For far too long, the FM (facilities management) industry has been facing stiff resistance from developers and landlords to put in requisite investments towards a building’s asset life-cycle. The pressures on the real estate markets have seen a trend where less funds are allocated for long-term management.
In fact, in most engagements that we have been involved in, almost negligible value was provided for this purpose. The double jeopardy is that while life-cycle management costs are already under-provided, the requisite maintenance cost is not sufficiently budgeted to maintain the upkeep of the asset, leading to higher life-cycle costs in terms of asset breakdowns and poor building conditions.
While laws such as JOPC in the UAE stipulate requirements for minimum sinking funds to ensure long-term sustainability of a building, in essence, neither of these measures are effectively managed or followed. The faults lie with the governance of strata laws and lack of awareness among the property owners and their associations. It seems there is purposeful default on the part of all stakeholders as these practices undermine the interests of not a few but all.
It is a known fact that an integrated FM engagement by any property owner if implemented effectively can deliver definitive results not only in the better upkeep of assets but increase the building’s longevity by 20-30 per cent. However, across commercial and residential properties, most of the stakeholders have adopted a shortsighted version of facilities management.
They assume it is more a business continuity tool with just maintenance goals and not look at the bigger picture. In many cases, what I have noticed is that these are not oversights but a deliberate attempt to under-provide long-term life-cycle costs to prop up their IRR (internal rate of returns) or just to cut costs by moving current costs to the future.
How can this be fixed? Indeed, better governance and regulations are one aspect, but more importantly awareness that any cost-cutting beyond reasonable limits or less than the intrinsic costs can significantly impact long-term returns and inflict financial damages.
Globally, this issue is impacting a cross-section of stakeholders, wherein both governments and large or small property owners and institutions with poor building conditions wait desperately in need of funds. We continue to see city skylines with dilapidated structures as a sign of building fatigues due to the above reasons.
There is an emerging crisis in context to residential, commercial and infrastructure assets. There are huge budget deficits to provide for building maintenance and requisite refurbishments. As a matter of fact, these deferred plans for facelift are putting additional fatigue on the operating costs of facilities management.
Often, operating budgets are being allocated for refurbishment instead of routine preventative plans. These deviations are also adding to frequent breakdowns and higher energy costs as low maintenance turns ACs and pumps into energy guzzlers.
The time to act responsibly lies on all, not just a select few. And more so on property owners.
Tariq Chauhan is Group CEO at EFS Facilities Services Group.