The facilities management (FM) industry in Dubai has matured rapidly over the past three years, scaling up as owners and developers seek to optimise their real estate assets in an increasingly competitive market. At a total current value of around $1.5bn, the industry is expected to trend positive through 2014 on the back of a slate of new project launches and a growing awareness of the importance of life-cycle management.
Companies in the FM segment typically develop and maintain services for a property or development in the commercial, residential or industrial segments. These services may include fire safety, security, maintenance, testing and inspection, cleaning, waste disposal, operations and business continuity planning.
An Essential Part
Though the industry is now attracting more interest as owners factor in the long-term maintenance and sustainability of their building stock, FM is a relatively new business in the emirate. When Jumeirah Beach Residence was launched by Dubai Properties Group in 2002, there was no FM company with operations in the emirate that could handle a project of that scale. In the intervening years, many buildings were completed and opened without any strategy to underpin their efficiency and long-term upkeep. Design decisions were typically based on short-term aesthetics with limited awareness of the long-term operational and financial impact. This contributed to less than adequate maintenance regimes and costly operating schedules. It was only after the downturn in 2008 and 2009 that property owners began to take note of the role played by external FM services not only in life-cycle management but also in the attraction of tenants. Property and FM services have since become a more integral part of the real estate process and its underlying infrastructure.
According to Jamal Lootah, the CEO of local FM firm Imdaad, the quality of management services has become a significant selling point for developers in recent years. “There has been an increase in demand for quality FM, as developers need to demonstrate to potential investors that they are maintaining their properties at the highest level,” Lootah told OBG.
Competition & Opportunities
Recognising the importance of quality property and FM, developers and owners are increasingly seeking to outsource or upgrade their FM services. The growing potential for market expansion has attracted a significant number of FM firms. Companies with local operations poised to exploit these opportunities are segmented into in-house providers, niche contractors, and larger, full-service and integrated FM operators.
“FM has become an umbrella term with more than 8000 companies currently operating under that title. However, there are closer to 20 when it comes to true, full-service and integrated FM operators,” Lootah said.
Though the field is highly competitive, larger companies tend to dominate the industrial and commercial segments, while smaller in-house or contracted FM companies typically focus on the residential segment. Competition between these groups is limited, with smaller firms competing on price and market leaders charging a premium for their services.
The fact that individual providers continue to account for approximately 60% of the FM market in Dubai nevertheless suggests that there may be significant growth opportunities for fully integrated services able to leverage existing competencies when it comes to contracting for large-scale projects.
This is a view apparently shared by some overseas service providers, which see strong market potential in the Gulf region. One such provider is Nippon Kanzai, a Japan-based building and environmental FM firm. “The Middle East is known for spectacular skyscrapers, yet their awareness regarding the asset value of buildings or fulfilling tenants’ needs is not fully developed,” the firm said in a statement in late October 2012.
For larger companies deciding whether to bid for a project, client sophistication is paramount. Factors including reputation, consistency in payment, the number of offers entertained when floating a tender and the degree to which most respondents are accredited or licensed by the International Organisation for Standardisation are important to consider given the growing issue of defaults in payment. This is a particular issue when ownership changes hands, as this can make collecting from a building’s new owners quite difficult.
Cost Savings
One of the key factors driving the market for sophisticated service providers in Dubai is a growing awareness of the potential impact that facility managers can have on owners’ bottom lines. “Clients are beginning to understand that well implemented FM can and should save money in operations, more than offsetting a service charge discrepancy with another competing provider,” said Ben Churchill, managing director of leading FM provider Emrill. Perhaps the most critical role played by Dubai-based FM companies in this regard is in the area of energy management. By reducing power bills that can cost as much as twice what they charge for their services, FM companies operating at the appropriate scale can effectively negate their own expense. “If an owner just installs more efficient machinery, they can expect reductions as low as 3%, whereas we have dropped power bills by as much as 30-40% in certain cases with custom solutions and well-trained management,” Churchill said.
To achieve a building’s full efficiency and make the best use of FM services, developers and property managers should consider including FM companies in the early stages of the building’s design process. “Early involvement at the concept design stage and then monitoring installations during the construction phase to match operational requirements remains a top strategy for facility management companies,” said Alexandre Mussallam, CEO of MAF Dalkia, a local FM firm. This early contraction model is prominent in the UK, where construction companies typically operate in-house FM services, but it is rare in Dubai.
Issues
Although Dubai’s developing FM segment has matured substantially in recent years, in the longer term there are a number of issues that may hamper the industry growth. Notably absent in the Dubai market is an appropriate regulatory regime for the administration of certifications, such that a certain degree of training or coursework is required to enter into different lines of service. This is particularly important given the responsibility of facility managers for security and fire safety systems. The supply of FM services is also expected to out-mature the procurement side, such that companies may be forced to lower their normal operating standards – a phenomenon that has caused the exit of several larger players in the sector. Speaking about the prospects for growth in the market, Billy Daly, the CEO of Ejadah Asset Management Group, that offers real estate and community services solutions, told OBG, “The GCC real estate services sector will witness exceptional growth over the next few years. Client expectations have shifted towards cost efficiencies, asset sustainability and maximising yields.”
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