Facilities management (FM), the interdisciplinary field that has grown around the servicing of residential developments, commercial spaces, and public and private infrastructure such as schools, hospitals and hotels, is relatively new, even among developed economies. Across most of the MENA region it is in its infancy. Yet, in Dubai, the recovery has resulted in swift advances in FM activity and a government-led process of formalisation has just begun. The activity in the emirate has the sector at the front of the segment’s expansion.
SECTOR STRUCTURE: The FM sector in Dubai began to pick up momentum as early as 2001, half a decade or so before a similar trend emerged in the UAE capital, and as a result of its head-start the emirate has one of the most diverse FM industries in the region. Today, large multinationals vie for business with local firms across the entire spectrum of FM practice. This includes operational services such as housekeeping, gardening, security, cleaning and the maintenance of machinery such as waterpumps, lifts and escalators, as well as the longer-term structural services such as the replacement of plant machinery – lift motors, pumps, water tanks and so on – at the end of their rated lifespans.
“There are lots of opportunities here. The huge number of projects from the past five years require maintenance and facility management and even upgrades, as businesses look more towards environmental and energy saving initiatives, and towards green buildings,” Saad Taher, the CEO of the Emirates Falcon Electromechanical Company, told OBG.
At the top end of this vibrant market, some of the largest names in the global FM sector have established long-term revenue streams by providing integrated FM services to Dubai’s major developments. These include: Johnson Controls, the US-based giant which operates its UAE buildings efficiency business from Dubai; Mace Macro, the FM arm of the UK-based consultancy and construction firm Mace Group; and Berkeley Services Group, which began to offer professional services in the UAE in 1984 and is now a member of Germany’s Kwik Group International. Other FM providers have a more domestic flavour. Imdaad, one of the leading integrated FM providers in the UAE, began life as a division of FM giant Serco in the 1980s, but has been operating from Dubai as an independent entity for the past five years. Wasl, one of the largest real estate management groups in Dubai, was established in 2008 by the Dubai Real Estate Corporation to oversee its assets and grow its portfolio. Its operations currently span residential and commercial properties, industrial plots, leisure and entertainment, hotels and serviced apartments. Idama Facilities Management emerged from Dubai Holding, and now offers integrated FM solutions which include advisory services, handover and defect liability period, and building and community operations management. Another FM firm, Emril focuses on managing large and complex structures in Dubai and Abu Dhabi. A subsidiary of Dubai Holding, EJ adah was established in 2005 and focuses on the provision of end to end community solutions. Majid Al Futtaim, meanwhile, established a joint venture with French FM giant Dalkia in 2002 to provide FM and energy management services to the region, with Dubai as its base. The sector is rounded out by a number of specialist and niche players. Farnek Avireal, for example, offers integrated FM services but, thanks to the security of experience of the Farnek component of the merged business, has established a reputation in the industry as a leading provider of security solutions. Other firms have secured revenue streams in other activities, such as IT and rope access for tall buildings, including the Burj Khalifa.
SCALING THE SECTOR: Assessing the size of this sector is difficult. The Department of Economic Development (DED), which licenses businesses in Dubai, lists around 4000 firms that describe at least part of their operations as FM. Most of them, in fact, do not meet the industry definition, and the DED’s list contains such notional FM providers as hairdressers and hotels. Of those that meet the definition, only a few have the capacity to capture and retain business themselves.
“I would say of the Dubai companies which are able to retain 70% of the business themselves, and deal with it in-house, there are maybe 50 or 60 of them at the most. Some might even say 20. These have big labour pools and facilities, and therefore don’t have to outsource,” Sinead Bridgett, the director of the Middle East Facilities Management Association (MEFMA), told OBG. Estimates of the sector’s size, therefore, usually derive from analyses of the construction sector and completed projects, and vary widely. However, most agree that the UAE market, which includes an increasing amount of FM activity in Abu Dhabi, has topped $1bn. “Currently, the UAE facilities management industry is valued at $1.5bn, with 60% of the business being done in-house or managed by small, inexperienced contractors,” Jamal Lootah, CEO of Imdaad, told OBG.
FORMALISING THE SECTOR: More light will be shed on the Dubai FM market in the short term, owing to efforts of the Real Estate Regulatory Agency (RERA), the regulatory arm of the Dubai Land Department. Under the present system, firms seeking licences from the DED are asked to pick five areas, or codes, which best describe their business operations. Thanks to the RERA initiative, those choosing the FM code in 2013 will be required to demonstrate that they engage in genuine FM activities and nominate an individual in the firm to undergo a government-mandated training course. MEFMA is playing a key role in RERA’s drive to formalise the sector. “We are assisting RERA in tackling this problem, and helping them with the training course. If companies want the FM code on their licence they will have to participate in a two- or three-day course, which will include an exam. RERA has recognised that challenges and issues exist in the sector and is trying to rectify them with these new requirements. Put simply, people have to know what they are doing in FM,” said Bridgett.
Established in late 2009 and commencing operations in August 2010, MEFMA has already taken some key steps towards sector formalisation. Founded under the auspices of RERA, it has as its core objective the unification of the regional FM industry. It conducts research, provides educational services and assists firms in the development of sustainable FM strategies. As the voice of the local FM industry, MEFMA plays the central role in addressing industry concerns. One such group produced a report on service charges based on the Dubai sector, which has been submitted to RERA. In late 2012, MEFMA turned its attention to sustainability, establishing a focus group to examine how FM costs might be reduced or at least held in place by more efficient use of equipment and machinery.
FUTURE GROWTH: The expansion of Dubai’s FM industry is underwritten by a real estate sector showing signs of recovery and a completion pipeline that suggests the quality services will be a useful selling tool. A recent study by Jones Lang LaSalle estimated that up to a quarter of Dubai’s residential properties are vacant and, with a further 25,000 units due to be delivered in 2013, this glut could get worse. The picture is starker in the commercial segment, with up to one-third of office space in the main business district empty, and an additional 900,000 sq metres of space set to be completed in 2013. The slow recovery of Dubai comes with a greater emphasis on the importance of FM. Prior to the economic crisis many buyers pursued a buy-and-flip strategy, and were unconcerned by the ongoing question of maintenance. For most, flipping is not a feasible option now: many owners paid more for their properties than the current market value, and often leveraged themselves to do so. Their assets must generate income to service this debt, and therefore for this segment quality FM management has taken on greater significance.
The market’s recovery is regarded optimistically and given the anticipated industry growth, establishing standards and oversight is of the utmost importance. “The UAE has several iconic buildings and landmark destinations, putting the country among the top destinations for travel, trade, commerce, tourism and lifestyle,” Billy Daly, the CEO of Ejadah Asset Management Group, told OBG. “These developments will need to be managed with a focus on sustainable asset quality.”
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