says Jason Falbo, chief technology officer at Mircom Group.
“Smoke detectors that are tied into a control unit can be left in forever as long as their functionality and sensitivity tests are met, but smoke alarms, combination detectors and carbon monoxide detectors all have an end-of-life requirement and we are just now starting to get those phone calls from people and hitting that first batch of the end of life of the products,” explains Rodger Reiswig, fellow and vice president, industry relations, global fire detection products, Johnson Controls, Milwaukee, and the current chair of ESA’s codes committee for life safety systems.
CO detection may be low-hanging fruit for fire alarm installers, but Tom Parrish, vice president AFAA, chair of codes and standards and vice president of Telgian Holdings Inc., Phoenix, says he sees another big opportunity for installing companies in carbon dioxide (CO2) detection/monitoring.
“This is something relatively new that’s going to affect more and more projects as AHJs adopt the new changes to the building and fire code for commercial structures with large supplies of CO2,” Parrish says. CO2 detectors monitor locations with large volumes of carbon dioxide for leaks, a requirement developed after a death in a commercial space occurred from leaking CO2, he explains. Examples would be a fast food restaurant or other location with a high number of carbonated drink machines. “There are also requirements for ventilation in these spaces as well as the monitoring,” Parrish says, adding that just like CO detectors, end-of-life issues with carbon dioxide systems present an additional opportunity for fire alarm companies to gain recurring revenue from annual testing and calibration, along with repeat business at the end of the life cycle.
BDAs, Area of Refuge & Systems Integration
In many areas of the country, 2019 was a year in which BDAs (bidirectional amplifiers) gained traction and wider adoption for new and retrofit projects; many expect the demand to continue. BDA systems extend the existing signals of first responder and fire department radios to ensure they work inside and outside of a building.
“There is a movement with AHJs and the fire service to help ensure the functioning of land mobile radios within buildings during emergency situations,” says Bruce Johnson, regulatory services, regional manager, UL, Northbrook, Ill.
Installing BDAs has been a source of growth for DynaFire, Casselberry, Fla., according to Steven Hatch, CEO. “We take the tower network that the fire department uses for its radios and we enhance and strengthen that signal inside of a building. It’s becoming more commonplace as jurisdictions adopt it,” he says. BDAs not only present an opportunity for installations, but also for recurring contracts on inspection and maintenance.
“We have definitely seen more requests for contractors to provide bidirectional amplifiers,” says Craig Summers, vice president of sales, fire and security division at Potter Electric Signal Co., St. Louis, Mo. “Historically radio companies were doing these, but now our traditional customer base is becoming more able to take on [these projects], confidently designing and installing these systems; and we only expect demand to increase.”
Another area where Summers is seeing opportunities is the integration of fire alarm systems with building management systems, as well as integration with other life safety systems including mass notification and shooter detection.
“In Minnesota, a voice system was not previously mandated,” says Clig of Custom Alarm. “It was just audio or visual with strobes. Now, based on occupancy — which usually tends toward school and campuses — pre-recorded voice systems are being implemented.” He says that additional feature sets such as tying the systems into the fire alarm panel, or adding emergency lockdown capabilities, active shooter notification or weather alerts has been a growing area of business in the last year.
Another change that many jurisdictions have adopted is regarding the area of refuge standards, and Reiswig says this is another opportunity for traditional fire alarm companies. “There have been a lot of changes with area of refuge,” he says. “We are seeing requirements for two-way area-of-refuge communication systems that are ADA compliant. I think this is an area a lot of dealers can get into or they are missing out.” He adds that dealers and integrators can be offering area-of-refuge communications, as well as elevator lobby and other stairwell communication systems beyond just high-rise buildings.
Though 2019 was full of opportunities, one pain point for fire alarm installers was increased tariffs passed along from manufacturers to installers. The increase was due to tariffs of up to 25 percent imposed by the U.S. Government on shipments made from China after May 2019, as well as tariffs on goods imported into the U.S. from Mexico. Inflation surcharges (of around 2.5 percent) passed on from manufacturers hit other parts of the installing market as well mid-2019, but many fire alarm companies felt an impact.
“That was notable because a lot of fire projects might take nine months to a year before installation, so we sell the project but don’t buy the equipment right away,” explains Garner of Mountain Alarm. “So we sold several jobs in 2018 and then when these tariffs [or inflation surcharges] were imposed by the manufacturers, by the time we were ready to install in 2019, we lost those margins because we had already quoted a price.”
A generally solid market, the fire and life safety industry has definitely seen an impact from the coronavirus, though due to fire codes and regulations that will always require such systems, the revenue-related impact may be smaller compared with other industries. According to SDM’s 2020 Industry Forecast Study, 48 percent of respondents expected 2020 revenues to increase in the fire space, and another 45 percent expected 2020 revenues to stay the same over 2019. Though the study took place before COVID-19 shutdown the U.S., many industry experts still expect to see an increase or flat revenues for 2020.
Omdia projects that the fire safety industry will only decrease in revenues by 0.5 percent in 2020, though Gonzalez notes that other professionals believe the impact could be even stronger.
Other sources point to scheduling difficulties and a shift in continuing education and training. Perhaps the largest overall impact is issues with building access, delayed or slower-than-normal testing done by certified labs for product approvals, as well as halted or slower inspections and approvals from AHJs.
“It’s hard to keep track as different parts of the country have been very inconsistent,” says Parrish of AFAA and Telgian Holdings Inc. “We have counties where the entire AHJs are shut down or fire marshals are approving nothing or very little. Some areas have worked out limited inspections with local AHJs with the caveat that once everything is opened, they can come in and do a full inspection. It’s a balancing act right now,” he says.
Some are seeing an uptick in work while buildings are vacant. Others have seen limited access to buildings and have built up backlogs of visits that need to be done, creating scheduling chaos.
“We saw a big slowdown in construction in some parts of the country such as New York and Florida,” says Chris Welch, sales manager for the Midwest, Advanced Fire Systems, Auburn Hills, Mich. “But others kept on as they were, so it will be interesting to see how it will continue overall.”
Garner of Mountain Alarm says that Congress’ Coronavirus Aid, Relief and Economic Security (CARES) Act can be a talking point with customers that are in need of fire alarm retrofits, since they could write off the upgrading of a fire alarm system as part of a capital improvement to their building.
The Seattle area was hit hard from construction shutdowns in March, and a lot of projects went on hold, Woodman says. “Our sales team changed their focus and offered CARES packages to help close sales.”
Woodman adds that on the inspection side, Washington Alarm has had a lot of access issues, for which AHJs are giving additional time to complete annual inspections. On the fire monitoring side, however, the company has yet to see any attrition because it’s required in many cases. “That’s one of the reasons we like the fire business,” she says. “I anticipate we will eventually have monitoring reductions in the future just based on people not going back and [not] filling their buildings up or downsizing, so I think it may lag for a few months, but then come back and be fine.”
For Shane Clary, vice president, codes and standards compliance at Bay Alarm Co., Concord, Calif., the biggest impact is the lack of in-person networking, tradeshows, technical sessions, etc. due to cancellations.
“That’s one of the biggest issues I see is that we are not able to go out there and see the new technologies,” he says. He adds that he has had some success with virtual meetings and online product demos or webinars, and that the industry is adapting quickly to online engagement, but he misses that in-person education and networking.
“There is a cost savings because you’re not traveling and I think you can do some stuff virtually, but it doesn’t replace talking to people and getting out there to touch and feel [the products].”