Blue chip companies drive demand for integrated FM services
The Asia-Pacific region is forecast to become the largest facility management market in the world by 2025.
According to research consultancy Frost & Sullivan, which revealed the forecast in its ‘The Future of Facility Management’ report earlier this year, expansion in the region will be driven by economic growth, commercial construction and a rising culture of service outsourcing.
The consultancy believes the next five years will be defining for the global FM market, with innovation through new business models, technology deployment and more sophisticated value propositions to be critical as services mature and commoditise.
As the industry develops in Australia, the APEC region and globally, new facility management contracts in Australia indicate that blue chip companies are already pioneering this defining era for the FM industry.
In August, oil and gas giant British Petroleum (BP) appointed real estate services firm Cushman & Wakefield to provide full-service integrated facilities management at about 350 of its Australian retail sites.
For BP the appointment is the first time the company has partnered with a fully integrated facilities management and delivery services provider in Australia. The company previously used in-house resources or independent contractors for FM services at its retail sites.
“One of the things BP and other big clients are looking for is certainty in cost. It is cost with defined performance, risk acceptance and very minimal, if any, surprises in the future.
According to Charlie Reilly, managing director, global occupier services, Australia and New Zealand at Cushman & Wakefield, blue chip companies, such as BP, are increasingly outsourcing services from integrated providers for the certainty they can deliver in challenging economic conditions.
“One of the things BP and other big clients are looking for is certainty in cost. It is cost with defined performance, risk acceptance and very minimal, if any, surprises in the future,” Reilly tells Facility Management.
“They are looking for that certainty, or predictability, and also evidence (of performance) through analytics and reporting. They want to know what that cost represents in terms of performance and risk acceptance – how we prove that.”
BP’s VP sales and marketing for Australia, Brooke Miller, says a service provider like Cushman & Wakefield brings deep industry experience and will ensure BP’s retail sites are maintained to the highest possible standard.
“As a result of this new partnership our retail sites will be able to operate more efficiently and, most importantly, we will continue to provide a safe and very welcoming retail experience for our customers,” Miller says.
By adding BP, Cushman & Wakefield has bolstered a facilities management client portfolio in the petrochemical industry in Australia that already includes industry competitor Caltex.
The services Cushman & Wakefield will provide to BP include the delivery of mechanical, electrical, building maintenance, fuels maintenance, cleaning, landscaping and ancillary services. Cushman & Wakefield will also provide certain FM services at close to 1000 BP retail sites across Australia.
Outside of the petrochemical industry, Cushman & Wakefield also delivers integrated FM services for the likes of Australia Post, National Australia Bank and several government clients.
Reilly believes Cushman & Wakefield is attracting this calibre of client not by simply offering the cheapest overall cost scenario, but instead demonstrating innovation through cost by delivering ‘smarter solutions’ than what have been previously offered and implemented.
“A smarter solution is the equation between cost, service performance and risk acceptance,” Reilly explains.
“Now, a smarter solution is really moving away from the traditional (FM) industry, which would offer low costs initially in the tender process, but then that would typically come with negative surprises later.”
Reilly says that Cushman & Wakefield applies a three-phase approach to every contract, which can be simplified into the planning, execution and proving phases, regardless of the industry in which the client is based.
The Frost & Sullivan report outlines that partnerships, collaboration and mergers and acquisitions (M&As) will increase to facilitate service integration, convergence with energy management, delivery of business productivity, smart technology and internationalisation of contracts.
The analysis finds that successful providers will position themselves as client advisers on business productivity in order to provide a value proposition beyond mere cost management.
Reilly says BP, and other blue chip companies, are looking for an FM or property management partner that has the capacity to go on a ‘journey’ with the company over a number of years.
“That’s really important in petrochemicals, and it is equally important in banking as well, as their world is changing,” Reilly explains.
“They are no longer looking for a provider who can present a low cost [proposition] all ends up or low costs with negative surprises later on. They are looking for someone who can actually partner with them and go on the journey.”
Enabling technologies, such as the Internet of Things (IoT), big data and advanced connectivity, are expected to drive efficiency for both service suppliers and clients, while changes to future workplaces and workforces will create robust opportunities for integrated workplace change management solutions in the FM industry, according to Frost & Sullivan.
Reilly says Cushman & Wakefield has identified this trend and is technologically equipped to deliver the innovation its clients in the FM space now demand. The company has also established strong background and knowledge in the industries in which its clients operate through an employee sourcing strategy that targets these specific sectors.
“[BP] has a changing business environment [itself] – even in the retail petrol environment if you look at the electric cars that are coming out; that market is changing massively,” Reilly says.
“We can actually add value to their business not just by bringing costs down, but by doing things better to align with their customer base as well.”
New York-based Cushman & Wakefield has pursued growth in the real estate and property management sector in recent years, both in Australia and internationally. In September last year, it merged with another property company, DTX, to create the world’s second largest commercial real estate firm behind CBRE.
With the BP appointment in Australia, the company believes it has further cemented its position as the number one integrated occupier services provider in the APAC region.
Reilly believes the trend of blue chip companies appointing integrated service providers, which then essentially become their strategic partner, will continue to present Cushman & Wakefield with growth opportunities.
Its chief executive for Australia and New Zealand, James Patterson, says the region is experiencing greater demand for integrated occupier services as large corporates in a range of industries seek specialised and innovative solutions to facilities management.
“Now, a smarter solution is really moving away from the traditional (FM) industry, which would offer low costs initially in the tender process, but then that would typically come with negative surprises later.
“This [contract] presents significant opportunities for Cushman & Wakefield to build on the 5.5 billion square metres of client area currently managed across Australia and New Zealand, and to build on our domestic blue chip client base together with a range of federal government departments,” Patterson says.
Reilly adds that the process Cushman & Wakefield undertakes with its partners is prevalent across whichever industry it works in, whether it is petrochemicals, banking or government.
“We believe that we can really add value and what we are finding from a lot of our clients, and indeed from a lot of pioneering consultants in the industry, is they are working on [developing] new models,” Reilly explains.
“We are also engaging with a lot of different partners in different spaces as a sounding board if you like… a go-to [service provider] in the industry that wants to create those new models.
“We are very much engaged with a number of those entities in looking at how the industry can move forward in terms of risk appetite, in terms of costs and in terms of performance.”