Mapping Egypt’s Facility Management Market

Monday, 24th October 2016

Flight from Egypt’s urban centers to suburbs and residential compounds is being driven by three main factors: the desire to part with the chaos in urban areas for quieter suburban towns, the improving quality and aesthetics of units and compounds built by private developers and the appeal of services offered in residential compounds through facility management. Of all these drivers, effective facilities management deserves a closer examination, given its essential role in shaping a potential client’s decisions to either invest or relocate to any given area.

Facilities management is broadly defined by the International Facility Management Association as “a profession that encompasses multiple disciplines to ensure functionality of the built environment by integrating people, place, process and technology.” It should be noted that while this article focuses on facility management in residential complexes, facility management is also involved in a large spectrum of developments, such as industrial and commercial projects.

Facility management services help developers ensure that clients have one key contact point that assumes all responsibility for the management of services provided. Facility management companies aim to develop and coordinate a ‘service portfolio,’ while service providers focus on providing specialized services to the client, such as gardeners for landscape maintenance or security staff. The discrepancy here exists where facility management companies provide the aforementioned services themselves or out-source to separate service companies, a model very much prevalent in Egypt and the rest of the world.

Egypt vs. Abroad

The services offered at the facility management level are wide and varied, and those offered in Egypt do not vary widely from those offered in countries were facility management is a far more advanced industry, such as Australia.

This is due to the unprecedented rate of growth of the facility management sector in Egypt in terms of residential projects spurred by the increase in demand for gated compounds. Various forms of facility management have been sought and experimented with by leading developers in order to settle on best practices. However, various issues concerned with facility management have confounded developers and facility management companies over the years.

The Egyptian market lacks a developer that provides a ‘full solution’ facility management service across all their properties. The only providers in the market that are able to offer a range of services are a limited number of subsidiaries of major developers, such as Emaar Hospitality, Key-Mountain View and Sodic Edara. It is also common that providers offer a range of services through subcontracting. A prevalent example in Egypt is the presence of the private security company Falcon in a number of residential compounds.

Management by Developers vs. Subcontracting

The progress of a residential project still under construction also plays a role in influencing a developer’s decision on the mechanism of facility management. It is common practice for projects under construction to have facility management conducted directly by the developer. With regard to projects that have already been constructed but are yet to be delivered, direct management or subcontracting to subsidiaries are prevalent in the market.

Other major concerns facing facility management companies in Egypt relate to operations and finances. As mentioned earlier, due to the new and unfamiliar market of facility management, the quest for determining best practices in terms of financing payments is yet to be discovered. Around 10-15 years ago, it was common practice that facility management fees for residential compounds were calculated by meter; however, this has been slated and replaced with maintenance fees as a percentage of house prices (with common range being 5% to 10%). These payments are either paid as part of the installments before receiving the unit, or in bulk before handover. While both methods exist in the market, expert opinions in the field assert that payments as part of installments are the favored practice among clients.

Moreover, the bulk of the financial burden of facility management is shouldered by consumers, with developers currently allocating an average of 5%-10% of the total project budget toward covering facility management costs. The enormous size of the costs required to provide and maintain the services offered is likely to come as a significant expense to both developers and clients, which acts as one of the major factors in rising real estate prices.

This article is produced in partnership with D-Code.

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