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‘Let’s get it done outside’

The market for outsourced facilities management is growing at a fast pace in the region, thanks to the advantage it offers, in the form of reduced overhead costs. Frost & Sullivan’s Ramesh Kumar has the report.

| | Apr 15, 2010 | 2:05 pm
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The market for outsourced facilities management is growing at a fast pace in the region, thanks to the advantage it offers, in the form of reduced overhead costs. Frost & Sullivan ’s Ramesh Kumar has the report .

The Middle East is home to some of the world’s construction wonders, all built with the help of the once burgeoning GDP to support the growing population in the GCC states. Countries in the GCC have adopted optimum use of technology and capital to make the Middle East the modern construction capital of the world.

With the arrival of multinational corporations, the demand to adopt and retain international standards is evident in all areas of society. This has induced a need to maintain facilities and increase the lifecycle of the building. Though the actual advantages of hiring a professional facility management company to maintain buildings and assets is still not acknowledged, the market for it is growing at a phenomenal pace.

The market for outsourced facilities management has been growing at an exponential pace since the year 2000, mainly fuelled by the need to concentrate on core business activities. However, there was a downward revision of market statistics influenced by the after-effects of the economic crisis in the Gulf. But some end-users were fully aware of the monetary benefits of involving a professional facilities management company. In fact, most end-users have begun involving them at the design phase of the building to improve the lifecycle of the asset and to efficiently manage operational costs in the long run.

Despite a growing demand for it and its increasing popularity, this industry was severely impacted by the economic recession, which spread across the region, starting in Dubai. However, some facilities management companies were well-insulated against this downturn, mainly due to the need for reducing costs; FM service providers help to reduce the overheads. Mostly, the providers who faced limited impact of the downturn were the ones who had a healthy order book and several long-term contracts in hand.

Though the number of contracts in 2008 was equal to that in 2007, the value was small. Moreover, many new buildings were almost 50% complete, and yet did not award a contract to any facilities management service provider, as developers in the region were sceptical about entering into long-term and high-value contracts.

The total market for facilities management in the Middle East was around $3.5 billion in 2008. The market growth rate slowed due to the sub-prime mortgage crisis that affected the global business environment. Some new construction projects were put on hold, and hence, new contracts were few. However, the growth and scope for facilities management services in the Gulf States are still high.

  • The facilities management (FM) industry in the GCC is structured into three groups: single service providers, bundled service providers, and Integrated Facilities Management (IFM) service providers.
  • There is a large cluster of companies that provide single services and specialise in it. Most single-service companies are beginning to partner with IFM providers in order to have safe order books. However, the demand for single services still remains strong as endusers value their experience and professional service.
  • There are more than 30 domestic and international companies that provide FM services in the GCC. There are over 50 service providers that operate in the unorganised sector and will continue to contribute to the FM market growth.
  • The IFM market is expected to grow rapidly as more clients understand the ease of doing business with FM providers under a single contract. This will also help bundled services to grow.
  • FM services in the GCC grew at a phenomenal pace until the recent recession. With the construction sector being one of the largest contributors to the FM market’s failure in Dubai, the outsourced FM market was adversely affected like in all the other countries. There was a sharp fall in the growth rate of the market.
  • FM growth in the Middle East is expected to gain momentum once the construction industry revives in all the regions, especially in the UAE. Dubai and Abu Dhabi have been contributing most of the revenue for the UAE market. This trend is likely to shift and start focusing on emirates such as Sharjah and Ras-Al-Khaimah, as they have started attracting multiple foreign investments.
  • Oman and Kuwait have not grown drastically. In addition to this, the economic downturn adversely affected the FM market in these countries. The growth is likely to stabilise in all the regional markets by the end of 2010 due to the economic recovery and increasing awareness about FM services.
  • The overall facilities management market in the GCC is expected to grow at a CAGR of 18% from 2008 to 2013. There was a drop in the growth rate in 2008, mainly due to the economic crisis in the Gulf, coupled with crash in oil prices.
  • The demand for facilities FM 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.

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