Adding value to property

Rajesh Kulkarni , February 16th, 2009

While the growing demand for functional spaces has been a key factor in the growth of the facilities management industry in India, FMS providers are gearing up to face the harsh realities of a recessionary market by focusing on cutting costs and delivering better value to end users writes Rajesh Kulkarni

With under construction projects facing an uncertain future due to a tight liquidity situation and new projects finding few takers, the spotlight now is clearly on extending the life of ready projects and providing a bouquet of facilities managed by professionals. It’s a trend that has brought into sharp focus the increasing importance of facilities management in a rapidly changing real estate environment.

FM is now being recognised as an investment into real estate rather than a mere maintenance function.

A term that can broadly be defined as management of the overall facilities provided at various realty projects, Facility Management Services (FMS) have become an indispensable service tool for key growth sectors including banking, pharma, IT & ITES, BPO, retail, manufacturing, education, PSUs, infra and real estate.

“Facilities management is a profession that encompasses multiple disciplines to ensure the functionality of the built environment by integrating people, place, process and technology,” explains Anuradha Gandhi, business head, Property Solutions (I) Pvt Ltd., the FMS arm of Kalpataru Group, whose clients include Reliance Industries, Prudential ICICI, Bank of India, Bank of Baroda and E-Funds.

“Typically services that come under its purview include soft services, electro-mechanical services, energy management, security services, office support services and even guest house management.”

With an estimated market size of approximately Rs1,000 crore, the domestic FMS market too has its share of the organised and unorganised sector.

While there are a number of global property consultants servicing clients in the organised sector, a huge pool of local players manage the janitorial component in the unorganised sector. These are primarily manpower supplying vendors with little expertise, servicing the lower end of the market.  Despite this, FMS has carved a distinct identity from the larger scope of Property Management Services (PMS), which though similar in its service objectives, caters to a different audience.

“The term FM is usually applied to larger commercial properties where management and operation of buildings is complex,” states Suryavir Singh, head – strategic planning (real estate), Sahara Group, which has opted for both an internal FM division and an external agency to service their FM requirements. “Property managers, on the other hand, may manage construction, development, repairs and maintenance of a property.”

“Facility management is a part of Property Management,” says Naushad Panjwani, executive director (Projects & FM), Knight Frank India, a prominent player in the FM market.

“In property management you are in charge of the profitability and operations of the entire property. In facility management you are not involved in rent fixation, collection, fixing of budget, or doling out contracts and are restricted to the operations and maintenance of the property and the equipment/services therein. A property manager is appointed by the owner of a property which is by and large leased out and occupied by a third party.”

“Simply put PM are services that are delivered to the landlord while FMS caters to the needs of the tenants,” says Yash Kapila, head – FM (West Asia), Jones Lang LaSalle Meghraj which has approximately 33 million sq ft under FM in India and a client roster that includes IBM, Accenture, Microsoft and Citigroup.

Asked about the role played by professional FM service providers in the management of high-end residential, commercial and retail properties Kapila says, “The primary role is to provide a service that allows the client to focus on his core business. For example, if the client is a bank or a BPO, we ensure that their facilities are always ready for use so that they can concentrate on delivering their core services.”

“FM service providers are appointed with the task of improving maintenance, enhancing asset life and its capital value and accomplishing this objective with reduced capital outlay in less time with fewer people per square foot,” says Gandhi.

“Moreover in the service industry, FMS providers also keep track of complex data to monitor equipment history and in turn improvements. They are also instrumental in creating cost effective and efficient facilities by tailoring spaces to the needs of the organisation and its workers.”

With energy efficient and environmental friendly constructions now more the norm than exception, FM managers are also involved in helping conserve energy usage.

“Energy conservation is an enduring goal of facilities managers which has gained urgency in the past few years because of rising costs,” concurs Gandhi.

“FM managers can do this by following simple steps such as maximising daylight, undertaking major projects like integrated chilled water plants and performing energy audits. This can reveal where and how a facility is using energy. It will also expose the areas in need of improvement and ways to boost overall energy efficiency,” she adds.

With a varied list of services on offer backed by professional standards, outsourcing FM requirements to professional agencies presents an excellent value proposition.

“Outsourcing FM requirements ensures a one point contact to service all our needs,” says Singh citing projects like Sahara Grace residential complex (Gurgaon), Sahara Ganj mall (Lucknow) and Sahara mall (Gurgaon) whose FM requirements have been outsourced to private service providers. “We don’t have to run behind vendors for sourcing services like housekeeping, engineering, security, pest control and horticulture since they are now the sole responsibility of the FM agency hired for the purpose.”

“Outsourcing is bound to bring down the cost of activities if the contract is managed smartly,” says Panjwani. “Engaging a large and reputed firm helps in bringing their economies of scale to the company. The costs of a specialised company are also likely to be lower. These are the direct costs, but the real benefits accrue in freeing the organisation’s time of sourcing, planning, training, managing and monitoring the performance of a large workforce engaged in a non core activity.”

Stressing on the rising demand for quality FM services in real estate, Vishwajeet Jhavar, CEO of the Pune-based  Marvel Realtors that has an inhouse FM team, adds that the entry of MNCs who form an important client base for developers, has been an important factor.

“Most MNCs follow stringent FMS norms in line with their global practises which local developers have to cater to if they want to sell their project,” says Jhavar. “This awareness is now applied across most residential projects also, wherein the FM needs are serviced by external agencies or inhouse teams set up for the purpose.” 

Yet the sector has not been immune to the adverse effects of the ongoing recession, considering that real estate has been one of the hardest hit. “All our clients are focused on cuttings costs,” admits Kapila. “But as a professional FMS provider we are okay with that. The challenge remains to reduce costs without compromising on quality.”     

“Like any other industry, the FM industry is also going through trying times,” avers Panjwani.

“Cost-cutting is the new mantra, which is not such a bad thing and will bring about efficiencies. Downsizing is a reality. Margins are under pressure. Companies have made investments in anticipation of the growth that was being projected.”

Voicing her perspective on the issue Gandhi says, “Payment delays from clients and the increasing inflation have affected cash flow. Many projects are delayed which in turn has delayed the decisions regarding outsourcing of FM services. A reduction in manpower has also led to a compromise on quality and a thinning bottomline.”

In the light of this difficult market reality, FM service providers have been forced to do a rethink on their business strategy. “Our strategy has been to firstly focus on quality and customer satisfaction,” reveals Gandhi.

“We are also engaging in the detailed study of customer satisfaction reports and ensuring proper implementation if required. This is a time to leverage lead management to maximise the value of each lead and focus on building our credentials in the market. We have to adapt our products and services to suit this new environment.”

“The major challenges are lowering expenses and providing facility solutions acceptable at different locations in a region and preferably worldwide,” says Panjwani. “Other areas would include an accurate measurement of facilities deliverables and adoption of environment-friendly practices.”

 “The industry is very quickly moving towards an output-based service where customers measure the costs with the output delivered,” concurs Kapila.

“We are working with our customers, vendors and others in our supply chain to drive down costs in keeping with the market requirements. We have to be receptive to the requirements of our clients. I actually believe the current market condition is a fantastic opportunity to generate some real innovation in terms of our services.” 

Faced with other key challenges that include manpower retention, lack of skilled professionals, non compliance by unorganised small operators and absence of a regulatory framework, FM service providers however remain optimistic.

“FM will play an important role in the growth of major emerging sectors like telecommunications, drugs and pharma and biotech industries,” feels Gandhi. “Growth in the infra segment is also likely to increase the volume of FM business.” 

But as Kapila points out, the onus is clearly on FM companies. “Service providers have to push the boundary themselves on what can be delivered rather than relying on customers to come up with ideas. There is a need to innovate to drive down costs and cut risks. It’s up to us to find ways and means of how we can deliver even better value to our customers.”