Kumar Ramesh looks at the future pipeline of FM work in the region
Kumar Ramesh of Frost & Sullivan’s environment and building technologies practice looks at the future pipeline of building work in the region, and the implications for FM service providers.
Managing a facility always forms the largest proportion of the lifecycle cost of a building. Building owners have begun to realise the importance of monitoring the overall lifecycle cost of a facility.
This has led to improved awareness and increased prominence for facility management services, right from the conception, or design phase, of a building project.
The global slowdown and the resultant strain faced by the construction sector have decelerated the pace of projects. But looking at the multi-billion dollar construction projects lined up, the high market potential for facilities management services in the Middle East is quite evident.
Improved standards of living and the huge influx posed by the expatriate population are constantly enhancing the importance of quality buildings, maintaining them and reducing operational costs.
With the arrival of multinational corporations in the region, the need to adopt international standards is evident in society as a whole. The market for outsourced facilities management was no different and has been growing at an exponential pace over the last few years.
This has mainly been fuelled by the need of customers to concentrate on their core business activities and to outsource other ancillary maintenance services.
However, there was a downward revision of market revenues influenced by the after-effects of the economic crisis in a few regions in the Gulf. But most end users were fully aware of the monetary benefits of involving a professional facility management company, and hence the facilities management market managed to overcome the tough times.
The facilities management market in the GCC is driven mainly by the plethora of construction activity taking place.
And the demand for facilities management is expected to increase spectacularly over the next few years. Most of the demand for facilities management services is expected from the new buildings that would border the skylines of the big cities in the Gulf region.
However, existing buildings that are aging and require maintenance and expert care are expected to contribute significantly to the growth of this market. Facilities in the Middle East will require expert maintenance, mainly due to the harsh weather conditions that prevail throughout the year.
To improve the living and working conditions of a building during these extreme weather conditions, there should be extensive maintenance of facilities.
Unrealistic timelines and mammoth construction activities also often lead to compromises in design quality or building techniques.
Eventually, when the project is completed and the building is occupied, it becomes difficult for the occupants to maintain the building at its highest standard, due to the gap created during the design stage. Such compromises have made building owners balance the gap by spending more on maintenance, using high quality facilities management services.
The facilities management market in the Middle East is in its infancy when compared to that in other developed regions such as Europe and North America. This creates an abundance of opportunities, and the sheer size of the construction happening is a testament to the excellent future of facilities management in the Gulf region.
Though participants are feeling the pinch of the economic slowdown, which has affected the region, the industry is expected to achieve high growth with the economic slowdown easing off.
The total market for facilities management in the Middle East was around US$3.5 billion in 2008. The market growth rate had slowed due to the sub-prime mortgage crisis that had affected the global business environment.
Some of the new construction projects were put on hold, and hence very few new contracts were drawn up. However, the growth and scope for facilities management services in the Gulf is still high, with growth between 2009 and 2013 anticipated at a CAGR of 18%.
The slowdown in the economy negatively affected the construction sector. However, most facilities management companies had a good order book, and were able to manage the effects.
Though the UAE has the largest market for facilities management among the Gulf states, the country also suffered the most from the economic slowdown. This affected the companies that were mainly relying on developments in Dubai.
The UAE, Saudi Arabia and Qatar offer an abundance of opportunities for the facilities management market, mainly coming in from their new developments.
The UAE offers maximum scope for penetration into existing buildings, while Saudi Arabia and Qatar offer more from new buildings. These countries together offer a multitude of opportunities for services like cleaning, housekeeping, security, landscaping, mechanical, electrical, and plumbing (MEP) services and catering.
But attracting and retaining the workforce required to execute these services is the biggest challenge the region faces.
Competition is intense with many facilities management companies already present in the market; the market is expected to witness some changes in the competitive structure, as many new developers, contractors and other different entities are entering it.
Adapting to local market conditions and providing competitive pricing are likely to be considerable challenges for multinational companies who are keen on entering this arena.
With increasing awareness among building owners, the market is expected to grow at a phenomenal pace in this region, and is likely to include facilities management as an important component in the design phase of the building construction.
Intensifying the role of facilities management companies is expected to improve project planning and help in better quality management of buildings.
The market in the UAE is becoming highly technology-driven, forcing facilities management companies to come up with innovative and effective technologies such as Computer-Aided Facilities Management (CAFM) and Computerised Maintenance Management System (CMMS) in facilities management.
As facilities management services constitute a continuous maintenance model for a building, most of the facility owners prefer long-term contracts with decent commercial benefits.
The prominence of such contracts has increased over the last few years and is forcing facilities management companies to provide better packages with less cost pressure.
Governments and insurance companies are demanding more effective and efficient maintenance practices. Hence the concept of maintenance is experiencing a gradual shift towards proactive maintenance; thermographic testing and other testing techniques are carried out to reduce the downtime.
Demand for facilities management services is growing strongly and moving in the right direction with the need for professional maintenance evidently increasing. Builders and facility owners in the region are becoming aware of the commercial and environmental advantages of involving a facilities management firm to address their maintenance needs.
The facilities management market is likely to continue to grow as almost all companies understand that a professionally-maintained building will avoid wasting resources and reduce asset depreciation.