The evolution of Facility Management in Real Estate
-Authored by Raghav Kapur, Assistant Vice President, SILA
According to a recent report, the size of the Facility Management (FM) sector is close to $350mn globally. In India, the organized FM market is currently at ~Rs.100bn and is expected to grow at ~20% to reach ~Rs.250bn by 2020. Before we begin to explain the evolution of FM, let’s briefly comprehend the services involved here.
The term Facility Management broadly encompasses the maintenance related activities of all classes of Real Estate Projects – Commercial, Residential, Infrastructure, Retail, Hospitality and Industrial.
The Services are broken up into a few broad categories –
- Soft Services – Housekeeping, Horticulture, Pantry/office services, Pest control, Club house Management, Guest Relations, Help Desk
- Hard Services – Mechanical, Electrical, Plumbing, Energy Management & Consulting, helpdesk, Information Technology & Support
- Security & Safety – Visitor Management, Fire Safety & Systems, Emergency/Quick Response, Guarding, Access Control Systems
- Accounting & Billing – Financial Controls, Billing, Forecasting, Lease & Occupant Coordination
It all began in 1970’s where cost cutting initiatives by organizations globally led to outsourcing of non-core services like office equipment maintenance resulting to the origin of Facility Management. In 1980’s, the outsourcing of soft keeping services began to take place and by 2000 the entire IT industry had begun to outsource these services further including the outsourcing of energy management, waste management and technical consultancy resulting in to the development of an industry by itself. Globally, the sector is so evolved now that any service that is non-core to the company is now outsourced to a service provider. In India, the industry started to develop around 2010 with a CAGR of 16% from 2010-2015 to a CAGR of 20% from 2015-2020. The growth drivers behind this have been –
- Focus on the core operations leading to creating a mandatory requirement for outsourcing
- Requirement for specialized services, need of cost reductions, procurement necessities, service integration, reduction in number of contracts
- Requirement for efficient running of operations and structured maintenance
- Need for risk sharing with a third party for FM services
We also believe that technology is also a major growth driver behind the FM industry today. The FM industry is gradually shifting towards a more automated service delivery, with companies offering technology driven platforms. In order to integrate the use of technology to improve on the service delivery, SILA has also invested in customized FMs software called ‘SILA Connect’. SILA Connect is a software that allows the operating teams and clients to optimize and monitor service delivery on-the cloud. The growing footprint of facilities management in the country would require innovation and demand in specialized engineering services, covering areas such as energy efficiency audits, and green building concepts. Use of automated and environment-friendly cleaning materials along with the availability of different kinds of equipment are also the tools that have helped develop the space rapidly. For e.g. In soft services, the usage of ride-on scrubber machine has reduced the manpower requirement and it also saves water as the usage of water here is limited, this is along with providing better cleaning quality. And in hard services like energy management, there are remote energy sensors which convey energy consumption that can predict shutdowns and help save on repairs and maintenance costs.
In terms of clientele, retail and commercial spaces are the most prevalent in the sector presently followed by residential space. Industrial and hospitality sectors have also begun to outsource now as FM operators are offering SOP’s specially customized for their sectors. To conclude, the numbers itself speak about the evolution of the market in last two decades in India, and we believe that the growth will sustain over the next few years due to the continuous development of the organized market. Metropolitan cities like Mumbai, Delhi, Chennai, Bengaluru are already witnessing a high penetration of organized FM players, these players are now also setting up office in tier II cities like Ahmedabad, Jaipur and Indore along with others. Tier III cities are still provided for by the unorganized players but we are likely to see a change in that soon as well. The growth of these cities along with the sectors would help shape the FM trajectory in the country, the opportunities we believe would be so vast that it will provide a range of employment opportunities for millions of individuals in the country in the coming years.