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FM growth margins falling in GCC

Dubai, November 24, 2013

The UAE, Saudi Arabia and Qatar lead the GCC region in terms of Facilities Management growth but the margins are declining and suppliers were seeking more sophisticated contract and delivery mechanisms as a way of protecting profit.

The GCC FM Briefing 2013' research was commissioned by the Middle East Facilities Management Association and conducted by Credo, a strategy consultancy to the FM sector that interviewed 35 of the region’s top companies and found that total spend on FM is being driven by GDP and construction expenditure.

The other key findings of the research were:

•Supplier contract margins were down from a pre-recession high of 15 per cent to between 5 to10 per cent
•Higher margin opportunities are likely to exist in specialised sectors such as healthcare
•Price remains the most important selection criteria amongst clients
•Customers still apprehensive towards contracts beyond three years

The research also compared facilities management in the Middle East with more developed markets and identified four different categories of development to protect margins – Bundling & TFM, Performance & Control (e.g. use of outcomes based contracts), Contract Length & Investment, and Delivery (e.g. increasing self-delivery and use of technology).

The report found that the degree of progress within these categories provides insight into how mature the market is and that suppliers in the UAE have made most progress within Performance & Control and Bundling & TFM to date.

When speaking with customers, awareness of the benefits from these approaches was understood to varying degrees and most were open to discussing them further with suppliers.

The one exception was regarding Long Term Partnerships & Investment, where customers were apprehensive about the risks from being tied into contracts over three years. As a result, the study expects to see most development in Bundling & TFM, Performance & Control and Delivery in the short term.

The report will be published and full details released at a dedicated event on November 27 at the Novatel Hotel at the Dubai World Trade Centre. The event will be sponsored by Idama and Credo.

Ali Al Suwaidi, the Mefma board member, said “Our collaboration with Credo has helped Mefma highlight the value of FM in specialised sectors, the importance of innovation and integration and the advantages of longer term contracts. It is now important that we use the insights and continue to promote FM in less developed markets where the margins are still high.”

Alistair Stranack, the director of Credo UAE, said: “We do not expect significant increases in the price of FM going forward, particularly as those interviewed indicate price is the most important factor in the purchase decision but adopting sophisticated delivery mechanisms will protect margins and ensure the GCC FM market continues to grow at a healthy rate with support from an active and representative association."-TradeArabia News Service




Tags: facilities management | GCC | margin |

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