The Saudi Facility Management market is expected to grow at a CAGR of around 10% mainly due to the Giga projects coming up and the push from the Saudi vision 2030: Ken Research

16-Feb-2023   Mr. Sultan Attar, Designation: General Manager, Olive Arabia   Author: Sarthak Kaushik, Twinkle Karnawat and Mukul Biradar

In conversation with Mr Sultan Attar, General Manager at Olive Arabia, we tried to understand the major trends and challenges in Facility Management Market in Saudi Arabia.

 “The major challenges being faced by facility management companies are retention of labour, lack of awareness and clarity among clients and rising competition in the industry”

Q1 Could you give us a brief about the Facility Management market in Saudi Arabia?

In 2011, it was very difficult to land a Facility Management contract. Most of people could not differentiate Operation and Maintenance from Facility Management. The market was very immature. The scope of the contracts was not properly defined. It was more focused on manpower rather than service KPIs. In those times, before getting any project, one needs to educate the clients about the services to clearly define their requirements.

Earlier companies used to hire manpower companies but now actual detailed RPFs are issued, companies are evaluated on different parameters and finalized at the best prices.

Even big projects like Makkah clock tower, the tallest concrete structure in the world, they had not taken facility management into account.

Q2 How big do you think is the facility management market in Saudi Arabia?

It is very difficult to pinpoint on a specific number. It depends on what is included in the definition and scope of facility management. The inclusion and exclusion of each segment affect the market size numbers. As per reports, the Global Facility management market is expected to be around $ 740 Bn and expected to grow at 9% over next 5 years.

In Saudi, the growth rate can be expected to be about 10% mainly due to the Giga projects coming up and the push from the Saudi vision 2030.

 Q3. Why has the number of companies providing facility management services increased rapidly in past 5 years?

The facility management industry has become an attractive business venture due to growing demand from commercial Giga projects. As a result, operation and maintenance companies have also ventured into providing facility management services although they don’t have the expertise in the same. Moreover, big real estate groups have also launched their facility management divisions/ subsidiary companies to serve the growing market.

Q4 What is the process of reaching out to a client and getting a client on board?

Generally, it starts with clients issuing RFPs, pre-qualifying the companies, evaluating their proposals and finalizing the contract.

We follow a different approach, as RFPs are vaguely defined, we try to connect with senior-level executives of clients and ask about their requirements and how pre-qualifying criteria can be met. Otherwise, due to an immature market, the client generally end up shortlisting the manpower-based companies that can provide manpower or labour but do not have the right expertise. These manpower companies offer very low prices as they already have the volume.

After getting the contract, facility management companies need to mobilize the manpower as they don’t have idle manpower, they are hired as per project requirements. They are mobilized from already ongoing projects, recently completed projected or hired and trained as per the need.

Saudi labour Law established manpower supply companies, they are granted concessions, benefits in visas etc. With the presence of manpower supply companies, the task of mobilizing manpower has eased to a great extent.

Q5. What are the profit margins generally charged by manpower and facility management companies?

The manpower companies work on volumes with more than 15,000-20,000 people so they charge 5-7% margin. Now, margins in facility management depend on the level of involvement, It can range from 12-20% depending on the project requirements, involvement level and risk associated.

Sometimes, facility management companies also need to bear the cost of funds as clients demand 60-90 days of payment flexibility and even then delay the payment as a result further hitting the net margins.

Q6 What is the role played by the Facility Management Agent?

In this, the client already has finalized the contractor(s) for the services but need someone to manage different contractors for different services, monitor their performance and ensure service delivery. In this case, a facility management agent/ manager is hired who is responsible to ensure the delivery of KPI as per the scope of the contract. The manager is responsible to ensure all the systems are maintained properly, cleaning, security, and landscaping services are performed optimally.

Q7 Which regions/cities generate the most demand for facility management services in the Kingdom?

Riyadh city being the capital and most populous city contributes to around 40-50% of facility management service demand across the kingdom followed by the western region, covering Jeddah and Makkah region with 25-30% contribution.

Q8 How is technology shaping the quality of service delivery in the facility management industry?

Technological integration in facility management has increased in the past few years. Now, systems like CAFM and assets performance monitoring systems are increasingly being used to monitor performance and KPI reporting. Any lag in the delivery of service gets reflected on system dashboards and can be rectified immediately

Q9. What are the challenges being faced by facility management companies?

Retention of employees: We train the employees from scratch with the right technical training but once trained, and skilled it becomes difficult to retain them as other companies offer them a higher salary.

Mobilization of employees: As facility management companies, we do not have idle free labour with us. Most of our labour is already working on some other projects so in case of new projects we need to hire new labour or mobilize them from other projects. Problem is that clients do not provide time for mobilization and expect labour to be available from the next day onwards.

Pre-qualifying for the projects: Many clients have a tendency of prequalifying only large manpower-based companies. Their criteria of selection are how many people you have. Hence, special efforts are needed to convince the clients of our capabilities.

Q10 How much is the labour turnover rate in the industry?

Actually, basic labour like technicians and cleaner tend to leave with the completion of projects if the contract is not renewed and it is not an issue to get these on-demand labour as they come and go with the same skill, attrition rate is around 30-40% in such basic labour but in the senior level staff like managers, engineers, supervisors and other attrition rate is around 10%.

Q11 What problems are being faced in the implementation of saudization regulation?

Compliance with saudization rule is not much difficult but the problem is faced with frequent changes in the saudization rate by the government and enough time is not provided for its implementation. For any given change in saudization rate, a 3-month time period is required to change employees’ structure. If not complied with, certain restrictions get imposed on operations and project execution. It is bit difficult to find Saudi people pursuing professions as a cleaner or technicians. There should be more clarity and better classification in the regulation.

For more insights on the market intelligence, refer to the link below: -

KSA Facility Management Market

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