The Facilities Management Business Confidence Monitor 2015

Middle East

IN PARTNERSHIP WITH

This collaboration between the British Institute of Facilities Management (BIFM), FM EXPO and i-fm.net, provides a depiction of the regional facilities management (FM) industry, as viewed by the professionals who work in it everyday. Through a survey and series of interviews, the report is aimed to capture a complete picture of FM market confidence by canvassing the views of the sector’s senior decision makers as well as the teams on the ground delivering those services throughout the Middle East. The outcome of this work gives us an accurate indication of the current state of play and an authentic forecast of overall business confidence for the next 12 months within the market.

As the industry has developed and continues to develop in the region, assessing its progress will be an important part of shaping its future.

This year’s research demonstrates a positive outlook within the market. This is seen in expectations for growth in business turnover and in the opportunity and appetite for future training and qualifications. A majority of FM employees are confident of a pay rise and even more are confident of an expansion in workforce. Almost 51 percent were confident of an increase in salary in the next 12 months, while a staggering 61 percent believe that their workforce will increase in the next 12 months.

The results also point to key opportunities for alert organisations. Just one amongst these is the chance to introduce training and qualifications to meet the demands of professional staff who want them, which may at the same time help to tackle the key business challenges of recruiting and retaining staff.

While statistics are interesting, opinions are vital too - that’s why we’ve included views gathered from around the industry in our analysis and highlighted a few key interviews. We hope the results gives you something to consider and will play a significant role in the Middle East’s FM industry as it assesses its plans for the future.

Welcome to the Facilities Management Business Confidence Monitor 2015

“More specialists will be attracted to enter the local market, either as entrants from abroad or as start-ups, and this will enable general providers to sub out more efficiently”

Survey Respondent

The Facilities Management Business Confidence Monitor 2015Page 2

Gareth Tancred - CEO, BIFMDavid Emanuel - Managing Director, IFM.netJaafar Shubber - Senior Project Manager, FM EXPO

WHO TOOK THE SURVEY?

The survey in total had 253 responses. The survey was conducted online, targeting those with a direct or indirect interest in the facilities management (FM) sector. Respondents primarily came from service providers (60 percent) with public and private-sector clients making up a further 25 percent of those who took part. Of the individuals who answered the survey, 85 percent identified themselves as in a middle management position or higher, across a breadth of typical industry roles.

Unsurprisingly, given the relative strengths of the FM industry in the different countries of the region some 73% of respondents work in the UAE. The remaining 27% principally work in other areas, of which 10% were from another region.

Most notable among the demographic data was the fact there was a very even spread among the sizes of organisation the respondents work for. Factors which may have contributed to this include the relative ease of setting up a business in the UAE and describing it as an FM company, although a number of smaller businesses or single service providers may be significantly more limited in scope when compared to genuine total facilities management organisations.

DESCRIBE YOUR ORGANISATION?

“Significant opportunities to develop the professionalism and quality of FM in the region as clients better understand the benefits to be realised from the sector” Survey Respondent

Results and analysis

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60%

Service providers

Public- and private-sector clients

Other

25%

15%

73%

5%

8%

2%3% 10%

UAE

QATAR

SAUDI ARABIA

KUWAIT

OMAN

OTHER

WHICH REGION DO YOU PRINCIPALLY WORK IN?

There is good news for those in the outsourcing business as the largest slice of client respondents indicated that their FM is totally outsourced (36 percent). When asked about how this was likely to develop 60 percent said more FM operations will be outsourced in the future. This is an optimism shared by those interviewed directly, although there was a word of caution with one interviewee suggesting that while outsourcing is a strong international trend, it still has some way to go to fully develop in the local market.

FM suppliers were also well regarded in terms of their ability to deliver innovation and best value. 78 percent of respondents were satisfied or very satisfied with that aspect of their interaction, something which may be surprising in a region where there is still a great deal of variance among the companies operating, in terms of both their standards and sophistication.

Outsourcing set to increase

Business environment and budgets

The Facilities Management Business Confidence Monitor 2015Page 4

The optimistic tone of the survey continued when respondents were asked to describe the current FM business environment with 61 percent seeing it as ‘positive’ or ‘very positive’.

Subjects interviewed for the report broadly agreed with the outlook, citing everything from increased construction activity and deliveries, to event based projects, as reasons why it was fair to expect a healthy level of business to continue in the near future. Also there was an acknowledgement that there continues to be a steady, if gradual, improvement in understanding of what FM is and where it can add value for clients who fully engage with the idea. That said there is still much to be done to continue improved understanding and awareness.

Almost no one thought the FM environment would deteriorate over the next 12 months, while 71 percent believed it would improve. Respondents were backing this belief in improvement with positive expectations about budgets, capital investment, forward order books and turnover, all of which the majority believe will increase to one degree or another.

“The FM industry is developing in this region. End users need to be educated about facility management functions. There should be criteria for starting an FM company in the UAE. Local laws and regulations should be introduced and implemented to increase the sanctification of end users”Survey Respondent

Q&A The macroeconomic view

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IS THE REGION AS BUOYANT AS THE SURVEY WOULD INDICATE?We see buoyancy across the region, but for different reasons in each country. We believe the industry is in a much better position now - compared to before the downturn - and we’re seeing a return to investment in construction, plus we’re also seeing the large developers such as Emaar and Nakheel start to invest again in building new mega developments and across the region we’re seeing significant investment in infrastructure and transport such as Qatar Rail, Saudi Rail and the Riyadh Metro projects.

Seeing it from an FM point of view the UAE is clearly the most developed market.

In Qatar the FIFA World Cup 2022 is driving a lot of activity, obviously in sporting arena’s but also in supporting infrastructure such as hospitality and retail, as well as mega developmentssuch as the Msheireb Heart of Doha Development and QP District. In Qatar, a lot of companies entered the market and we do expect to see growth and opportunities, but we’re not seeing any provider standing out and taking the lead.

Saudi Arabia is probably the most interesting market in the region at the moment. There is more investment going into Saudi Arabia than anywhere else. It is investing in huge developments and educational facilities. We’re also seeing requirements for significant levels of Saudisation in contracts to provide employment to local people. A number of international players are entering the market, but levels of FM outsourcing in KSA remain low in comparison to UAE or Qatar.

WHO IS MOST LIKELY TO MAKE THE BEST OF THE MARKET?The people that maximise those opportunities I believe will be the people who can differentiate themselves from others, a lot of the newer entrants have now shown the capability to have any real impact in the market.

Since the global economic downturn, FM providers have been put under-increasing pressure from clients to deliver savings and efficiencies, leading to areduction in operating costs. The companies that were able to differentiate themselves, drive innovation and quality and offer value for money, have managed to grow during this difficult period and are likely to continue to do so.

Saeed AhmedFM Director – MENAInterserve International

“We see buoyancy across the region”

Crucially, given the already competitive labour market for both professional and skilled operational staff, results indicate that 65 percent of respondents believe their workforce will increase. A similarly substantial 55 percent of respondents believed their in house teams would increase in size. The reasons given varied, but all centered around the core idea that there would be more work and more contracts available to win.

Boosting team sizes may prove easier said than done and respondents were aware that it may not be straight forward. Two of the top five business challenges identified in the survey as an obstacle or barrier to business success over the next 12 months included a shortage of skilled staff (29 percent of respondents picked this as one of their top three choices) and recruiting/retaining staff (26 percent of respondents picked this as one of their top three choices).

Competition for skilled staff is on the increase as new markets develop around the region. Emerging markets in places like Saudi Arabia are working hard to recruit professionals with regional experience and the current weighting of the industry means many of these people are being taken out of the UAE market via some highly competitive offers.

When asked about their individual career prospects responses reflected the fluid nature of the labour market and a belief that it is one with plenty of opportunity in it if for those with the right skills and experience. Confidence in career prospects was high with 84 percent of people ‘somewhat confident’ or ‘extremely confident’ about their prospects over the next 12 months. Only 21 percent felt they were facing direct job security issues, although 25 percent were unsure.

On the issue of pay, 51 percent of respondents expected to see an increase in the next 12 months with a further 23 percent uncertain. Only 27 percent thought they would not receive a rise.

Something companies need to be alert to is the relative mobility of the workforce in the region. While 41 percent of respondents had no plans to change organisation in the next 12 months, 29 percent have plans and a further 30 percent are unsure either way. The uncertainty could well be an indicator of people who are keeping their options open, making them likely targets for unsolicited job offers.

This represents a risk all companies face as competition for skilled people looks set to hot up. Executives interviewed confirmed that turnover remains high and pay increases have continued to be given at higher-than-inflation levels.

“Over the last six to seven years we have seen salaries increase above the level of inflation and would expect them to continue to do so as competition increases for good and experienced staff,” said one regional executive.

Part and parcel of this workforce mobility is an awareness of the need for qualifications, possibly to create enough differentiation to secure an improved job offer. 70 percent believed further qualifications would be essential to their career development and 61 percent had plans to pursue those qualifications over the next 12 months.

This appetite for training represents a significant opportunity for FM specific training organisations who can offer certified courses. It may also point to a key way of improving employee retention for those organisations with the resources to support employees in coordinated pursuit of professional development.

Encouragingly some 67 percent of respondents believed their organisation would ‘increase’ or ‘increase significantly’ their spend on staff training over the next 12 months.

Workforce plans and challenges

“Stock of property is increasing and much of it built in the last decade is now requiring more than minimal maintenance. Also the large number of owner-occupiers of residential property is increasingly in need of AMCs rather than ad-hoc maintenance call outs” Survey Respondent

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52%

14%

2% 1%

Extremely confident

Somewhat confident

No strong view

Somewhat unconfident

Extremely unconfident

32%

CONFIDENCE IN CAREER PROSPECTS

91 percent of respondents believe they are using technology to grow their business. However it is clear from the sheer variety of answers covering where any investment might be going that there is a very broad view of what constitutes technology. While some make mention of Computer-Aided Facility Management (CAFM), Enterprise resource planning (ERP), Building Information Modeling (BIM) and remote devices for field work, the variety of answers reflects a wider misunderstanding of the role of technology in FM.

Among the executives interviewed it was clear that while all had an appreciation for the benefits and applications of technology in the FM sector, no one believed the regional industry had got to grips with the role technology might have to play.

While there is a lot of ground to make up in the appropriate application of the right technologies in the region, some hope that this is happening may be seen in respondents claims about their organisations’ research and development (R&D) spend. Although the responses were not technology specific, some 47 percent believed spend on R&D would ‘increase’ or ‘increase significantly’ over the next 12 months.

RESPONDENTS

Technology’s turn up

91%47%

believe they are using technology to grow their business

spend on R&D would ‘increase’ or ‘increase significantly’ over the next 12 months

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Q&A The technology view

Adrian JarvisGeneral ManagerFSI (FM Solutions) Middle East

WHAT’S A KEY CHALLENGE OF TECHNOLOGY IN FM?The big thing is making people aware that not all things are driven by cost. There is value to investment and looking at a proper investment can give better returns than just buying into something to tick a box.

DO YOU BELIEVE PEOPLE ARE USING TECHNOLOGY TO GROW THEIR FM BUSINESSES?There’s a lot of smoke and mirrors, with a lot of people trying to jump on the smart cities bandwagon and talking about technologies that they don’t understand. There are a lot of people buying FM technologies to tick boxes but they are not applying the correct level of focus to actually implement the tool properly and therefore get proper business value out of it.

HOW DO YOU SEE TECHNOLOGY BEING DEPLOYED CURRENTLY?You’re finding that some of the employers are getting quite savvy around technology and using it to measure and monitor contractual output. Yet most of the FM providers still think of input based contracts, rather than using the technology as a means to be more efficient and actually show their clients they are doing the job they were contracted to do in a timely and cost effective fashion. Our lifeblood is technology, but we know if it is not applied properly it’s not going offer any value.

WHAT’S YOUR PERFECT TECHNOLOGY SCENARIO?In a perfect world, technology gives visibility to the work of FM. It can help people to understand that FM actually does something that is tangible and real and something that the wider populace should be more aware of. People should try to be more proactive in the way they contract with service providers and use measurement to help both parties improve, as they move toward output based contracts. People should try to be more proactive in the way they contract with service providers and use measurement to help both parties improve, as they move toward output based contracts.

“Growth in the market but also thin margins and more competitors entering, lured by the perception of low barriers to entry”

Survey Respondent

With abundant confidence about the prospects for the economic performance of their businesses from a vast majority of those who took the survey. 93 percent were at least as confident about the next 12 months as they had been about the last, if not more so - there is a clear optimism about the FM industry in the region from those who are in the business.

While that’s good news for established businesses, executives interviewed think it might be tougher than expected for any new entrants. While it is easy to set up and get a foot hold, at least in the UAE, several agreed that with a number of good players already in the market, it would be difficult for a new company to gain any significant share unless it was through acquisition or partnership.

As businesses look ahead, 45 percent of respondents believe their business objectives are based around a growth in revenue, up to 20 percent per annum. A further 18 percent thought that more rapid growth - above 20 percent per annum - was on the cards.

Sale of businesses, or acquisitions drew very little in the way of interest from respondents.

Opportunities identified by individual respondents included expansion in retail, hospitality and social infrastructure, as well as the array of new commercial developments. Challenges identified clustered around staffing, cash flow and competition.

Both cash flow and competition were highlighted as barriers or obstacles to success in the next 12 months by 39 percent and 55 percent of respondents respectively, in a question where they had to pick their top three options.

The consistency of the responses in these areas, across different questions, shows the significant role staffing, cash flow and competition will play in determining whether or not businesses are as successful as people hope over the next 12 months.

The Facilities Management Business Confidence Monitor 2015Page 8

“Our business will grow howevermargins are being squeezed tothe point that a lot of business isbecoming unattractive”

Survey Respondent

“Not being able to pass oninflationary cost increasesto customers (e.g. staffaccommodation costs)”

Survey Respondent

CHALLENGES

Challenges and opportunities

OPPORTUNITIES“Whilst demand from ownersshould be robust, the overall UAEeconomy prospects has beenexaggerated in the last two yearsand some “reality check” will occurand this will have a deceleratingeffect on new investment”

Survey Respondent

“Ensuring proper cash flow,not to be carried away bya surge in opportunities,be selective in taking upprojects”

Survey Respondent

“[Non]-specialisedproviders promotingthemselves to be FMproviders”

Survey Respondent

Q&A The business development view

Page 9The Facilities Management Business Confidence Monitor 2015

ARE YOU AS POSITIVE IN YOUR OUTLOOK AS THE SURVEY RESPONDENTS?I would probably put myself in the positive bracket because I think that clients are starting to understand the importance of what FM means. There are a lot of new units being released over the next couple of years and that means from the owners’ perspective they want to keep their places as nice as possible and maintain the integrity of their buildings. With more competition out there, the nicer their place looks, the more likely it is they can get a premium amount for their apartments.

WILL BUSINESS CONTINUE TO IMPROVE?It comes back to the major developers in the country that, again, are starting to change the game in terms of the kind of FM supplier they want: no longer is it about somebody being there with a wash cloth. Obviously they also realise a lot more now that with flagship properties they need to maintain them, do it well and be market leaders themselves.

WHAT AREAS OF THE BUSINESS IS YOUR ORGANISATION INVESTING IN?We’re spending a lot of time on research and development in technology. This year at Farnek the theme is innovating technology, so we are, and will continue over the next few months, to introduce new technology.

AND WHAT CHALLENGES DO YOU THINK ARE OUT THERE?As much as there are developers that are definitely believing and changing the goal posts, there is still a large percentage that don’t, so we are still going to have that challenge where price is king.

Jennifer PeltenbergDirector of Business Development & MarketingFarnek

“Clients are starting to understand the importance of what FM means”

Responses to the Facilities Management Business Confidence Monitor 2015 indicate a firmly held belief in the health of the regional FM industry. Central to this has been the role of the UAE acting as a regional bridgehead for global best practices coming into the Middle East.

No one doubts that there is still much more to learn about how the FM industry can play a role in the region, but there is an acknowledgement and understanding that key proponents of well organised FM have had some success in educating the market thus far.

CONCLUSION

The nascent nature of the FM industry in other nations is likely to continue to put pressure on the UAE industry. This pressure will be felt in areas such as staff retention and pay, as lucrative offers come in for experienced professionals with some knowledge of the Middle East. If the FM industry takes off in a market the size of Saudi Arabia, this pressure is only likely to intensify.

Individual FM professionals are aware of the opportunity they may be presented with as the industry continues to mature. This can be seen in both the expectation of salary improvements and in the desire among a large majority for further professional development and qualifications.

There is a clear opportunity for a training body to offer certifiable qualifications with an FM specialisation, if the demand indicated in the survey responses proves to be real. If this was offered as an in house option by FM employers it may help to offset a key concern around staff retention. While the labour market in the region is always likely to be more fluid than in more established markets, professional staff with ambition can sometimes value opportunities for development and education above straight forward remuneration increases.

Competition in the market continues to increase, a factor businesses are acutely aware of. There is a sense, both from survey responses and interviews, that the open nature of the market - especially in the UAE - is impacting prices and standards as poorly qualified businesses effectively buy work through rock bottom offers. Equally there is a belief that clients are becoming more aware of what FM services should be, which may eventually force the smaller, less-qualified start-ups out of business. However, if there continues to be a steady flow of new work into the market - as many seem to expect - then it may be a while before this starts to take effect.

As in other areas of business related to the construction and property markets, cash flow continues to be a key challenge. The wider industry has battled with late payments since the onset of the financial crisis and several respondents cited the absence of effective banking support as an aggravating factor. The FM industry is not alone in facing these challenges regionally, but it will likely have to find its own solutions.

If people’s expectations of a busy market are met in the coming months, bidding for the right work at the right price will be essential if companies are going to be able to provide value and innovation at a profitable margin.

Report released at FM EXPO 2015. Visit www.fm-expo.com

BIFMThe British Institute of Facilities Management (BIFM) is the professional body for Facilities Management (FM). Founded in 1993, we promote excellence in facilities management for the benefit of practitioners, the economy and society. Supporting and representing over 15,500 members around the world, both individual FM professionals and organisations, and thousands more through qualifications and training.

We promote and embed professional standards in facilities management. Committed to advancing the facilities management profession we provide a suite of membership, qualifications, training and networking services designed to support facilities management practitioners in performing to the best of their ability.

FM EXPOFM EXPO, the only largest event in the middle east region that connects professionals from the facilities management, building maintenance, hygiene, health and safety, energy and environment industries, all under one roof.

I-fm.neti-FM, the award-winning web-based news and information service catering to the needs of the facilities management community.

With a reputation for top-quality news, features, comment and research, we have grown and developed with the industry - always maintaining our distinctive focus on the FM marketplace. Updated every business day, the site delivers a unique service – easily accessible, fully searchable and highly topical.