Demand for realty facilities mgmt surges 18% this fiscal

Written by Mona Mehta | Mumbai | Updated: Nov 20 2009, 06:14am hrs
Demand from top corporates and banks for sourcing facilities management solutions (FMS), which helps maintain properties as per international standards and includes taking care of maintenance, equipment and operations, has gained 15%-18% between April to October 2009.

Despite the growth, demand has not touched the peak levels of 2008 yet.

Demand growth was 25%-30% during financial year 2007-08. But demand from the retail sector for outsourcing FMS has fallen 50% in tier II and tier III cities as retail companies are rather opting to manage malls themselves.

Naushad Panjwani, executive director, Knight Frank India, told FE, This facility is to maintain properties at the level of international standards, making them energy efficient, thereby ensuring that clients are free to concentrate on their core business without becoming involved with routine property maintenance issues. As a result, corporates are able to save on rental costs.

Reliance Industries Ltd, which conducts training programmes for employees at the project management centre at Mumbais Bandra Kurla Complex is evaluating plans to open many more such centres in India for which it is eyeing FMS.

A senior official involved in the project management at RIL said, We conduct project management training programmes for employees at our centre based in Bandra Kurla Complex (BKC). We intend to open many such centres in India where we will continue sourcing FMS from third parties in a phased manner. Currently, Knight Frank India is maintaining the existing project management centre property of RIL.

Tata Consultancy Services (TCS) is currently sourcing FMS from Knight Frank for its commercial IT facility in Pune. Deutsche Bank, which is planning to expand branches in India, is also outsourcing FMS and will continue to do so.

Barclays Bank currently sources FMS for its BPO branches from Jones Lang LaSalle Meghraj and from Knight Frank for its bank branches. It is currently talking to both these companies to provide FMS for other properties as well. The current area under management by Knight Frank is about 15 mn sq ft. Industry experts estimate FMS services potential in India to be around Rs 6,000 crore.

Yash Kapila, managing director integrated facilities management Jones Lang LaSalle Meghraj said, Demand from corporates and the BPO sector have started emerging, along with certain new market dynamics. There is now increased interest in alternate pricing models rather than the usual cost plus models. There is also an increased transfer of risk to FMS providers. In the past, it was the corporates who had to take the risk burden.

Further, in the current scenario, it has become a norm for FMS providers to receive a share of the savings generated most particularly in the case of energy savings, on which there is now more emphasis. In the retail sector, decrease in overall footfalls have impacted the margins of retailers and mall owners and this is being reflected in the pressure on FMS pricing contracts.

However, demand still exists for FMS in the larger, more successful shopping establishments, Kapila added.