Regulation is challenge for FM sector

Facilities Management (FM) companies are increasingly signing facilities management contracts with more developers rather than building owner associations (OA). This trend will continue until owners' associations become a more formalised and legal entity, according to a cross-section of property market analysts and players.

In a round-table discussion with Emirates Business, organised during the FM Expo Networking Event by DMG World Media; Samer Al Qada, Managing Director, Facility Services G4S; Kyle Bashy, Business Development Director, Middle East, Honeywell; Ian Kennedy, Senior Facilities Manager, Brookfield Multiplex Services; Abdelaziz Rihani, General Manager, Portland Middle East Facilities Management; Rohit Dalmia, Business Development Manager, Al Shirawi Facilities Management; Ravi Kumar, Service Technical Manager, Belhasa Engineering & Contracting; Sean Heckford, Senior FM Consultant, International Built Asset Consultancy, EC Harris, said they have signed up with more developers than OAs since these associations were not yet a legal entity.

Overall, developers continue to influence authority on this trend and will do so until OAs become a more formalised and legal entity, said Dalmia. He added that a trend has been noted towards government developers looking at in-house FM and direct recruitment of FM managers whereas OAs, in areas such as Dubai Marina and Jumeirah Lake Towers (JLT), are moving away from the influence of their developers.

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Are you, as an FM provider, signing up with more developers or OAs of buildings and communities? Are more developers approaching FM players in order to incorporate FM into their buildings?

Qada: Developers are co-operating with FM service providers for better services such as operation and maintenance, including Mechanical Electrical Plumbing (MEP), cleaning, waste management, power management, landscaping and facade cleaning.

Bashy: Developers have been reluctant to sign contracts fearing that their own projects might not finish on time or within the budget. From our point of view, there is an 'out of sight, out of mind' mentality, meaning that once a developer has handed over the building and the quota of apartments or offices have been sold, no-one will invest or take responsibility for the after-care. However, we have more contracts with developers than with building associations. Even if there is a building association, they tend to be inactive rather than proactive, while we believe in preventive maintenance to ensure safety and comfort.

Kennedy: At this point in time, most of our contracts are directly with the developer, although one of our contracts is in the process of being signed by an Interim Owners Association (IOA) where we are converting one of our service agreements for an IOA. Developers utilise FM providers if they do not have an in-house service or supplement an in-house FM team with maintenance providers.

Rihani: So far we have signed more contracts with developers than with owner associations because they are yet to become a legal entity. The FM industry has seen several international and home-grown companies entering the market and gaining a share, but unfortunately, the majority have no clue about the FM industry. This of course gives developers a huge list to select from. Personally, I will say that developers have also become more selective and demanding about FM companies, but a majority still consider the price factor more than the quality factor.

Dalmia: We are signing up more with property developers than with OAs because they are not yet formalised and the legal authority still rests with developers. Several large developers are in the process of establishing OAs and, therefore, selecting an FM manager still falls within their scope. There are cases wherein we signed up directly with OAs with no involvement of the developer. Overall, developers continue to influence authority on this trend and will continue until OA becomes more formalised and structured.

Government developers are looking at in-house FM and are still directly recruiting FM managers whereas OAs in areas like Marina and JLT are moving away from the influence of their developers. A key observation is the occupancy level. Buildings that are nearly occupied are acting more independently than those with 50 per cent occupancy.

Kumar: Yes, indeed. More FM providers are signing up with developers in the market today. The financial crisis has actually helped improve the business as real estate companies and big-time developers are putting a premium on cost-efficient and high-quality maintenance and management solutions for their existing properties.

With up to 80 per cent of the overall costs within a building's life cycle being attributed to operation and management, developers and building owners are now optimising business value of properties through cost-effective building management solutions of FM providers.

Heckford: Developers are becoming aware of the value that can be added by effective asset and FM and some developers are setting up in-house FM operations. We have seen a steep change in asset owners and developers taking a more strategic approach to the management of their portfolios, taking a long-term view on their asset management and putting robust strategies in place for the future.

We are involved with several developers in the region, assisting them with their asset strategy, performance and FM challenges. There is an increasing awareness of the positive impact that FM can have on asset performance and the outcomes this can deliver to businesses. This is attracting interest from other developers, asset owners and public sector organisations.

What are the main challenges today before the FM industry?

Qada: We have many challenging areas in our area of business such as the economic climate and professional manpower availability in the FM sector.

Bashy: Regulation and transparency are the two main challenges for the FM sector. Better regulation will ensure that end-users are not being duped by low prices and a false economy does not enter our market. Transparency will ensure that FM providers build up a level of trust in the market so that our services become an indispensable part of buildings development.

Kennedy: Lack of cash-flow is one of the main challenges the FM sector faces.

Kumar: Rising employment costs and erosion in profit margins are some key challenges to the FM industry. Also, a big challenge is to find a suitable FM professional as most of them are recruited directly from MEP companies who are not aware of the full concept of FM. They think implementing FM is expensive and a financial burden, hence they employ their own maintenance team members without proficient and qualified FM managers. Another big challenge faced today is the global financial crisis which restricted a developer's budget. Hence, the industry has to overcome these problems and generate proper awareness among builders for longer building life and life cycle costs.

Rihani: Facilities management professionals play an integral role in ensuring that their company is positioned to face the challenges that can result from cyclical growth. Today's FM professionals must confront a number of significant challenges, including maximising workplace productivity and flexibility to develop a detailed budget to operate a workplace and a team.

Dalmia: The biggest challenge is that owners think they are powerless and have to settle for what they have been handed. The other challenge is that they don't understand the basics of FM and hence compromise on short-term savings for long-term losses. This issue is more significant in the UAE because owners don't see themselves holding on to their assets for too long, instead hoping to pass on the more expensive bills to the next buyer.

Heckford: The main challenge is raising awareness and appreciation of the value that a well-designed approach to FM offers.

Can you give us a break-down of the type of savings that developers/property owners can make by incorporating FM into their buildings right at the design stage of a building?

Qada: Property owners will surely make a saving as FM companies have good experience and background in all building types and this will add value to clients as they provide a programme to maintain buildings through the day that will save the cost of power, increase asset life, prevent buildings from major failure by providing preventive maintenance and record all the maintenance activities which in the long-term, will save clients' money and time by providing FM services through a professional and well-trained team.

Bashy: Every facet of a building can be assessed and subsequent cost savings made as a result, but if we are talking generically, then the biggest growth area for FM globally is in energy savings.

Kennedy: Important to most building owners is reducing demand for energy not just for economic reasons, but also because energy consumption goes hand-in-hand with carbon emissions. Reducing energy during the operational phase of a facility's life similarly reduces carbon emissions. When considering that 30 per cent to 40 per cent of a country's total carbon emissions are attributable to buildings and other constructed facilities, it is clear that facility managers as much as the operations of the occupiers have significant roles to play in ensuring highly efficient maintenance and operations within their facilities.

Rihani: Building owners have begun to realise the importance of monitoring the overall life-cycle of their properties and its cost. For an FM company, there are many forms and ways to come up with a break-down on the type of savings.

Dalmia: Dubai's construction boom was no different [from other areas] in the sense that buildings were constructed in such haste and with such absolute disregard for FM, that it's a challenging and costly affair to manage these several sites. It's difficult to pinpoint exactly where savings can occur because both sides have to look at the probable structure as a whole. We are not too far away from the time when potential buyers will be more interested in the practicality and technicality of a project rather than in its perceptual appeal alone. This level of understanding alone will lead to significant savings.

Kumar: There are savings that can be incurred if during design stages, one can consider thinking of implementing green building concepts in order to ensure saving energy as well as preserving a green environment. For successful FM, it is essential at the planning stage to consider all the MEP and other selection of HVAC equipment, light fittings and plumbing installations, which will make FM possible as a whole.

On a large number of projects, FM only enters after topping out and possibly after the first users have already moved in. This act of negligence is inexcusable because, many critical decisions for efficient building management have been taken at the planning stage.

Heckford: By taking a long-term view on asset and FM and incorporating strategies at an early stage, owners and occupiers have the ability to create 'fit for purpose' flexible working spaces that meet business needs. This approach drives efficiency in business operations and creates added value for stakeholders and investors.

Focussing on areas such as energy efficiency and maintenance at the design stage can, in the long-term, help to improve asset productivity and value.

Do you believe that Strata Management will help propel the FM industry?

Qada: The strata and FM companies are competing with each other to ensure providing FM services to buildings.

Bashy: By empowering property owners to demand an international standard of building management, accountability and heightened competition will drive the success of the FM industry.

Kennedy: Strata management is normally the day-to-day management of a building while the FM sector is concerned with maintaining long-term sinking fund budgets, protecting common areas of the facilities sector and ensuring that capital assets for all owners are not diminished over time. Therefore, the influence of strata management will eventually have an effect on the FM industry and will greatly rely on the OAs' desire to maintain the asset value over a period of time.

Rihani: It might take some time for all concerned to cope with and understand the strata regime, but definitely it will help in clearing up a lot of things, if laws and regulations are strong enough to protect each shareholder.

Dalmia: Most definitely! Give the owners the right to decide the fate of their own equity and you will see a drastic improvement in the FM delivery across the board. Innovation and accountability are the two main ingredients of success for FM companies that will finally differentiate the best from the worst. We need it!

Kumar: According to me, there is still a lack of awareness of the Strata Law.

The economic climate and professional manpower availability are challenging areas Samer Al Qada, MD, Facility Services G4S

The biggest growth area for FM globally is in energy savings Kyle Bashy, Business Development Director, Middle East, Honeywell

Strata management will eventually influence the FM industry Ian Kennedy, Senior Facilities Manager, Brookfield Multiplex Services

Developers have become more selective and demanding Abdelaziz Rihani, General Manager, Portland Middle East Facilities Management

Buildings that are nearly occupied are acting more independently Rohit Dalmia, Business Development Manager, Al Shirawi Facilities Management

Rising costs of employment and eroding profit margins are key challenges Ravi Kumar, Service Technical Manager, Belhasa Engineering & Contracting

There is increasing awareness of FM's positive impact on assets Sean Heckford, Senior FM Consultant, International Built Asset Consultancy, EC Harris

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