Focus shifts from residential to commercial property management services in the post-COVID era

More sustainable fee collection, fewer complexities 

A few more facility management firms are considering shifting from managing residential complexes to commercial towers because the collection of management fees in the latter is regular and sustainable. Besides, there are fewer complexities and more focus associated with managing commercial properties.

Several developers rope in international management firms once their housing project is ready because it reinforces their sales pitch. Some continue with their services even after handover to the residents’ welfare associations, or RWAs. Of late, there have been cases of some developers defaulting on their fees with dues running up to crores of rupees.

Often, RWAs find it difficult to collect the maintenance amount from homebuyers who either do not pay on time or are unwilling to bear any escalation in maintenance charges.

Complexities associated with managing residential projects are huge. A recent fire in a residential complex in Mumbai is a case in point. Fire broke out on the 19th floor of a 61-storey residential building in central Mumbai, claiming the life of a security guard.

A probe of the fire has suggested blacklisting of the fire-fighting audit agency and action against the flat owner for carrying out unauthorised alterations in the apartment that caught fire. The report has suggested blacklisting of the firm that certified the fire safety equipment. Water from the fire-fighting system had to be activated manually to ensure the water flowed with sufficient force to control the fire.

Bearing on property valuations 

Commercial property owners are more forthcoming when it comes to paying maintenance fees on time as they are conscious of the fact that a well maintained complex has a direct bearing on property valuation. They are also dependent on corporate entities for their rents.

Collections are therefore, relatively more regular, experts say.

Cushman and Wakefield Property Management Services India Private Limited is planning to increase its footprint in the residential space and sees it as an opportunity at a time when most people are working from home and attendance in commercial projects is low.

“Deployment of facility management resources in commercial properties is currently lower compared to residential projects. Despite several companies urging employees to return, footfalls are still just about 7-10%. Deployment of manpower is currently maximum in case of retail (malls) and residential projects,” Manoj Sharan, managing director, Cushman and Wakefield Property Management Services India, told Moneycontrol.

Housing demand up 

“Housing demand has picked up over the last few months and it is a matter of time before demand for office space will also gain pace. Therefore, right now we are focusing on getting more clients in the residential space but without ignoring anything in commercial as the facility management cycle is long. Over the last few months we have bagged 22 new contracts. We are actively participating in RFPs, tenders, discussions with the commercial space providers. The pace of closure of residential contracts is much higher,” Sharan added.

Cushman and Wakefield’s total footprint in the facility management space is close to 160 mn sq ft, of which 25% is made up of the residential component and the rest is commercial (office space, retail, manufacturing, warehousing establishments).

 The demand for providing integrated facilities management solutions is on the rise across sectors such as healthcare, education and government institutions in addition to commercial office spaces.

This is expected to fuel higher investments in the sector over the next few years. Going ahead, there will be more investments in ‘technology’ as an enabler as organizations look to automate several aspects of building management, Sharan said.

The scope of work under facility management contracts includes engineering and maintenance, housekeeping, pest control, repair and maintenance, pay-rolling, vendor management and security services, among others.

While the bulk of the business comes from multinational companies, other clients include information technology (IT) and IT-enabled services (ITeS) firms, banking and financial services, pharma companies, manufacturing industries, malls and residential complexes, among others.

The Facilities Management (FM) business in India includes a mix of entities--large platform players, smaller, localised, single service players focused on services like housekeeping or security and corporate entities who manage the facilities in-house.

Huge potential 

Real estate experts say that because of the nature of the business, it is difficult to put a base number on the industry’s size.

A report by technology research company Technavio says the facility management services market size in India in the environmental and facilities services industry is expected to grow by $13.43 billion, progressing at a compound annual growth rate (CAGR) of almost 14% during 2021-2025.

Industry research suggests that two-thirds of buildings that will exist in 2040 are yet to be constructed and the demand for effective management of these buildings from an energy efficiency perspective, from a tenant experience perspective and from resilience perspective will generate a huge potential in the next few years.

Research by JLL India says the real estate sector accounts for nearly 40% of total global carbon emissions and this presents a huge opportunity for facilities management experts to build efficient, sustainability programmes around green buildings and renewable energy.

“However, driven by the need to create safe and healthy workplaces with a focus on sustainability, technology and employee experience, there is a huge demand in the market with an industry growing at upwards of 20% Y-o-Y,” said Ajit Kumar, group account director, work dynamics, JLL India.

JLL India currently has a footprint of close to 400 million sq ft across 110 cities.

Changing expectations 

“After two waves of COVID-19, the changing nature of a young workforce in India is leading to a completely different set of expectations from workplaces and that would mean more employee centric interventions for occupancy planning, cafeteria operations, visitor management and so on which would lead to a superior employee experience,” Kumar explains.

“The pandemic has taught us the importance of building more resilient workplaces with strong BCP measures to ensure business continuity. All the above factors mean that FM players as well as clients are looking at facilities management in a totally different light and unlocking opportunities in areas beyond traditional services. All these would mean that the industry is poised for a tremendous growth phase for the next decade,” he says. BCP is short for business continuity planning.

With the 3Ws of Work, Workplace and Worker coming together in the hybrid reality, there are huge opportunities. The pandemic has created new working standards and most employees expect new kind of experience services.

Facility management partners are at the forefront of creating experience led, hybrid work environments, he said.

“Post two waves of the pandemic, the focus has been on technology, employee experience, health and wellbeing and sustainability across residential and commercial properties managed by us,” Kumar said.

“Almost all aspects of a building today can be made more efficient with technology. From virtual working environments to smart seat booking apps, contactless elevators, smart visitor management apps, smart washroom cleaning solutions to cafeteria apps. A lot is happening at the backend as well. This includes indoor air quality solutions, sensors predictive equipment failure, on demand services for predictive maintenance and technologies for energy and water efficiencies,” he said.