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Sun 1 Jul 2007 12:00 AM

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Research revealed

As new research delves deep into the total facilities management market, facilities management Middle East asks industry professionals what they think of the findings.

New research into the Middle Eastern facilities management market (excluding Saudi Arabia) has concluded that the total facilities management sector will be worth US $575.9m (AED 2.1bn) by 2012.

But is this figure correct? What is driving the market? Is there a country leading the way? What services are most in demand? Does technology play a crucial role? And what does the future hold for the FM sector?

This overview of the findings aims to provide you with answers to all these questions and an insight into the reactions of some key industry professionals.

The research was commissioned by CMPi in the lead up to its launch of new facilities management exhibition, Working Buildings Middle East.

"The findings of the Frost & Sullivan report clearly demonstrate the exponential growth of FM in this region. It also highlights the variety of opportunities available to the suppliers of FM products and services in this largely unpenetrated sector," states event director, Chris Fountain.

However, what has become clear in the questioning of the report's findings is that FM professionals see the market as one that is still in its infancy with many developers still not understanding the true meaning of facilities management.

With this is mind, it seems industry insiders are still educating the developers and emphasising the benefits facilities management can bring.

As it stands, there are many facilities management companies operating that have been formed by developers. For example: Emrill is owned by property developer Emaar and UK-based facilities and property management company, Carillion; Idama is owned by Dubai Properties and ServeU is a Union Properties company.

Some people have argued that by developers owning their own FM company, the market is closed off to other FM service providers. While this maybe true, Mark Povey, general manager of marketing at Transguard, states that the region is simply going through a transitional period.

"The Middle Eastern facilities management sector is following in the footsteps of the UK market. All FM companies in the 80s either grew out of construction or soft service suppliers. It's a natural evolution thing, it's not wrong."

There are many levels of FM companies that currently occupy the market place. From basic soft service outfits to the more technical and strategic ones who practice international concepts and standards. Terms such as Total Facilities Management (TFM) are yet to be fully understood in the region.

What is TFM?

As with most industry terms, there are numerous definitions and explanations. However, during interviews, Terry John-Baptiste, senior facilities manager of Emrill gave a clear and simple statement.

"Total Facilities Management (TFM) incorporates a seamless solution to customers, which includes advice and best practice solutions from design, construction and transition, through to operations.

"It includes setting up tailor made policies and procedures to fit each client's needs efficiently and taking full responsibility for a wide range of services to maintain the essential aspects of a building."

There are many different kinds of benefits to applying TFM in a company.

David Graham, general manager of Farnek Services points out, "at a corporate level it (TFM) ensures you deliver strategic and operational objectives, including control of cost and realisation of savings and on a day-to-day level what we're speaking about is providing a safe and efficient working environment."

Tim Leech, vice president of AMC, adds: "TFM gives any business or environment an integrated approach to how it is managed and operated, provided that the solution designed always has reference to the business/life objectives of the client/user. Therefore, it could be said that total FM allows a business to focus on its core business and use its skills and resources accordingly. Good FM practitioners will add value and even profits to companies, similarly, they will improve service delivery."

Responding to the report, Fountain concludes: "FM is still seen as an emerging market in the Middle East, yet it's one of the fastest moving industries and one that will eventually outstrip the region's booming construction business. This comprehensive analysis provides a reliable study of the sector and pinpoints the key growth areas - something the industry has been in desperate need of. Only when a market understands it's true position can it begin to effectively evolve."

Industry sectors interviewed• Commercial- including banks, insurance companies, corporate offices, telecommunications companies and government offices

• Hotels- including resorts and hotels

• Retail- including shopping malls, leisure centres and entertainment complexes

• Mixed-use- including residential complexes, property developers and managers, and mixed-use developments.

There have been mixed opinions as to whether the estimated value of the total facilities management sector is correct.

Both Stephen Barker, director of Operon and Mark Povey state it's difficult to cite any kind of value. Barker thinks the Middle East's development boom clouds the ability to put an estimate on the FM sector, while Povey says that it's difficult to pinpoint a value anywhere in the world.

However, what was apparent was that most people did agree that whether the figure be right or wrong, the facilities management sector is growing at a considerable rate.

"The estimated future growth highlights two things. Firstly, there is a rise in buildings coming on line and secondly, property owners and managers now realise the importance and benefits of maintaining their properties adequately in order to maintain their full life cycle," explains Terry John-Baptiste.

David Graham states that both figures are underestimated. "I think it's more, because I think Abu Dhabi is really going to kick in."

And as Graham says, the report concluded that Abu Dhabi is the second emirate in line when it comes to countries leading the way, with Dubai retaining the number one spot.

With 66% of market share, it seems the UAE will continue to lead the market for the foreseeable future.

Value and country split

Report says...

Market size in 2006:US $200m (AED 734.5m)

Expected market growth by 2012:US $575.9m (AED 2.1bn)

Leading the way (in this order):UAE, Qatar, Bahrain, Oman, Kuwait

"FM has to show that it can add value and is a profession, not just a posh word for maintenance," states Tim Leech.

Terry John-Baptiste agrees, stating that the ‘handy man' attitude needs to disappear if the industry is to progress.

Stephen Barker adds that he thinks the market is evolving slowly and it is simply going through a process that other parts of the facilities management world have witnessed during their development.

One of the main restraints facing this industry and many others, is skilled man-power. "Ultra cheap, unskilled and semi-skilled labour is one of the biggest factors holding back the development of a truly professional FM industry in the region," explains Mark Povey. "It is an inhibitor of development and innovation, a barrier to best practice and a concern for inward investors."

Not surprisingly, one of the drivers behind the market is the region's construction boom. However, Povey believes this is an obsticle with developers creating a prominent problem that needs addressing. "I don't think the developers think about doing it cheaply, they just don't factor FM in at all. There have been major buildings going up and they haven't even consulted an MEP consultant," he claims.

One area Barker thinks will drive the market forward is sustainability, a word that seems to dominate the development world. Paired with sustainability is life-cycle. If a building is to be sustainable, developers, contractors and FM professionals need to start thinking about the life-cycle costing of a building.

"There's still quite a bit of short term thinking in relation to maintenance during the defect liability period and a reluctance to carry out full maintenance, which is short sighted. It's definitely not maintaining or ensuring the asset has an optimal life if you don't maintain it fully in the first year," adds David Graham.

Drivers and restrains

Report says...

Drivers

Construction boom

Freehold ownership

Changes in lifestyle

High-end developments

Influx of MNCs (multinational corporations)

Restraints

Shortage of manpower

Lack of awareness of total facilities management

Increased inflation

In a region where air conditioning accounts for 70% of energy consumption, it's surprising to see that environmental management falls at the bottom of the service list.

However, according to Mark Povey, the same entity (air conditioning) is also the reason behind MEP services being most in demand. "MEP is the most popular service here because of the region's climate."

As the report states, support services are the next in line with cleaning and security being top priority. A trend the region is currently experiencing is the attention being paid to security. With the international tourism spot-light being shone on the Middle East, Dubai in particular, security is paramount.

"Some customers are trying to separate security from anything else. That might be because of changes in the security profile in Dubai but they are wanting to see security provided differently from other things," states David Graham.

Terry John-Baptiste thinks that soft services are in demand due to operators seeing them as extremely labour intensive. While Tim Leech think the mass of residential complexes adds substance to the need for front of house and soft services.

"The current market in Dubai is seeing the handover of many residential properties. These require front of house and soft services with a customer focussed approach and service standards acceptable to occupiers - mainly Westerners - is essential.

"The hard services must also be delivered to the same exacting standards that we expect back home," he explains.

Most interviewees stated that they see this trend shifting to see a more strategic FM lead the way in the future.

Services in demand

Report says...

The following is a list of service areas companies are demanding, in most popular order:

Building operation and maintenance - this includes the most in demand service, MEP

Support services - including cleaning and security

Property management

IT and telecommunications - see technology section

Environmental management

In the more established FM sectors world-wide, industry specific technology has evolved alongside the market. However, with the Middle East playing catch up and trying to implement an established FM process into an underdeveloped and inexperienced economy, FM technology is often an afterthought.

There are currently four main players in the BMS sector but FM professionals do not think they are doing enough to promote the benefits BMS systems can bring to a building and its owner - a restraint FM professionals agree with.

"Where are the BMS system suppliers here? I'm very surprised at the absence of BMS suppliers. Perhaps the owner or architect up until now doesn't really place the importance of BMS in terms of the running efficiency of the building," says Stephen Barker.

This is something David Graham aggress with. "I think the role of BMS is not all that it might be. There isn't always an awareness of a real benefit to having them.

"What tends to happen is they are poorly specified, inadequately commissioned or not properly maintained because there isn't an awareness of the benefit that you get if you take it seriously," he explains.

Until developers start considering the drivers that benefit the operators and end-users, BMS will continue to take a back seat and be more about cost instead of how it can keep a building sustainable.

This is something Tim Leech sees changing in the market. "The involvement of FMs in design will bring this to the forefront during the value engineering process, whole life and whole life operational cost planning processes."

Technology

Report says...

Market size in 2006:US $82m (AED 301m)

Expected market growth by 2012:US $221m (AED 811m)

Drivers:Desire for comfort, needs for reduced operation and energy costs, construction boom, mega projects, high-end developments

Restraints:Shortage of skilled manpower, low awareness, lack of lifecycle costing approach, lack of specialised consultants

Leading the way(in this order):UAE, Qatar, Bahrain, Oman, Kuwait

Market share:Four main BMS suppliers

Here in the Middle East, singular contracts are more popular than an integrated package and in-house services are still popular.

The region is experiencing a steep learning curve in contract management and only when the industry is able to produce and manage these contracts, will the end-users and tenants start to benefit.

"There's a reluctance in the market to commit to long contracts. I think part of it is fear of being trapped in a bad contract. Although if the contract is written properly you can always get out of it," says David Graham. However, he also states that if a contract is written carefully and there are key performance indicators, measured deliverables and a service level agreement, then people do not need to worry.

According to Terry John-Baptiste, the local market has yet to reach a stage of maturity whereby longer contracts can be awarded. "Traditionally the local market has been viewed as very much transient and commitments longer than three years are unusual."

He thinks that three years is currently the most popular time frame.

"Currently most contracts run for three years which at present benefits both parties. The property owner can budget and plan costs into a three year business plan and service providers can amortise over three years its capital investment on machines and equipment to maintain the site."

Tendering is also another educational process the market is presently going through. There is a fear from building owners to outsource to a company they have not previously dealt with. This impacts on the tendering procedure by preventing FM service providers to grow and develop with the region. "Tendering does happen, but in some parts of the region this is viewed with a degree of scepticism i.e. that it is done to satisfy legal or governmental rules. The process and results are not always as open as perhaps they might be," claims Tim Leech.

Contracts and tenders

Report says...

Market split:Singular, bundled and TFM

Percentage split:Singular 79% and bundled/integrated 21%

In-house vs outsourced:In-house 27%, contracted 33%, mixed 40%

Tenders:Ranges from open tender to invite only. Invitations are usually restricted to contractors who end-users have had prior experience

Duration of contracts:One year or less 63%, one to two years 12%, two to three years 22% and over three years 2%

Contracts mainly measured by:Service level performance

The future

It's fair to say that the future of the facilities management market is bright.

Regardless of whether or not this research is spot on with its findings, it has got the industry talking.

It confirms that the Middle East is going through the same transitional process established market sectors like the UK went through when FM was in its infancy.

However, the difference here is that facilities management is evolving alongside the development of cities. It is here, at the design stage, where the Middle East has a real chance to show the international business world what it can offer - a unique situation the region should openly exploit.

Both the report and the people interviewed for this overview concluded that they see the market maturing and eventually slanting towards a more strategic shift.

"I think we're going to see a lot more strategic FM. Far more of a link between the construction process and facilities management, basically a replica of 1999 to 2004 in Europe," states Mark Povey.

But before a more detailed FM approach can start to take place, players in the market need to ensure they understand the local business culture and adapt international working conditions to ones that suit the Middle East.

In partnership with this, developers must start to include FM at design stage, while building owners need to start taking a more pro-active involvement on the maintenance of their building(s).

A basic set of standards, relative to the Middle East, need to be implemented and worked towards. "The UK went through this process and it's now about quality of delivery and not just the best price. This is when you come to strategic FM provision and consultancy. I think that will be an interesting development in the market," explains Stephen Barker. Local government can also have a positive impact on the development of FM by implementing laws and regulations. "Good legislation drives innovation and best practice and allows like-for-like comparisons," says Povey.

There are so many benefits to outsourcing services and FM service providers believe the process will become more popular.

"Whether people are ready to outsource the real high level FM, the strategic part, I haven't seen any evidence of that yet but experience suggests that will come. It's just not ready for that yet," claims David Graham.

With this in mind, shows like Working Buildings Middle East are an encouraging platform for buyers and suppliers of services and products to meet.

Working Buildings Middle East is a new exhibition dedicated to FM and the built environment.

• For exhibiting information, please contact
Jon Berry: jberry@cmpi.biz +971 50 8814632

• For visiting information, please log on to www.workingbbuildingsme.com

Working Building MiddleEast will take place 10-12 December 2007 at Abu Dhabi National Exhibition Centre.

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