3.0 Market – opportunity and competition Introduction The facilities management market in the Middle East and North Africa is still in the infancy stage of development when compared with established markets such as North America, Europe and Asia. The recent global economic slowdown has affected the region dramatically, with the UAE issues being recognised as the most affected, though the industry is expected to recover and continue to flourish in the next 1-3 year. The market saw no expansion between 2007 & 2008, the contract values remained small and developers were cautious about entering into higher value, long term contracts.
3.1 Regional Market development The GCC market for facilities management in 2008 was valued at $3,500 million, this value reflected the impact of the credit crisis. The GCC market has been one of the most active construction markets in world since the mid 1990’s, Multinational corporations have established themselves in the region and are now actively maintaining their buildings to global standards. A recognised trend is the incorporation of an integrated facilities management service, this is enabling companies to compete and gain a significant portion of the developing market. International expertise is still recognised as the key driver. There are 3 types of facilities management services being offered in the Middle East: • • •
Single Service – providing a single service to the facility – cleaning, catering , security & maintenance Bundled Service - when 2 or more services are combined Integrated Facility Management Services – provides all of the services required, often on a subcontract basis,
The market is now facing a number of challenges which can be broken down into the following: Challenge
1-2 Years
3-4 Years
5 years
Low Industry Awareness [Lack of advantage awareness]
High
Medium
Medium
Cost of Manpower
Medium
Medium
Medium
Misconception of Facilities Management [Perceived as cost]
Medium
Low
Low
Current economic climate
Low
Low
Low
Low Industry Awareness End users currently perceive that in-house maintenance of buildings are seen as a cost effective approach, the industry has yet to adopt the advanced technological approaches of the developed markets. Cost of Manpower Manpower is currently in abundance, though the trend towards stricter labour laws and the ability of the employees to locate work in regions closer to home. Manpower costs include the cost of travel, visa’s and accommodation which are met by the employer. GCC Misconception of Facilities Management Facilities Management is seen as additional cost to the owner with an inability to understand the benefits that are achieved.
Current Economic Climate The recent global crisis heavily impacted the UAE [Dubai specific] construction market and this has impacted upon the development of the facilities management sector due to the fear that revenues and returns from construction projects have now been severely dented.
3.2 Qatar Market assessment Further detailed market assessments are in Appendix A. The key outcomes of this assessment are as follows: • • •
The FM and PM market in Qatar is relatively unsophisticated and lacks any clear market dynamic. The overall number of units under development by Barwa (and others) is far beyond the current capability of Waseef to address In defining Waseef’s mobilisation strategy, careful consideration and distinction should be given to striking the right balance between the requirement to service those units within its immediate portfolio and the opportunity posed by the favourable market conditions.
Market Environment In 2008 the Qatar facilities management market was estimated to be worth $420 million, though this was spilt into 2 distinct capabilities; organised and unorganised. Unorganised services which accounted for 76% of the market were not professional facilities management companies providing the most basic of services, 24% of the market which was organised was spilt across companies such as Gulf facilities Management, MMG Qatar etc (company descriptions are included in the competitive analysis section 3.3). Projected Revenue Forecasts The Qatar market is expected to exceed the regional annual growth estimates of 18%, most of the extension is expected to be based upon single or bundled services. The growth is based on the continued construction of high quality units, as yet there are no signs of market saturation up until the 2013 period. Qatar’s expansion is expected to exceed CAGR 25%up until 2013, the market is expected to have doubled between 2007 & 2013, market research in 2008 projected the following:
Year 2007 2008 2009 2010 2011 2012 2013
Revenues ($ million) 311.5 420.0 505.0 630.0 780.0 1,010.0 1,310.0
Revenue Growth Rate (%) 35.0 20.0 25.0 25.0 28.0 30.0 30.0
Qatar FM Market Drivers Qatar’s conservative approach to development and the recent government support has ensured that the impact of the global credit crisis has not impacted as greatly as the majority of the region. In alignment with the region, Qatar’s key drivers are as follows: Key Market Driver
Description
Construction Boom
Qatar’s infrastructure expansion has continued with minimal cancellations compared with the majority of the region, this has resulted in a number of major conglomerates relocating in Doha. The relocation has continued to support the development of some of the major construction programmes.
Presence of Multinational Competition
A new benchmark of services is now being established, as the conglomerates expect the global service standards. This heightened demand has caused an increase in the service demand.
Focus on green building
The industry focused approach on reducing the consumption of natural
technology
resources and managing the buildings requires a sophisticated approach to
Scope of projects
Size and scope of projects have dramatically increased in scale.
Expanding Economies
Hydrocarbon based economies across the region are now looking to diversify their economies. The ability to co-invest in ventures has attracted a number of major companies to the region, requiring further service support.
Appendix A – Detailed market Analysis Summary Analysis of Potential Market Size On a market segment level, an assessment was carried out in terms of relative market share per developer for the identified future supply coming into the market. It is important to note however, that such an assessment is limited in its accuracy due to a lack of confirmation by developers corresponding to respective completion dates and finalized confirmation for each developments respective unit count and size. Commercial (Office) Segment If all future supply identified (on the tables provide prior) for the office market does materialize, an anticipated 2.9 million square meters of grade A office space could potentially enter the market over the next ten years. Of this anticipated supply, PwC estimates that approximately 71% of total grade A office space entering the market is being developed by Qatari Diar and Barwa combined. It is important to note that this assessment is heavily skewed by the inception of Qatari Diar’s Lusail project, which represents the majority of the company’s anticipated future supply of office space development. Relative Share of Grade A Office Space Development (share of GLA)
Residential Segment If all future supply identified for the residential market does materialize, an anticipated 82,400 units could potentially enter the market over the next ten years. Of this anticipated supply, PwC estimates that approximately 72% of total units entering the market are being developed by Qatari Diar and Barwa combined. Again, this assessment is heavily skewed by the inception of the Lusail development. Relative Share of Residential Development (share of units)
Retail Segment Finally, if all future supply of high grade retail space identified for the retail market does materialize, an anticipated 1.8 million square metres of gross leasable area could potentially enter the market over the next ten years. Of this anticipated supply, PwC estimates that approximately 72% of total space entering the market is being developed by Qatari Diar and Barwa combined. Again, this assessment is heavily skewed by the inception of the Lusail development. Relative Share of High Grade Retail Space Development (share of GLA)
As final notes to the above market share assessment and assumptions used, it should be re-emphasized that the development of the Lusail project provides the majority of Qatari Diar’s assessed market share. The latest discussions, research and insights Qatari Diar has provided gives ample confidence that the project is moving along, although it has been significantly delayed and may even get further delays. Also, caution must be exercised in assuming 100% materialization for all the future supply identified. Such included assumptions and data shall be used as directional and predictive ball park assessment of each of the target segments. As these figures are dependant on the variability of developer’s plans over the years and the variability in market conditions. These estimates have been provided as per publicly available information, discussions with market representatives, and PwC best estimates. It would be diligent not to assume that 100% materialization is likely for any of the components.
Appendix B - Real Estate Overview The Qatar Real Estate market has been growing rapidly over the past decade. In this decade, significant development opportunities have been exploited as the government and private sector have increasingly integrated their efforts in putting the country, and specifically Doha, on the global map. Key driving forces of the real estate market’s growth involve the sound economic state of the country, the diversification of its demographic landscape, the development of its employment market and the improvement of its general and tourism infrastructure. Qatar is one of the wealthiest nations in the GCC region and one of the richest in the world in terms of GDP per capita. The country primarily derives much of its wealth from vast reserves of natural gas, and today constitutes one of the world’s fastest-growing economies despite the deterioration of the global economic climate in recent years. Endowed with enormous reserves of oil and natural gas, Qatar has promising prospects for growth over the next ten years. The non-hydrocarbon sector is anticipated to steadily grow in relative importance over the next ten years. By the end of 2020, the government anticipates the non-hydrocarbon sector to constitute just under 50% of nominal GDP. The rising population and revenue generated by the hydrocarbon sector is anticipated to provide the fiscal budget to stimulate investment in real estate and other sectors. A survey conducted by the Qatar Statistical Authority (QSA) has indicated that the population of Qatar stood at approximately 1,552,820 persons in 2008, increasing by approximately 108% over the 2004 – 2008 period. In approximately four years, Qatar’s population had doubled. The CAGR of Qatar’s population over the period stood at approximately 20%, amongst the highest annual growth rates witnessed around the world. This growth is set to bolster the real estate market in the short to medium term, especially as it is being driven primarily by a growing middle class with improving purchasing power. There has been rapid growth in the economically active population in all major economic sectors over the 2004 -2008 period, which has complimented the rapid growth of Qatar’s economy. The most noticeable growth segment has been the construction sector which grew at a CAGR of approximately 47% over the 2004 – 2008 period. The construction sector employed approximately 46.6% of the total economically active population in 2008, making it the largest employing sector in the Qatari employment market. The “Real Estate, Renting and Related Activities” segment of the economically active population has grown at a CAGR of 36% over the 20042008 period, making it the third fastest growing segment of the economically active population. The large and growing construction and real estate markets are a testament to the rapid development of the country’s real estate industry. The tourism industry, which is largely dependant on the regional MICE markets, has witnessed significant growth and capital investment in the past 5-10 years as several tourism development plans have been undertaken to diversify and expand the local economy. Tourism arrivals have grown at a compound annual growth rate of 5.2% over the 2006-2009 periods with approximately 1.05 million tourists arriving to the country in 2009. The Qatar Tourism & Exhibitions Authority (QTEA) continues to undertake several initiatives to stimulate the tourism sector of the economy in the hopes of establishing Qatar as a tourist hotspot in the region. The government plans to grow the tourism sector by 10% per annum over the next three years with a target of 1.4 million tourist arrivals to Qatar by 2012, as shown below. Historical and Forecasted Tourism Arrivals to Qatar 2006 – 2012 (000’s Persons)
Source: Qatar Tourism and Exhibition Authority
In order for Qatar to establish itself as a real estate commercial and tourist hub in the Middle East, it must continue to focus on developing its infrastructural base. Historically, Qatar’s real estate market has been driven by private investors, under the umbrella of government backed master plan developers such as Qatari Diar, United Development Company “UDC” and Barwa. The government is increasing its role in master planned developments and major infrastructural projects to further control the pace and quality of these developments in the hopes of moderating the potential over supply of various components and avoiding unsustainable pressure on the country’s growing infrastructure. The table below provides a list of major infrastructural and mixed use development projects currently underway in Qatar, along with their respective developers and approximate budgeted project values: Major Infrastructural and Mixed Use Development Projects Across Qatar
Source: Zawya, PwC Market Research Continued focus on the country’s infrastructure will be essential to the government’s plans to diversify the economy away from hydrocarbon dependence. With significant master planned developments being planned and executed, and increasing investment in the country’s internal and interstate infrastructural base, it is likely that Qatar will succeed in positioning itself as a regional hub for real estate, commerce and tourism in the near future.
Real Estate Components – Office Market Overview Market Overview The development of commercial office space in Doha has been moving towards the northern parts of the city. The Diplomatic District and West Bay are regarded as the new focal point of Doha’s office market comprising an estimated 50% of Doha’s total Grade A stock of commercial office space. The business districts located in areas such as Grand Hamad Street and Salwa Road are now considered older business districts. The expansion of Doha’s Oil and Gas industry has been the primary driver of demand for commercial office space over the past few years. According to market representatives, 75% of new market demand in 2008 had been contributed by the Oil and Gas, Financial Services, and Government sectors of Qatar’s economy. Demand for new office space has dropped sharply over the 2009 period. According to market representatives, demand for new office space in Q2-Q3 2009 stood at approximately 70,000 sq. m., 75% less than demand in the same half year period during 2008 as illustrated below. This significant decline is a result of the global financial crises as local companies have held back on expansion and market entry plans. Demand trends in the future are largely dependant on the activities of the Government, Oil and Gas, Financial Services and Engineering and Construction sectors of the economy. Qatar’s Financial Centre has been instrumental in growing the financial sector of Qatar's economy and is expected to license 15 more international financial companies to begin operations in Qatar during 2010, according to market representatives. New Demand for Commercial Office Space for Q2-Q3 2008 and 2009
Source: Colliers MENA Real Estate Overview Q3 2009 It is estimated that in 2009, the grade A office space requirement in Doha stood at approximately 1.56 million square metres of gross leasable area. With market occupancy for the year estimated at 85%, estimated 2009 grade A market supply is 1.83 million square metres of gross leasable area. Forthcoming supply is likely to more than double the market size in the next ten years, and will likely pressure occupancy and lease rate levels downwards in the medium term. Market Performance Currently the sales of freehold commercial developments are limited to Qatari and GCC nationals / companies. There are however, office developments that offer long leasehold contracts, as is the case with West Bay’s The Palm Towers, although these transactions are limited. Consider the following graphs for a reflection of Qatar’s commercial office market performance figures: Doha Average Annual Office Market Rent Rates 2010
Source: PwC Market Research Doha Office Market Performance Indicators 2009
Source: Collier MENA Real Estate Overview Q3 2009, PwC Analysis In terms of market occupancy levels, according to market representatives, the estimated occupancy in the commercial office market for 2009 stood at approximately 85%, decreasing significantly from approximately 95% at the end of 2008. Market Sizing and Forthcoming Supply Industry expert estimates of the current size of the commercial office market vary significantly, while there is no publicly available information from the government regarding market size. An assessment of the current grade A office market size has been developed by considering statistics and deriving analysis regarding Doha’s economically active population, the level of education of this population and regional benchmarked office space requirements per white collar employee. The resulting estimated 2009 grade A office space requirement in Doha stood at approximately 1.56 million square metres of gross leasable area. Applying the 2009 estimated market wide occupancy rate of 85% to this figure provides for an approximate 2009 grade A market supply estimate of 1.83 million square metres of gross leasable area. Consider the following table for data pertaining to anticipated future supply in the grade A office market in the medium term: Future Supply 2010-2021
Source: PwC Market Research and Analysis *Expected completion dates are provided on a best estimate basis and are not confirmed by PwC The Diplomatic District and Al Waab city are expected to supply the majority of Doha’s new commercial office space in the short term, adding a total of 650,000 sq. m. of gross leasable area to the market by 2012. As for
the long term, the majority of Doha’s future supply of office space is expected to be supplied by the Lusail master development. According to market representatives, Lusail land plots and zones are not expected to be handed over to individual developers until 2013. The total future supply anticipated for the market over the period is 2.9 million square metres of gross leasable area.
Real Estate Components – Residential Market Overview Market Overview The growth and diversification of Qatar’s economy in the past five years has resulted in a sizeable inflow of expatriates which has created a substantial need for residential accommodation. Prior to the financial crises and the introduction of significant residential projects to the country, the residential market in Doha was considerably undersupplied and struggling to accommodate the high increase in demand. This had resulted in a sharp rental increase in excess of 25% per annum over the 2005-2008 period, according to DTZ’s “Property Times Qatar” published in Q3 of 2009. Population growth and new expatriate inflows to the country has slowed in the last three quarters of 2009, and as a result, demand for residential accommodation has reduced considerably. The slow demand, coupled with a rise in supply over the past few years, has forced average rental rates across the housing market to drop over the last three quarter period of 2009. The West Bay and Diplomatic District area, currently regarded as the new city center of Doha, has been the focus of high rise luxury apartment development over the past five years. Upscale apartment tower developments in the area provide residents with a wide range of recreational facilities while the surrounding area provides all other necessary social amenities. The majority of developments in this district are owned by local developers and investors who subsequently lease them out to international companies and expatriates. Market representatives have indicated that the number of residential apartments located in the West Bay and Diplomatic District falls in the range of 5,000 – 6,000 units. Also according to market representatives, the majority of these apartments are two and three bedroom apartments. Residential development at The Pearl serves as a benchmark for the future upscale residential market in Doha. As Lusail is set to start groundbreaking no earlier than 2013, upscale residential development will be limited to The Pearl, the West Bay Lagoon, Al Waab and several other areas in Al Dafna for at least another four to five years. In this time, the Abu Hammour area will have also seen gradual movement towards more upper scale residential developments. Future supply of residential accommodation in Doha is skewed towards the upper scale market. The estimated total supply of residential units in the market stands at approximately 176,750 units. The market size is anticipated to almost double in the next ten years. All of the above market data of expected housing and properties supply indicate that there will be a large supply of properties from shareholders (Barwa and Qatari Diar) as well as other developers, which will need to be professionally managed and serviced by a fully integrated company such as Waseef. Waseef will be the answer by offering controlled quality services through its ‘in-house’ infrastructure and capabilities rather than partial outsourcing of each or some of these services. Market Performance The tables below provide average rent rate information for the apartment and villa markets in Doha. Average Apartment Rent Rates Q4 2009
Average Villa Rent Rates Q4 2009 Source : Asteco International As of Q4 2009, residential apartments in the newer parts of Doha such as the West Bay, Lagoon Plaza and The Pearl Qatar commanded the highest rental rates in the market. The average rates achieved in Q4 2009 for properties in older areas are significantly lower than the rates achieved by apartments located in the newer parts of Doha. Based on discussions with market representatives, the current average rental yield for apartment properties in Doha is estimated to be approximately 10%. Villas at West Bay, West Bay Lagoon and the Al Dafna area commanded the highest rent rates in the market as of Q4 2009. Rates being charged at Al Waab fall in the middle range of the market. All Gharrafa and Al Khraytiyat areas commanded the lowest rental rates amongst the areas presented. As for the sales market, the Qatari government has allowed freehold residential ownership for expatriates at the West Bay Lagoon, The Pearl Island and Lusail City. The villa resale market is currently only available to expatriates in the West Bay Lagoon as no built up villas are currently available for resale at The Pearl. The average rental yield being generated by villa’s in Doha lies in the range of 4% - 6%.
Market Sizing and Forthcoming Supply Industry expert estimates of the current size of the residential market vary significantly, while there is no publicly available information from the government regarding market size. Consider the following table for data pertaining to anticipated future supply of residential units for the market. Anticipated Future Supply of Residential Units
Source: PwC Market Research, Discussions with Real Estate Brokers According to market representatives, a potential 82,417 identified new residential units spread across ten residential developments are anticipated to enter the market by 2020. It is advisable to consider an additional 25% contingency for unidentified supply given the lack of publicly available information. The total anticipated future supply over the coming ten years will then range between 82,417 and 109,890 units.
Real Estate Components – Retail Market Overview Market Overview Doha’s retail market has grown considerably in recent years, reflecting the change in demographics created by an expanding population with greater affluence and disposable income. Retail development is moving towards the developing areas of Doha such as the West Bay and the West Bay Lagoon areas. Retail density in Doha is about 0.61 sq. m. of retail gross leasable area (GLA) per capita, surpassing only Muscat and Sharjah in the GCC market in 2009. Retail density in Doha is relatively low because the retail market is driven primarily by local demand, whereas the UAE and Saudi markets accommodate significant demand from tourism. The Doha retail market is dominated by shopping malls although Doha's retail amenities also comprise traditional street-facing retail outlets (primarily located between A to E Ring Roads) and traditional souqs such as Souq Waqif, Doha’s oldest traditional market. Based on discussions with market representatives, retail capture rate for malls is in the range of 50-60% as most malls, such as City Center, are centrally located and frequented by residents across all social classes in the country. According to discussions with market representatives, the current supply of retail mall space in Qatar is approximately 518,500 sq. m. spread across ten notable retail mall/promenade/podium developments in the market. The market is currently undersupplied, whereby a sharp rise in disposable income and demand for retail space in the recent past has not been accompanied by a proportionate increase in supply. In recognizing this trend, several malls have expanded as has been the case with Landmark, Villaggio, and The Mall. The latest addition to the market has been the partial opening of The Pearl’s Porto Arabia retail promenade in late 2008. Most of the malls in Qatar boast 100% tenant occupancy with a long line of retailers on the waiting list.
With unprecedented population growth and a rising disposable income per capita, market segmentation is becoming more feasible. Malls such as The Mall and Hyatt Plaza Mall have recognized that Villaggio mall and The Pearl’s Porto Arabia retail component are effectively catering to the higher-end consumer bracket and have thus, refocused their strategies to capture the local and expatriate middle income consumer brackets. Market Performance The table below illustrates selected information pertaining to tenant occupancy and footfall at selected Doha malls in 2009. Selected Average Lease Rate and Footfall Information 2008-2009
Source: Mall Management, PwC Market Research Retail malls have enjoyed 100% tenant occupancy for several years as demand for retail space has continuously been greater than the supply of retail space. The selected comparable malls’ average annual footfall is 7.7 millions persons, with City Center enjoying the highest relative market share. The graph below illustrates average lease rates for select malls over the 2008-2009 periods. Selected Average Lease Rate Information 2008-2009
Source: Mall Management, PwC Market Research The average monthly lease rate per sq. m. of GLA for the selected comparables stood at QR 176 in 2009. The average increase in lease rates over the 2008-2009 period for the selected comparables has been approximately 14%. Most malls have increased their rates by 10% or less due to contractual obligations over the period.
Market Sizing and Forthcoming Supply Doha’s current supply of retail mall space is at approximately 518,500 sq. m. of gross leasable area. The graph below illustrates the distribution across retail malls in Doha. Distribution of Gross Leasable Area Across Doha Malls
Source: Mall Management, PwC Market Research The anticipated supply of retail mall space to enter market by 2021 stands at approximately 1,801,500 sq. m. of gross leasable area, as illustrated on the table below. Anticipated Future Supply of High Grade Retail Space in Doha
Source: Mall Management, PwC Market Research *Expected completion dates are provided on a best estimate basis and are not confirmed by PwC The additional retail mall space to enter the market by 2021 will increase the current supply by about 347%, to a total of approximately 2,362,500 sq. m. for the Qatari market. This translates into a CAGR of about 13% for the period 2009-2021.
Property Management Market Sizing Consideration An assessment of budgeted project values for current and planned mixed use projects by the large real estate developers in Qatar can provide insight into the approximate market share of each of these players. The real estate developers considered in the assessment are Qatari Diar, United Development Company, Qatar Foundation and Barwa’s various real estate development companies. Consider the following graphs for an illustration of the respective companies’ total budgeted project values and accordingly, their respective market share in the mixed use development market.
Total Budget Project Values Per Major Developer Source: Meeds Projects, PwC Analysis Respective Market Share Per Developers’ Budgeted Project Values Source: Meeds Projects, PwC Analysis This market share assessment indicates that the mixed use development market, at a total budgeted value of approximately USD 97 billion over the medium term, is dominated by Qatari Diar and Barwa Real Estate Development with a combined market share of 75% in budgeted project value terms.
Appendix E – GCC Facilities Management Market Analysis Summary The total GCC market for facilities management was valued at $3,500 million in 2008 and is expected to be worth $8000 million by 2013. The key centres of focus in the GCC are Abu Dhabi (UAE), Saudi Arabia and Qatar. The UAE has the largest market for facilities management in the Gulf valued at $1,750 million. The economic slowdown affected construction in Dubai and the overall UAE facilities market dropped from 9% to 7%, however, Abu Dhabi is now the centre of facilities management activities with numerous government projects underway. Saudi Arabia has the largest construction market with over $50 billion worth of construction in progress and 200 other developments in the design phase. Qatar, with its low entry barriers and high infrastructure and construction investment is now the most attractive market for facilities management services in the Gulf. Although there was only 10% growth during the recession ( contributed mainly by Saudi Arabia and Qatar), the current compounded year market growth is 18% and is expected to reach 25% by 2013. The and the industry profitability margin is between 10% and 15%. There is no evidence of market saturation during the forecast period and most markets are expected to stabilise by 2013, although some markets such as Bahrain and Oman are expected to drop. The key drivers for growth are the increased presence of international companies, increased focus on ‘green’ buildings and the large scope of the projects. The current restraints are regulatory issues, inflation and bureaucracy. A key concern in all the GCC countries is the acute lack of skilled labour and the subsequent high level of dependency on expatriate workers. The GCC facilities market has a relatively low penetration rate, mainly due to a lack of awareness of facilities management. However, the market is rapidly progressing through its infancy stage, evidenced by a declining market concentration of 30%, increasing degree of competition of 7 and a large number of new international entrants. Currently there are more than 30 companies that provide facilities management services in the Gulf and over 50 that operate in the unorganised sector. Regionally, the companies that hold a considerable share of the market are: Imdaad, Emcor, Saudi Oger, Serve U, Dalkia, Zamil, Nesma and Safari Group. The overall GCC facilities management revenue forecast table for 2007 to 2013 is shown below: Year 2007 2008 2009 2010 2011 2012 2013
Revenues ($ million) 2,940.0 3,500.0 3,920.0 4,500.0 5,300.0 6,420.0 7,900.0
Revenue Growth Rate (%) 19.0 12.0 15.0 18.0 20.5 23.0 25.0
The market spilt in 2008 across the 3 types of services was as follows: : Country Oman Kuwait Bahrain Qatar Saudi Arabia UAE
Integrated Service Management % 5 15 18 25 25 30
Bundled Services %
Single Service %
25 45 47 40 55 48
70 40 35 35 20 22
Integrated services defined as providing all services – Maintenance, cleaning security Bundled services defined as providing 2 or more services Single service – providing a single service such as cleaning, catering or security Market opportunities The GCC region has a number of major developments that will require a significant Facilities management services, these projects worth was estimated over $50 billion in 2008.
Qatar has a projected infrastructure budget of over $118 for the next 5 years, this does not include any work that would be required to complete 16 stadiums for the 2022 FIFA bid. Analysis of the UAE Market Facilities management is a very popular concept in the UAE with Dubai having a penetration rate greater than 65% and Abu Dhabi’s rate between 40% and 64% in 2008..The total market for the UAE was valued at $1,750 million in 2008 of which Tier I companies held 41.8% of the market, Tier II held 31.5% and Tier III held 26.7%. Tier I companies Emrill and Imdaad dominated the market with $130 million in revenues each in 2008. Tier 1 companies are mainly involved in large government projects of which there are few, Tier II are usually in the commercial office, entertainment and education sectors and Tier 3 are in smaller projects or act as subcontractors to Tier I companies. The UAE market is highly technology driven, however most end users lack the inhouse expertise to handle professional facilities management. With the increased demand in Abu Dhabi, a large number of new entrants are expected to enter the market. Although entry barriers are low, strategic alliances will often help secure key contracts. Government contracts are open to the public but bidders need to be approved by the Government. The Revenue for the facilities management market in the UAE is expected to grown from $1,750 million in 2008 to $2,900 million in 2013 with a growth in CAGR of 11% from 2008 to 2013 and a revenue growth rate of 15% by 2013. Analysis of the Saudi Arabia Market Facilities Management in Saudi Arabia is still a fairly new concept in Saudi Arabia with a low market penetration rate between 0% and 39% in 2008. The total market was valued at $375 million in 2008 with Tier 1 companies holding 62.9%, Tier II holding 20% and Tier III 17.1%. Tier I company Saudi Oger dominated the market with $110 million in 2008. Tier I companies win most of the large government and industrial projects in the oil and gas and petrochemical sectors. Tier II companies offer services primarily to commercial office spaces. A key growth sector is banks. The market is extremely price sensitive with Tier II companies being very competitive with Tier I companies in terms of offering integrated facilities solutions. With its massive geography, rapid population growth and high industrialisation the Saudi Arabian market is very attractive. Until recently, the market has been dominated by local service providers with preference given to awarding contracts to Saudi Arabian firms, although it is now opening up to new entrants and foreign companies. Referrals play a key role, therefore events and conferences are a strategic option for companies that are planning to expand into Saudi Arabia. In addition, the company’s service portfolio and licenses are important criteria for being shortlisted. The market is extremely price sensitive. Revenue for the facilities management market in Saudi Arabia is expected to grow from $735 million in 2008 to $2,350 million by 2013 with a revenue growth rate of 30% by 2013. Analysis of Qatar Market Although the concept of facilities management is new to the Qatar market, it is one of the fastest growing markets in the GCC and was valued at $420 million in 2008. The market penetration rate was between 0% and 39% in 2008, however the construction industry had unparalleled growth in 2007 with the dramatic increase in infrastructure spending. Until 2003, the companies were highly unorganised and efforts have been made since then by developers and companies to organise the market. The unorganised sector held 76% of the market share in 2008, however there is a serious lack of professionally trained staff. The organised sector held 24% in 2008 with the major companies being Gulf Facilities Management, MMG Qatar and Emcor Qatar. The organised sector is expected to increase its revenue to contribute to more than half the market revenues by 2012. With the introduction of freehold property, there has been an increase in demand for high standard and more sophisticated facilities management. The market has slowly begun to open up to competition and although Qatar has low entry barriers, most international companies are in joint ventures with local companies as the market is highly price sensitive. A large number of new entrants are entering the market after shifting their focus from Dubai. With the size of Qatar being a limiting factor, the market can very easily reach saturation point, therefore there is fierce competition to win early deals for planned developments. The key sectors are commercial units, oil and gas companies, banks and waterfront properties. Upcoming sectors are sports and healthcare facilities.
The revenue for the facilities management market in Qatar is expected to grow from $420 million to $1,310 million by 2013 with a CAGR of more than 25% by 2013 and revenue growth rate at 21% by 2013. Analysis of Bahrain Market Bahrain is considered as the most open and active market in the Gulf, inspite of its geographic size and was valued at $350 million in 2008. The market penetration rate is between 0% and 39% in 2008, however there is widespread awareness of professional facilities management. Bahrain has set up a structure of low entry barriers, an easy work culture and a high interest in professional building maintenance in order to attract facilities management companies. Opportunities are limited, competition is high and rising inflation are some of the issues faced by facilities companies wanting to set up here. There are a limited number of companies in the organised market and the unorganised market is highly fragmented. The key sectors are banking, commercial and retail, however there are a significantly lesser number of government projects. Numerous large construction projects are either underway or have been planned which is expected to drive an upward demand for facilities management. The main companies are Emcor, Dalika and Hochtief, together holding 54% of the market share and $50 million each in revenues in 2008. Other companies had combined revenues of $130 million in 2008. The revenue for the facilities management market in Bahrain is expected to grow from $350 million to $720 million by 2013 with a CAGR of more than 16% by 2013 and revenue growth rate at 21% by 2013. Analysis of the Kuwait Market Kuwait has a rapidly increasing construction sector which has lead to an increase in facilities management services. As awareness is quite low, the market penetration rate was between 0% and 39% in 2008 and was valued at $175 million in 2008. The Kuwait market has low entry barriers but is highly competitive. Currently oil and gas companies and government entities are the largest sectors, with hotels and commercial developments seen as the new sectors. The demand for very high quality services for the emerging sectors is far higher than for government contracts. Contracts for different sectors are handled centrally by different ministries. Although the market is largely unorganised, the organised companies hold a significant share of the market. The main player in 2008 was Kharafi with 23% of the market and $40 million in revenues, who mainly operates in the oil and gas sector, but has limited knowledge of professional facilities management. The other major companies are Kuwait United Development with 9% of the market and $15 million in revenues in 2008 and Emcor with 6% of the market and $10 million in revenues in 2008. Both companies are fairly new and Emcor has a strong geographic presence and both are keen to tap into the opportunities in the market. Other companies made up 62% of the market share and $110 million in revenues in 2008. The revenue for the facilities management market in Kuwait is expected to grow from $175 million to $430 million by 2013 with a CAGR of more than 20% by 2013 and revenue growth rate at 25% by 2013. Analysis of the Oman Market The Omani market is still in its infancy stage with low awareness levels and completely dominated by unorganised service providers. The market was valued at $70 million in 2008 with a market penetration rate between 0% and 39% in 2008. The facilities management sector is highly dependant on the construction industry which was not growing as expected. In addition there are a smaller number of business houses than other GCC countries, resulting in less opportunities, high price sensitivity and low margins. Most projects are managed by offices in other parts of the GCC region. Consequently, the Government of Oman is trying to promote real estate development and investing in infrastructure in order to attract foreign investment and fuel growth. The key sectors for growth are the government and oil and gas companies. Although Oman is not traditionally seen as an attractive market, there is good potential for growth in the manufacturing and government sectors. In addition there is a large scope for developing an organised market. The revenue for the facilities management market in Oman is expected to grow from $60 million to $185 million by 2013 with a CAGR of more than 20% by 2013 and revenue growth rate at 28% by 2013.
