Poor maintenance imperils ROI in real estate properties

Poor maintenance imperils ROI in real estate properties

Facilities management must meet international best practice standards
Facilities management must meet international best practice standards

RIYADH — Saudi Arabia’s property owners face the risk of stranded assets in their real estate portfolios if they neglect maintenance and fail to protect the value of their facilities.

As newer properties enter circulation, real estate investors could be faced with declining returns from existing assets if they don’t keep pace with market change. Once, new builds were fueled by the ready availability of labor and low-cost materials. But as costs have risen and budgets tightened, leaving built assets to survive with little maintenance is no longer an option, suggests Lionel Prodgers, who will chair the Facilities Management Leaders’ Conference, taking place as part of FM EXPO Saudi 2017 on Jan. 15.

“I think as things become more expensive, attention turns to how we can improve the life of the asset,” said Prodgers, who is managing director of Agents4RM. “There is an aspiration, particularly on the new builds and iconic developments, where there is an understanding that they need to be properly maintained.”

A growing recognition of the need to care for assets in Saudi Arabia’s built environment is positive news for organizations with the skills to deliver what is needed. “We are very optimistic about the facilities management market in Saudi Arabia,” said Saleh Al Rajhi, General Manager, Advanced Facilities Management, the headline sponsor of FM EXPO Saudi 2017.

“As the country enters a new era with the implementation of the National Transformation Plan, demand for facilities management is expected to grow in parallel to the projects being announced. We have seen a keen interest from the healthcare, industrial and real estate sectors.

“It’s an exciting time to be in Saudi Arabia as it grows and we are truly looking to invest in the education and development of the market by actively contributing to sharing knowledge and best practice,” he said.

Facilities management that meets international best practice standards will become a necessity as the Kingdom’s built environment increases in sophistication. New build properties are often packed with technologies that put pressure on owners to secure quality facilities management services to maintain the assets at peak efficiency. But as it stands there is some work to be done to bring the industry up to scratch.

“With the current quality of facilities management provision it will be hard to maintain the kind of new building stock being built in Saudi Arabia, without a significant change in approach,” said Alistair Stranack, a partner with Credo Business Consulting. “Historically owners tend to completely divorce construction and maintenance costs. Very few people think about the total cost of ownership of the building and optimize that in terms of lifespan, or capital expenditure versus operating costs.”

This approach belies the fact that the operation of a building can represent 80 percent of the property’s total lifecycle costs. “The overall economics of the whole building cycle can be handled much more cost effectively if you have a proper maintenance program,” said Stranack, who will present a session on technology in facilities management during the Facilities Management Leaders’ Conference.

For investors, the bottom line may hit hardest when tenants reject buildings that come with high-energy consumption charges, or are simply poorly maintained. Being prepared is the answer and events such as FM EXPO Saudi 2017 provide educated property investors an opportunity to gain greater insight into how facilities management and asset management strategies can be used to reduce operational costs, increase operational efficiency and make their buildings more attractive to the market. — SG