Saudi Arabia’s FM dynamic is evolving
Having weathered a difficult 18 months following the low-oil price crisis, Saudi Arabia’s future is looking more balanced, which could spell success for the estimated $29.1bn FM sector
Facilities Management is developing throughout the region, and while the UAE is regarded to have better defined standards and practices in the GCC, Saudi Arabia is not too far behind. It’s believed there were no more than three well-known FM operators across the Kingdom a few years ago. Today, that number has risen above 10.
Then in 2015, consulting firm Credo famously declared that Saudi’s FM sector would be worth a whopping $29.1bn by 2017. And since, there have been scores of opportunities outlined for the sector’s growth in the Kingdom. Experts from various FM firms say they have just about managed to weather a fierce storm that stemmed from an ecological imbalance caused by the crude oil price crisis.
So GCC’s largest, and most potential market, is shaping up for a revival and the last 12-18 months can be described as a calm before the storm, bringing with it positive winds of change.
Cushman & Wakefield (C&W) took over DTZ FM recently and the company is in the process of rebranding regionally. Its CEO Richard Naylor says: “There are many differences between the Saudi Arabia FM market and more mature regional markets such as the UAE. One of the most noticeable differences is the quality and general approach in the RFP documents which are issued to market. In Saudi Arabia there are still many clients issuing input based, labour intensive scope of works. The awareness and confidence to transition to an output measured form of contract has been slow to evolve.
“However, with the growing number of internationally recognised FM service providers now operating in the Kingdom, clients are becoming more informed and aware of the benefits of measuring performance through SLAs and KPIs as opposed to purely the number of people deployed on the project,” Naylor notes.
Dubai-based integrated facilities management company MAB is another major player that operates in the Kingdom of Saudi Arabia. MAB KSA general manager Majed Zeitun says the market remains relatively immature as compared to more established markets like the UAE. He adds: “There are, however, a lot of opportunities which need to be explored, yet there are a lot of challenges including the education of FM concepts in general. Although an improvement has come about in the last three years, the market is still behind other areas with regards to employment visas, hiring the right calibre of staff and regulations.
Naylor describes the last 12-18 months as “economically challenging”, but says the firm has managed to win a few noteworthy contracts, while MAB is eagerly waiting to find out if it has won contracts in Jeddah and Riyadh.
Zeitun says: “At present we are handling several projects and sites at King Abdullah Economic City (KAEC) including FM Services, catering services and CSR initiatives, along with outsourcing of senior and junior FM manpower personnel. We are awaiting the outcome of a few new projects that we have participated in within KAEC, Jeddah and Riyadh.”
Meanwhile, C&W has managed to secure a number of new consultancy commissions and sizable operational IFM contracts which include, “a major piece of consultancy for one of the largest regional airlines, managing agent services for one of Saudi Arabia’s largest banks, a managing agent/contractor hybrid contract for a brand new state of the art hospital and a similar contract for a large multinational company’s head office and manufacturing facility,” Naylor says.
However, FM companies’ growth has come with its share of teething problems. Experts believe the opportunities outweigh the challenges, but that isn’t to say FM companies have sailed in calm waters. Zeitun says: “Along with the aforementioned problems surrounding visas and hiring, there is a high cost in employing experienced management level staff from outside KSA. A few newly implemented government fees and charges have also had an impact.”
In addition the imminent implementation of value added tax (VAT) will also be a factor FM companies will need to account for. While companies don’t consider the implementation of VAT as a challenge, its imposition will certainly impact costs.
“Lack of regulation and homegrown industry standards in Saudi Arabia remain a challenging area for all service providers as we are often asked to price against British or American standards or indeed the complete opposite where no standards are referenced at all, which can allow for a variety of service standards to be bid against. It is a situation which unfortunately often leads to an ‘uneven playing field’ for bidders and in some cases an unsatisfied client,” Naylor adds.
While FM companies have “wholeheartedly” accepted Saudisation the labour situation does pose two unique challenges for some companies. Naylor explains: “Firstly obtaining foreign worker visas is becoming increasingly challenging as all responsible employers are being encouraged to nationalise as many positions as possible.
However, finding suitably qualified and experienced Saudi talent in an industry that has historically not been seen as overly attractive, combined with the lack of established facilities management training courses in country compounds the challenge even further.”
Matters pertaining to sustainability have not been high on the agenda, but like most things in the Kingdom there have been winds of change.
“It’s taken a bit of time for developers and property owners in Saudi Arabia to recognise the importance of sustainability, however we can see through our consultancy capability this is an area that is beginning to attract a lot more interest from our clients, whether it be assistance in securing LEED accreditation or energy and sustainability reviews at design stage or to existing assets, this growing awareness is encouraging to see,” Naylor concludes.