Durable demand

Most discussion of the businesses worth holding assumes demand moves with the economy. Some categories grow when GDP grows, others shrink when consumers pull back. Cyclical, by default.

A meaningful share of demand has stopped working that way. Some of it is driven by physics — buildings age regardless of the rate cycle, weather happens regardless of trade policy. Some by demographics — populations grow older on their own schedule. Some by entrenched technological transitions that proceed regardless of which administration is in office.

The result is what could fairly be called durable demand. Not recession-proof revenue, which is a different and weaker claim. Durable demand is demand created by demographic, physical, regulatory, or technological forces — forces that persist regardless of where the cycle happens to be. The businesses sitting underneath that demand are different in character from the cyclical economy around them.

Five forces fit this description. Most are well-known individually. The pattern across them is less often noticed.

Energy

Of the five, energy is the loudest. The conversation about data center electricity demand has finally caught up to the underlying physics, and the pyramid of contractors and equipment specialists underneath that demand is being noticed.

The numbers are still arresting. US data centers consumed 4.4 percent of national electricity in 2023 — 176 terawatt-hours. The Department of Energy and Lawrence Berkeley National Laboratory project that share to reach somewhere between 6.7 and 12 percent by 2028. The midpoint implies a doubling of physical demand in five years.

Data centers are only one driver. The reshoring of North American industrial activity is loading the grid in regions that have not loaded for two decades. Vehicle electrification is moving transportation energy from the gasoline supply chain to the electrical one — a migration measured in tens of millions of vehicles, none of them returning. None of these forces are correlated with each other. They are stacking.

The constraint on serving this demand is not capital. It is grid capacity, permitting timelines, transmission bottlenecks, and skilled trades labor. Each of those constraints makes the businesses that do the actual work more valuable, not less.

The lower-middle-market businesses sitting underneath this are the contractors, distributors, and specialists who do the work. A small electrical contractor serving data-center corridors may never market itself as an AI company, yet its backlog is increasingly driven by AI demand. Transmission and substation services. Industrial HVAC specialists handling new facility cooling loads. Backup power and generator services. Energy-efficiency contractors retrofitting commercial buildings. Most are family-owned, with founders in their sixties, operating in markets that institutional capital still treats as cyclical even when the underlying demand is not behaving cyclically.

Climate

The second force is the most viscerally visible. The events themselves get covered; what gets covered less is the operating reality of the businesses that respond to them.

Canada's 2024 insured weather damage reached $8.5 billion, breaking the previous record by nearly 50 percent and totaling roughly twelve times the annual average from 2001 to 2010. A single hailstorm in Calgary in August 2024 produced over $3 billion in insured losses in just over an hour — and tens of thousands of roof, siding, and water-damage jobs that did not exist that morning. Summer 2024 alone produced 228,000 insurance claims across Canada, an increase of more than 400 percent over the twenty-year norm.

Every major weather event creates thousands of work orders overnight. The relevant businesses are not the insurers. They are restoration contractors, mold remediators, drainage and roofing specialists, emergency response operators. These categories are highly fragmented, dominated by regional family-owned operators, and growing on both a cyclical basis (each major event) and a structural basis (changing building codes, insurance requirements, and regulatory standards keep adding to the baseline of work).

Whether or not a particular reader believes climate change is the cause, the insurance industry, FEMA, provincial emergency services, and municipal water authorities act on the data. The work follows.

Infrastructure

The third force is the one most independent of cycles. Roads, bridges, water mains, transmission lines, sewer systems — they were built on a depreciation curve, and a meaningful share of them are now well past their original design lives.

Most people notice infrastructure only when it fails. A bridge closes. A water main bursts. A road collapses. By that point the repair has already become mandatory.

The American Society of Civil Engineers' 2025 Report Card gave US infrastructure a C grade — the highest mark since the report began in 1998, and a function of the 2021 Infrastructure Investment and Jobs Act beginning to flow through. The same report estimates that $9.1 trillion is needed by 2033 to bring all eighteen infrastructure categories to a state of good repair, against $5.4 trillion in projected funding. The gap, $3.7 trillion, is structural. The IIJA authorization expires in 2026, which means the gap may grow before it narrows.

Either way, the work backlog is independent of whatever the macro environment looks like over the next decade. Every deferred bridge repair eventually becomes someone's work order. The businesses paid to do that work are typically asphalt and concrete contractors, utility locators, trenchless pipe operators, stormwater specialists, traffic control providers, civil inspection firms. Most are paid by municipalities, utilities, or provincial governments — slow payors, but durable ones.

Aging

The fourth force is demographic and unambiguous. The US population aged 65 and older was roughly 56 million in 2020 and is projected to reach 80 million by 2040 — at which point one in five Americans will be 65 or older. The 85-plus cohort grows faster than any other age group. Every additional year of life creates demand for care, transportation, accessibility, and support services that did not exist when the person was 75.

The market response is already visible in scale. The US home healthcare market reached $162 billion in 2024 and is projected to reach $381 billion by 2033 — a ten percent compound annual growth rate over a decade. Roughly 85 percent of older adults have at least one chronic condition. The vast majority prefer to age in place.

The businesses underneath this go well beyond home health agencies. Mobile diagnostic services. Dental practices serving aging populations. Audiology and hearing aid clinics. Specialty rehab and physical therapy. Senior transportation. Accessibility retrofit contractors installing grab bars, stairlifts, and bathroom modifications. Medical equipment rental. Most of these categories are highly fragmented, founder-owned, and aging out at roughly the same rate as their customer base.

Many of the businesses serving this cohort are themselves owned by operators approaching retirement. Demand and succession are arriving on the same schedule. That overlap is unusually powerful.

Prevention and recovery

The fifth force is the one most commonly miscategorized. The category usually called “wellness” covers a wide spread of activities, some of which are legitimately discretionary lifestyle spending. The durable sub-categories are those that have steadily migrated toward preventative healthcare — mobility, recovery, mental health, rehabilitation, sleep, longevity-oriented preventative medicine.

The pivot is structural. The line between wellness and healthcare is dissolving from both directions. Medicare Advantage plans, which now cover more than half of US Medicare beneficiaries, increasingly include fitness programs, transportation, meal delivery, and behavioral health. Categories once treated as wellness are being absorbed into healthcare.

The Global Wellness Institute estimates the broader wellness economy at $6.8 trillion globally in 2024, growing at 7.6 percent annually toward a projected $9.8 trillion by 2029. The category has doubled in size since 2013 and is now larger than the global IT industry, larger than tourism, larger than the green economy. What appears in aggregate to be wellness spending increasingly behaves like healthcare spending — on both the consumer and operating sides.

The businesses worth looking at are not lifestyle businesses. They are physical therapy clinics. Mental health and counseling practices. Pilates and recovery studios with recurring memberships. Mobility and rehabilitation specialists. Sleep clinics. Preventative medicine and longevity-oriented practices that operate inside the medical system rather than at its periphery. These businesses share two properties that make them durable — they serve customer relationships built over years rather than seasons, and they sit close enough to healthcare that consumers do not cut them first when conditions tighten.

What this thesis is not

Durable demand on its own is not the thesis. Public markets are full of companies exposed to durable demand, and many of them are priced accordingly. The opportunity at the lower-middle-market layer appears when durable demand collides with ownership transition — when the businesses sitting underneath these forces remain founder-owned, regional, fragmented, and approaching succession. The demand is growing. The ownership base is aging. Those two realities are arriving at the same time.

A real risk in any argument like this is letting the structural case do work that operational reality has to do.

Durable demand does not produce durable returns. Many businesses sitting underneath these five forces will fail. Labor shortages in skilled trades absorb margin. Reimbursement pressure in healthcare moves faster than most operators can adapt to. Local regulation in environmental services can change overnight. Customer concentration in any of these categories can leave a $2M EBITDA business one phone call away from being a $400K EBITDA business. Where the demand is most visible, the most buyers are arriving — and where buyers are arriving, prices move first.

The right framing is not that every business exposed to these forces will succeed. It is that these forces create large hunting grounds where durable businesses are more likely to exist. The forces narrow the search. The work of finding the right business inside them, structuring the right acquisition, installing the right operator, and running it well — that work is unchanged.

What is left to notice

One more pattern is worth noting. Of the five forces, only one is currently showing up in public discourse at any volume. Data center electricity demand and the electrical contractors underneath it are everywhere now. The other four forces are happening just as physically, just as durably, and just as quietly.

The discourse and the acquirable businesses sit one layer apart in each case. Public-equity investors discuss data centers; the people buying electrical contractors are quieter. Pharmaceutical valuations soak up healthcare discourse; the people acquiring mobility clinics rarely make headlines. The remediation work that follows every major flood gets reported as a news event, not an investment category. The businesses worth holding tend to live one layer removed from the loudest narrative.

Markets spend enormous energy trying to predict what comes next. The more practical question is often what is unlikely to go away. Durable demand does not guarantee success — it narrows the field. In a market increasingly obsessed with prediction, businesses built around what is inevitable may prove more interesting than businesses built around what is forecastable.

What is durable about these forces is not just that they create demand. It is that the demand keeps showing up long after the discourse has moved on to whatever is next.