🔦Elevator Service & Installation

🔦 Welcome to this week’s edition of Sector Spotlight!

Every Tuesday we highlight an under-the-radar and often underappreciated industry. This week we take a closer look at the Elevator Service industry.

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-Harry & Carter

🔎 We identified 223 elevator service companies as strong, potential targets. These companies have verified contact, location, and financial data. We limit the amount of downloadable excel company lists to the first 10 searchers, so we don’t overwhelm the sellers.

Click here to access this list.

*Revenue between $1.5M - $20M

Elevator Installation & Services

• Size of Industry: $41.42B

• Industry Projected Growth: 2.5% (CAGR)

• Profit Margin: 6.2%

Harry & Carter’s thoughts:

Elevator service companies represent a niche, yet crucial sector within the equipment repair industry. Consider an elevator service company in a major city - when a building's elevator fails, the entire structure can become unusable. This urgency incentivizes building owners to maintain contracts with elevator service companies at all times. We believe the appeal of such companies hinges on the proportion of revenue generated from repair and maintenance services, compared to new construction and installation projects. With repairs being a constant necessity, long-term maintenance contracts offer stability and predictability.

Over the past five years, corporate profits have seen consistent growth, particularly benefiting elevator installation contractors. Given that commercial markets contribute significantly to industry revenue, strong corporate profits ensure a consistent demand flow. Steady demand for repair and maintenance work provides a revenue lifeline to companies during periods of market stagnation. We have more recently seen demand jump from public buildings aiming for ADA compliance and healthcare institutions seeking expansion, benefiting elevator installation contractors.

The industry landscape is characterized by the dominance of small regional enterprises, often engaged in price-based competition. Regions with dense populations offer ample opportunities for contractors catering to multifamily residential construction demands. The Southeast and Mid-Atlantic regions, boasting highly developed residential construction markets, particularly the multifamily apartment segment, serve as prime locations for such endeavors. Kone stands out as the market leader in elevator installation, exhibiting no signs of slowing down, evident from its strategic acquisitions. These acquired businesses specialize in elevators, escalators, and automatic building doors.

Industry Breakdown

Design and Installation: These companies work with architects, builders, and property developers to design elevator systems that meet the specific needs and requirements of a building. They handle the installation process, including the assembly and installation of elevator components, wiring, and safety features.

Maintenance and Repair: Elevator service companies provide ongoing maintenance services to ensure the safe and efficient operation of elevators. This includes regular inspections, lubrication, adjustment, and testing of elevator components to prevent breakdowns and ensure compliance with safety regulations. Additionally, they respond to service calls for repairs, troubleshooting issues, and replacing faulty parts to keep elevators running smoothly.

Modernization and Upgrades: As technology advances and safety regulations evolve, elevator companies offer modernization services to update older elevator systems with newer technology, improved safety features, and energy-efficient components. This may involve replacing outdated equipment, upgrading control systems, or retrofitting elevators to meet current standards.

Consultation and Compliance: Elevator service companies provide consultation services to building owners, property managers, and architects on elevator design, code compliance, and safety regulations. They help clients navigate the regulatory landscape and ensure that elevator systems meet industry standards and legal requirements.

What We’re Watching

In the coming years, increased investment in heavy industrial sectors will likely lead to improved industrial production, driving demand for the installation of material-handling equipment and the relocation and assembly of existing capital equipment. This all points to increased demand for elevator installation and servicing.

Elevator installation contractors also cater to escalator installation, repair, and maintenance needs in shopping malls and transport terminals. Moreover, revenue growth will stem from repair and reconstruction projects in transport terminals, factories, warehouses, refineries, and infrastructure, especially in areas affected by natural disasters.

While high interest rates have dampened residential construction market investment since 2022, the anticipated lowering of interest rates over the next five years is expected to reignite demand for elevator installations in residential markets, particularly in multifamily housing (as apartment buildings and condominiums typically require elevator installations).

Favorable macroeconomic conditions, coupled with business expansion and increased construction activity, will continue to attract new players to the industry.

Questions to Ask Owners

⚫️ What is the revenue breakdown between installation and maintenance projects?
⚫️ Does your company primarily work with residential or nonresidential construction markets? Can you easily switch between these markets?
⚫️ Does your company serve as a general contractor or third-party subcontractor on most projects?
⚫️ Has complying with new energy-efficiency rules in various building codes driven up costs?
⚫️ How often do you invest in new equipment/software?