5 Trends to Look Out for in UAE Facility Management Market

UAE facility management market is soon becoming a hot topic in the eyes of a lot of Gulf-based business leaders, and the origin to this topic is very interesting in itself. The stupendous decline in oil prices and almost overnight erosion of liquid capital following the final vestiges of the 2008 global financial crisis severely impacted the GCC countries, not just economically, but mentally and socially as well. The groupthink quickly came to the conclusion that the sea-change in energy markets required proactive, pragmatic thinking, rather than the simple reactive game that high oil prices had led them to play over the past 50-odd years.

Energy based economies, whether Venezuela, Nigeria or Russia, had all been crippled severely, and the GCC was haemorrhaging money. A decision was made, individually in all GCC countries but with the same conclusion in mind: the economy had to change and the starring role of energy assets in the economy would have to change with it. In this dramatic situation, the choice was made to leverage the country’s impressive infrastructure investments to switch to a services-oriented economy.

Tourism, real estate, healthcare and education would be the new pillars on which to build a new kind of economy, one where energy would play a supplementary role. TechSci Research brings you the latest on the UAE facility management market, one of the major successes of the UAE government over the past 5 years or so, and how it can act as a model for other service-sector based developments across not just the country, but across the GCC countries.

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1. Strong Growth in UAE Facility Management Market

The UAE Facility Management Market Size, in terms of value, has experienced double digit growth over the past half-decade or so, from just over $6 billion in 2011 to $11.26 billion in 2016 with a y-o-y growth rate ranging from a high of 16.25% in 2013-2014 to a low of 11.65% in 2012-2013, which is extremely impressive, to say the least.

TechSci Research experts predict that the market for UAE facility management services will continue to grow over the next 5 years, even if not perhaps quite as rapidly. The figure being provided for the 2021 fiscal cycle is $17.41 billion, which will make the growth story of the UAE facility management market all the more impressive.

Another interesting factor behind the UAE facility management market is the type of companies operating in the market. Leading players in the UAE facility management market include Emrill Services LLC., Imdaad, Farnek Service LLC, EFS Facility Management Services and Khidmah L.L.C, among others. Most of the major UAE facility management companies are indigenous, and a majority of them are Dubai based.

This implies that not only are the companies able to better understand the needs of their customers, but also that many of the companies are in their home market for the long term, which would imply more stability and better chances of consolidation, which would further the chances of witnessing growth in the market.

Companies operating in the UAE facility management market are expected to consolidate as Tier-I and Tier-II companies expand further through merger and acquisitions. For instance, in 2017, UAE-based facilities management (FM) provider, Imdaad announced investment of USD16 million for the acquisition of small players. Many of the companies set up and operating in the UAE are looking towards long term global and local cues to help them make informed business strategy decisions.

2. Robust Investment in Construction

The future for the UAE facility management market looks just as bright as its contemporary history. Construction projects worth $ 629 billion are expected to be completed in UAE by 2021. Upon completion, these projects will pave the way for further growth of facility management services in the country. As mentioned previously, shrewd companies operating in the market are already starting to evolve their long-term plans to correspond with the major indicators being witnessed in the overall economy of the UAE.

Construction sector spending in the UAE has been stable and robust, if not quite as phenomenal as what is being witnessed in the UAE facility management market. Construction spending has grown from $ 37.68 billion in 2012 to $ 41.58 billion in 2015. The CAGR over the years 2012 to 2015 has been slightly under 3.5%, and is following UAE’s GDP growth rate, a welcome sign given that investments are set to increase given a strong run by the economy.

As global demands pick up and if all prices stabilize as the markets clear, a strong GDP showing will provide a major boost to UAE’s construction spending, which will eventually spur the UAE facility management market.

Given that there are grand ambitions for UAE to spurn its energy based economic system to a much more inclusive service based system, once the tightness being felt in major sectors ease, construction and facility management can become two major drivers for a new UAE economy.

Given the scale and magnitude of some of the construction projects being undertaken in recent history, such as that of the 828 metre Burj Khalifa built in October 2009 and the ongoing 711 metre tall Dubai One Tower, there is no doubt that the real estate is viewed as a key sector in the UAE and its corresponding sectors too will see corresponding growth as the impact of the real estate sector on the UAE economy deepens.

3. More Tourism and Events

Tourism has been identified as another key sector which can be a potential money spinner for the UAE economy and, of course, the UAE facility management market. Amongst the GCC countries, UAE has the largest tourist footfall, second only to Saudi Arabia in that regard, and nearly as much as the combined tourist footfalls of Bahrain, Qatar, Oman and Kuwait.

According to data by Dubai Chamber, the UAE’s tourism sector is expected to grow by 6.5% annually between 2011 and 2021. TechSci’s own figures peg the number of visitors in 2015 at 14.2 million and expect the number to rise to 20 million by 2020, right in line with its ‘Vision 2020’ document.

The overarching aim of the UAE government is to diversify the economy through propagation of various other sectors, primarily that of services. Dubai, often called the luxury capital of the world, holds some of the biggest global events pertaining to sports, arts and culture etc.

The Dubai World Cup, one of the richest horseracing events in the world, the Dubai Classic golf championship, Barclays Dubai Tennis and the Dubai International Rally are just some of the very many events that take place every year in the UAE. This is in addition to new forms of tourism, such as medical tourism, that the UAE government is trying to propagate.

Tourism is expected to play a much bigger role in the UAE facility management market, given that it is one of the fastest growing service sectors in the country. Not only promotion of tourism be good for the hotel business, where facility management is often used, but it will create a ripple effect. Retail sector will get a boost, as the increase in footfall will lead to more people visiting malls, shops etc. It will also lead to promulgation of the office space facility management market, given that tourists may need to visit banks etc. that will be covered under this specific segment. Therefore, increase in tourism can act as a multiplier effect in the UAE facility management market.

4. Demand Supply Gaps for Commercial, Residential, Retail, Hotel etc.

Here is a look at the four major demand generators in the UAE facility management market:

• UAE Office Space Supply Outlook: Gross leasable office area estimatesin 2015stood at nearly 8.3 million square meters in Dubai and 3.3 million square meters in Abu Dhabi. Rising demand and delivery of office spaces in Dubai & Abu Dhabi is projected to surge the demand for facility management services in the UAE facility management market.

• UAE Residential Supply Outlook: Residential house supply in the two major cities during 2015 were around half a million units for Dubai (around 452 thousand units to be more specific) and just under a quarter million for Abu Dhabi (around 244 thousand). Development plans linked with Dubai Expo 2020 and the resultant influx of tourists and workers in Dubai is one of the major factors behind the escalating requirement for houses. In 2015, Abu Dhabi Urban Planning Council (UPC) approved 26 property projects covering gross floor area of 2.3 million square meters, which is just one of the many examples of how indigenous construction will create its own demand for facility management in the UAE.

• UAE Hotel Supply Outlook: According to World Travel & Tourism Council (WTTC), contribution of tourism sector in UAE’s GDP is set to reach $ 64.47 billion by 2026, up from $ 36.43 billion in 2015. TechSci Research estimates suggest that total number of hotel rooms in Dubai could cross the 90 million mark in 2018, up from under 60 million in 2012. Abu Dhabi is expected to also enjoy considerable, if less stupendous success, with over 23 million hotel rooms in 2018, up from around 17 million in 2012. Dubai Tourism Vision 2020 and Abu Dhabi Vision 2030 aim to promote tourism sector by encouraging investment in development of hotels, resorts, tourist centres etc., thereby fuelling the need for facility management services in UAE.

• UAE Retail Space Outlook: Dubai set to emerge as a prime location for shopping globally and aims to attract investment worth over $ 4 billion by 2017 for development of retail centres. Abu Dhabi’s retail sector is expected to grow at a rapid pace owing to strong domestic demand for luxury goods and constant inflow of tourists, which would result in addition of retail space, thereby offering business opportunities for facility management service providers in the region. UAE’s retail sector is expected to expand from $ 56.6 billion in 2016 to $ 71 billion by 2021, thus fuelling development of malls, retail shops etc. These developments are expected to positively impact the UAE facility management market in the near future.

5. Conclusion: Dubai & Abu Dhabi Driving the UAE Facility Management Market

TechSci estimated that the UAE facility management market share for Dubai in 2015 hovered around the 50% mark, and will continue to enjoy this kind of dominance over the next 5-6 years. Abu Dhabi comes next, with just over 24% of the market share in 2015 with shares remaining stable for the forecast period.

Good infrastructure, heavy tourist footfall, hosting of premier and flagship events, large amount of FDI investments targeting the two locations, and government interest in developing the two as some kind of flagships, all play a part in some way or another vis a vis the high UAE facility management market share.

Upcoming projects such as the $ 1 billion Al Maryah Mall in Abu Dhabi, $ 2.8 billion Dubai Parks and Resorts, $ 1.6 billion Blue Water Islands etc. have primarily concentrated in these two areas. However, Sharjah is also now being touted as a premier destination, with new projects such as the Sharjah Retail Complex project worth $56.7 million, Sharjah Waterfront City worth $ 5.4 billion, Sir Bu Nair Island project worth $ 135 million etc. it will be interesting to see if the other regions follow suit and duplicate the Dubai and Abu Dhabi models of development. If that were the case, then the UAE facility management market is one that must be paid close attention over the next few years.

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