In developed markets, FM services are closely integrated with some other services in the real estate sector, such as rent collection and lease management. However in India, the concept of FM has hitherto not matured enough to provide complete property management solutions.
In India, FM or outsourcing of services constitutes only 35% of the overall demand for real estate services, while remaining 65% or US $1.5 billion is managed in-house by construction companies. Unlocking this remaining 65% is hindered by many factors including lack of availability of technical and non-technical manpower, increased lead times in mobilizing resources/staff after a project has been successfully contracted due to manpower shortage, increase in inflation and labor cost, and ineffective provision of services at low rates by unorganized industry participants.
Technology Impact
FM service providers, who have historically focused on providing soft services, are increasingly looking to add specialized technical services within their service portfolio. In matured markets, the focus of FM remains on integrating facility, maintenance and building control systems (hardware and software) through building operations and maintenance services.
Service provisions in matured markets like the US and Western Europe are more inclined toward offering clients advanced technologies that enhance efficiency and quality of their services. In India, FM service offerings are quite mundane in nature with basic electro-mechanical maintenance of lifts, diesel generator sets, plumbing, security, housekeeping, and landscaping. Technology is yet to make an impact on the Indian FM market, unlike developed markets.
Best Practices
Best practices in FM should be aimed at reducing overall cost of maintenance, increasing life of the asset or building, and enhancing the client’s experience if he opts for outsourced FM services. All these factors hinge further on the ability of FM service providers to offer personalized solutions and adhere to timelines and quality consistency during service delivery.
For example, in developed markets, there is an integration of facility management and maintenance management departments through customer relationship management (CRM) software platforms offered by IT and telecommunication companies. CRM allows FM service providers to automate maintenance procedures and employ wireless handheld inspection terminals and web-based portals which make it easy to track equipment performance, plan maintenance, control inventory, inform repair technicians, and report results to management in real time. This has led to increased reliance on handheld devices to minimize paperwork and improve accuracy of data collection. In addition, communications and data systems offer service providers more informative tools, which they can utilize to assist clients in the decision-making process.
End-User Perspective
With respect to the segment-wise breakdown, commercial and industrial segments have contributed to 70% of the current effective FM market in India. The commercial segment including malls, hotels, hospitals, corporate offices, and multi-tenant office buildings has remained the traditional stronghold of most FM companies here.
Lately, greenfield industrial activities have led to improvement in scope of growth for FM. Limited competition in the industrial segment, followed by continued off-shoring of manufacturing units by multinational corporations (MNCs) has propped up this segment. Some FM service providers have developed capabilities to specifically meet rigid outsourcing requirements/standards insisted by MNCs in industrial units, including pharmaceuticals, automotive and auto ancillaries, food and beverage, semiconductors and electronics, etc.
Industry Convergence
The Information and Communication technology (ICT) sector has effectively converged with the FM market in most developed nations. Remote monitoring of one or more geographically-dispersed buildings from a single remote location has become quite prominent in matured markets. Proactive monitoring and predictive maintenance through continuous real-time monitoring of various systems in a building, such as HVAC, lighting, electrical, and security is a very specialized solution.
Remote monitoring aids in finding and fixing any issues, optimizes energy consumption, and reduces operational costs. Integration of ICT and emphasis on energy management could transform the Indian FM market from contract-based to performance-based, forcing service providers to maintain high levels of quality to meet client requirements. Companies hitherto focusing on providing soft services are now partnering with companies with core competencies in technical services to attain capabilities in these areas.
Economic Impact and Competitive Analysis
Competition in Indian FM services market is intense with presence of both domestic and international service providers. The market is expected to witness more competition from new entrants through mergers and acquisitions. Since the market is riddled with low-cost unorganized service providers, pricing and margins come under pressure. These unorganized players provide services at low rates, essentially scuttling the competition from large organized players. However, many international property management companies have made a foray into this market and have been achieving phenomenal growth rates over the last five years. Through the inorganic route, few international property management companies have witnessed meteoric rise in the market by acquiring some domestic companies.
Through this acquisition spree, these international companies are gaining strength and scale to cover major metros as well as other cities/towns. The FM sector’s business model is also changing, wherein larger facility/property management companies are outsourcing all elementary activities like landscaping, security, janitorial, plumbing, and electro-mechanical services to smaller or local FM companies. However, they retain supervisory services, lease and rental management, construction management and real estate brokerage services.
Market Outlook
As investments increase in IT/ITES/BPO, finance/banking, telecom, retail/malls, and industrial sectors, the FM market will continue to witness strong growth in the next two to three years. The outlook of FM services in India is shaping up to be highly optimistic, mainly due to growing maturity of end users and the need for improved safety, comfort, and professional maintenance of assets.
The commercial sector, being primarily driven by information technology (IT), business process outsourcing (BPOs), and banking-finance, would continue to drive demand for outsourced services in future as well; especially since these segments were the prime movers when the FM market began to emerge in India.
FM is expected to witness increased penetration especially in the industrial and manufacturing sectors, which were thus far inclined toward in-house management of facilities. Such outsourcing allows manufacturing companies to focus on its core competency instead of worrying about maintenance aspects of the facility.
Similarly, there is abundance of untapped potential in the government sector including public property like museums, libraries, government offices, etc. The infrastructure segment, inclusive of railway stations, airports, and metro stations, is also expected to amplify opportunities for the FM market.
Demand in retail, office space, hotel rooms, and residential housing are strong growth enablers for the FM market. It is expected that even a GDP growth of 6-7% in the next five years will push the real estate sector on a growth trajectory with strong prospects for the FM sector.
Sasidhar Chidanamarri
Industry Manager
Environment & Building Technologies Practice
Frost & Sullivan