Promised delivery

Nicolas Bouquay, vice president, North Star shares his views on the state of the facilities management market.

North Star, COMMENT, Facilities Management

Nicolas Bouquay, vice president, North Star shares his views on the state of the facilities management market.

A quick look around the region confirms the rapidly expanding real estate market, with US $1 trillion (AED 3.6 trillion) of new projects coming over the next five years.

Rapidly escalating costs are forcing owners to take the total cost of owning and maintaining a building more seriously.

These are mouthwatering figures for the FM industry with an estimated US $4.8 billion (AED 17.6 billion) in hard and soft services required a year across the GCC. The deception is that 80% of this industry is actually managed in-house and at best some of it is outsourced.

This leaves major opportunity for growth from increased outsourcing of the installed base and servicing the rapidly increasing property market.

While the opportunity is certainly out there, we have all heard the common complaint about the rationality of asset owners who don't value the life cycle cost of a building as they clearly demonstrate by cutting corners on their facility management budget.

In their defense, we may have to admit our own fallibility and acknowledge that FM services and certainly Total FM has not been uniformly up to the standards required to earn the full trust of asset owners.

In truth, both sides are under pressure to adapt along with the rapidly growing real estate market. New and successful developers are brining on new projects at a rapid pace and realising this is no easy task.

To keep moving in their core businesses they are turning to outsourcing non-core activities which can free them to focus on their growth. Rapidly escalating costs are also forcing owners to take the total cost of owning and maintaining a building more seriously.

In response, FM companies would like to take on the new market opportunities and provide some of the more advanced services needed to provide true Total FM. The question remains, how well can the outsourced industry actually provide international staples such as:

  • FM considerations being integrated at the design stage;
  • Remote site monitoring and security;
  • Maintenance function is more preventive than reactive;
  • Energy management led by software and other smart applications.

There are a number of good but small and single service providers, however, it is not mission accomplished if there are shops working out of Jebel Ali Free Zone with two employed FM managers who outsource their core activities to the lowest cost labour provider.

In large part, facilities management was and still is about in-house multitasking watchmen taking care of basic cleaning, maintenance and security issues while more important breakdowns were dealt with by a patch work of external MEP companies.

An increase in opportunities is demanding FM companies to change and increasingly requiring a new set of qualities. The new generation FM companies will need things like scale, structured systems, resident professional management, access to deep knowledge pools, the ability to provide bundled services and a captive experienced work force.

Many of these attributes can be seen in the types of companies that are beginning to emerge as the market leaders. These firms typically came from:

  • Developers, in many cases out of requirement not necessarily desire, stretched to cover facilities and asset management for their properties;
  • Contractors who encouraged their MEP branches to go to market to perform third party services as a new side business;
  • International FM players franchised their systems to access government entities or were sponsored by developers/banks.

While going a long way towards professionalising the FM industry, there still appears to be a gap to be filled by FM companies that accumulate the required characteristics described above, but which are also commercially driven and focused on FM as their core business.

Additionally, those FM companies, which are non-core extensions of other businesses, do not seem to capture the strength of the existing market participant's resources which are commercially minded and focused exclusively on FM.

A natural winner is to combine the strengths of several independent service FM providers, a stable and varied portfolio of properties and a global FM partner.

In order to keep pace with the requirements of the FM market the question for smaller niche FM players will not be whether to join forces, but how?

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