When asked about impacts on business from interest rates, Marks comments: "What I will tell you is I think we've hit a level where people are questioning investment, not in infrastructure, not in public-private partnership, but where people have the opportunity to delay, especially private developers, I think they're working on the math because of the interest rates."
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And it's really driven on the strength of our service business. New equipment did well. But our service business just, again, showed its resiliency across the globe. All four regions growing. Our portfolio now is over 4% growth every quarter for the last quarters. And we're going to approach 2.3 million units by the end of the year in our service portfolio.
On the new equipment side, little different story for everyone to know. China is still really seeing some headwinds in new equipment. We're now saying the market's going to be down north of 10%. And especially North America, US, it's going to be down mid-teens. We've seen really a lot of jobs before they even get awarded being held now because of interest rates, primarily multifamily followed by commercial. Infrastructure still looks good.
But we're seeing a little tap on the brakes, certainly, in the US. And the indicators, whether they be the Architects Billing Index, Dodge Momentum construction, they're both down this month. And that's what we're seeing in the market.
BRIAN SOZZI: You just brought a lot of economic reports to life, Judy. That is just fascinating stuff. Do you think from your perch this was the first quarter where your business saw the impact of higher interest rates?
JUDY MARKS: I think we're seeing developers be cautious. So whether that's in China because of liquidity or here in the US because of interest rates specifically, I think we're seeing some caution. The strength of our new equipment business, though, Brian, is we've got a great backlog. Our new equipment backlog, even with these challenges, is up globally 2% in constant currency. Our modernization backlog is up 15%. We're a long cycle business.
So this gives us really good line of sight in new equipment in North America probably for the next 12 to 18 months. We've got work we need to convert. And in the rest of the world, we still have multiple quarters left to work to convert.
BRIAN SOZZI: Do you think-- look, I'm not going to ask you to play macroeconomist here, Judy. But do you think we need some form of rate cut next year to ease that concern amongst developers?
JUDY MARKS: You know, I'm not an economist. And-- but what I will tell you is I think we've hit a level where people are questioning investment, not in infrastructure, not in public-private partnerships, but where people have the opportunity to delay, especially private developers. I think they're working on the math because the interest rates.
So anything that can either stabilize or reduce would certainly be beneficial in North America. In Europe, we're not seeing the impact of rates as much. We're seeing part of it in Germany and Northern Europe. Southern Europe still really strong-- Spain, Italy. Middle East is still strong. And then Asia-Pacific is still growing. India is growing significantly as is Southeast Asia.
So all in all, you know, it's this geographic diversification we have, which is our strength in new equipment. But it's our service business that just is the foundation and about 80% of our profits.
BRIAN SOZZI: Have you been able to put your finger on what is happening in China? Is this just the blowback of overbuilding over the course of many years and it's finally come home to roost?
JUDY MARKS: Our view is it's really two factors that need to be overcome. One is confidence and really consumer confidence in terms of people buying properties, buying an apartment, buying a unit for themselves. Because that was their investment methodology and still is.
The second is really liquidity of the major developers. When we go to market in China, there's some significant developers. They're both private, and they're state owned. We've pivoted where the majority of our key accounts are state owned. And their liquidity is in good shape. But you've seen all the challenges and the headwinds for the private developers. They are overextended.
So when and how that emerges, we don't think is going to happen fourth quarter this year. We're waiting to see next year. We've reassessed. We've driven productivity. We've driven our costs down on the new equipment side to be ready for both acceleration or continued sluggishness. But whichever way it goes, we've been growing our service and modernization business in China, just preparing for the future.
BRIAN SOZZI: And that modernization business, as you call it in the earnings release, I think it was mod. A lot easier saying and real time on TV, Judy. But is that a reflection of people going back to the office and office owners are trying to just upgrade their facilities to handle now this pushback to these office settings? And then secondarily, what are these elevators being modernized to do?
JUDY MARKS: So mods are really broad category, but it applies to every elevator in every sector. So if you're living in a condominium and you've got a 20-year-old elevator, you probably want to upgrade the technology. You want to be able to have something more modern in terms of aesthetics.
So the residential section-- sector is ready for it globally. We say about 7 million of the 20 million units right now are 20 years or older in the globe in terms of elevators. They're ready for new circuit boards. They're ready for new controllers. They're ready for new aesthetics.
When we look at office, sometimes it's a competitive edge. If you're competing for class A and there's a new building, of course, you're going to upgrade your aesthetics and upgrade your building. And that starts typically with the elevator. And then finally, there-- a lot of this is just based on older construction cycles, especially in Europe, where people invested 20 and 30 years ago. And it's like anything, you would want to modernize any type of infrastructure in your building.
BRIAN SOZZI: I'll namedrop for us, Judy. I saw you a couple of weeks ago on the White House. I mean, not many people get to say that. It's-- it was an honor for me. And I'm sure it was an honor for you. And when you talk to the administration, you know, at this point in, I guess, the lifespan of the infrastructure package, how is that and how is that shaping your business at this point? And then what else would you like to see for the administration to make what you do a lot easier?
JUDY MARKS: So the infrastructure package itself was landmark. And we're delighted that it passed and it's funded. It's early days for us. We're a little later cycle in terms of right now, they're going to move dirt, bridges, roads, and start thoughts on buildings, transit, airports, and the like where we do have a very large play. And we do well in the infrastructure sector.
So delighted by the demand that's being created for us. Hasn't really hit yet, but it will over the medium term. But what we really are-- really need to focus on is supply, supply of workers in the construction trades. We're continuing to develop our apprentices. We don't have a labor issue in the elevator industry. We have some incredibly talented mechanics and always bringing new ones on.
But infrastructure is bigger than just here in the US. And it was an honor to be there and to see you too, Brian. But in-- if you look globally, whether it's India, even China, infrastructures are single, biggest sector for investment right now in terms of building. If you look across Asia, Europe, this is going to be a global macrotrend for the next decade plus.
We've got a great position in it. We've got great products. So we're looking forward to it. Mod and infrastructure are really beyond the service business that's almost a continuing focus annuity subscription. Modern infrastructure are going to layer right on top of that, which is why we're so encouraged about the future.
BRIAN SOZZI: Lastly, Judy, you just laid out a case. And I think just brought to light that you-- Otis is a global business, doing business in so many parts of the world. It has been a challenging two weeks for the world, a lot more uncertainty. You name it. Of course, a lot of that coming from the Middle East. As a leader, what's been your message to employees during trying situations like this?
JUDY MARKS: Well, clearly, I think-- and I have sent a memo out to all of our colleagues because I think it's most important that I speak to all 69,000 colleagues. It's about empathy. It's about respect. It's about our absolutes and what will and won't be tolerated in our company. And I think that's the context that we need to have.
But the other thing is we control what we can control and that we need to perform on. We need to deliver for our customers. We need to deliver for our shareholders. And we need to deliver for each other. That's the key message. We can't control geopolitics. We can't control the macroeconomics. But what we can control, we will. And I think we just put 15-- the 15th quarter together, where I think we proved that.
BRIAN SOZZI: Judy Marks, Otis chair and CEO, always great to get some time with you. Thanks for making time for Yahoo Finance. We appreciate it.
JUDY MARKS: Great. Thanks, Brian.