Fast-growing real estate sector: The need to provide support services to make it sustainable
December 28, 2017- The Sri Lankan real estate is going through a positive phase of transition in the process of its development. It is gradually moving towards becoming more organised. This has largely been possible due to the entry of international real estate players and foreign investors into the real estate sector. From 2015 and early 2016 the real estate sector in Sri Lanka has witnessed phenomenal growth due to rapid urbanisation, increasing levels of income and the opening up of the sector to Foreign Direct Investment (FDI). The real estate community will have taken a greater role in the financial ecosystem.
Now in Sri Lanka people are looking for vibrant, diverse places to live and work, and according to this trend Sri Lanka is investing in many infrastructure projects like the Colombo International Financial City, Megapolis and expressways.
There are also many global hotel chains that are investing in Sri Lanka. Presently, the real estate sector is booming with opportunities. Previously Colombo was a luxury hub for investors but now investors are looking to invest in newly developing cities and suburbs. There is increased demand for residential properties from the wealthy and middle-class populations while there is also a high demand for commercial properties in Colombo and the suburbs.
As mentioned earlier, the Sri Lankan real estate sector has witnessed an upward trend and there are many projects going on under the Megapolis Ministry and this will attract more people, so the cost of prime urban real estate per square metre will continue to rise and developers will become more innovative about how they design and build commercial and residential real estate, seeking to use space more efficiently.
The services sector like the tourism, hospitality and IT industries has triggered high demand for the real estate sector in Colombo. Technology is finally coming to real estate now. We can take the example of the launch of the 3,000 mm diameter drilling rig by D.P. Jayasinghe Piling. These things will take the construction industry to the next level and will change the nature of real estate developers and the investment community. In the future the real estate market will become far bigger and more global.
The real estate industry plays an important role in the economy of a country and the welfare of its people. It also affects many other areas of economic wellbeing that aren’t measured. It is an enabler of economic activity and it attracts FDI. Furthermore, real estate is a source of employment in all sorts of areas; not only for architects, builders and engineers, but also for legal and financial advisors, surveyors, facilities managers and all those who provide services for the construction industry.
Real estate plays a vital role in the provision of infrastructure. In general, the level of infrastructure development in a country says a lot about its economic status. Furthermore, high-quality, modern and innovative buildings contribute to maintaining the country’s reputation as an international trade hub and attract skilled labour and capital investments from the rest of the world, creating further opportunities.
Support services linked to sector
As I mentioned above, the real estate sector is growing rapidly in Sri Lanka. But to maintain this demand and growth we need support services and providers such as facility management companies, property lawyers, a standardising brokerage, loan facilities, etc. When it comes to support services, facility management companies are the key component in the real estate industry because facility management is a tool used to manage and maintain facilities in an organisation. The facilities include an office complex, physical resources at the company or site and any other mechanical and electrical utilities that can cause health or safety hazard to employees.
Sri Lanka requires over 1.5 million housing units in the next 15 years and most of these will be condominium housing units. Building these units will be a challenge whilst maintaining those buildings for a long run will be more difficult without the help of support services like facility management players. A real estate sector is linked with many supporting services therefore the success of a real estate sector also depends on the quality of the supporting services linked with it.
Facility management has gained importance over the last few years as businesses have identified that well-managed buildings and utilities help companies function effectively and efficiently. In some Asian countries like Japan and Singapore, facility management is considered an important area of business and the techniques of facility management are increasingly used by them. In Sri Lanka, the field is still in its infancy.
People, process and place are the three main factors of an organisation and there is a need to manage the physical environment in concert with people and job processes. Facility management finds management solutions by positioning itself at the intersection of these factors and facility management makes sure all these factors are functioning properly. The functions of facility management are wide and include the management of real estate, finance and human resources, in addition to services maintenance, domestic services, utilities supplies, security, safety and health – all of the non-core activities of the organisation. Furthermore, facility management will ensure all the facilities in an organisation are compliant with industry health and safety regulation, the complex has disability access, fire prevention methods and an emergency exit plan in place, effective waste disposal and control of hazardous substances and maintenance of the company parking space. In order to help the business achieve a competitive advantage and increase overall worker productivity, companies must involve the facility manager in strategic decision-making.
As I mentioned, in Sri Lanka, the facility management discipline is still in its infancy and its related duties are fragmented with limited knowledge on the subject. Awareness on the importance of facility management is often not being discussed, whether in the public or private sectors. However, initiatives are being taken by some institutions to reduce risk.
Health and safety in the workplace is a critical issue. For example in Great Britain in the 2009/2010 period, there were 152 fatal accidents, 233,000 reportable injuries and 5.1 million working days were lost due to workplace injury.
It might happen in Sri Lanka too, so if we have to reduce such risks it’s really important to include a facility management company in the business, because the use of equipment in the workplace can increase the risk of accidents and must be carefully managed.
Risk reduction measures like machinery guides, warning devices, protective clothing and maintenance routines keep the issue of safe use and maintenance at the front of everyone’s minds. It is important to remember that employees also have a duty to handle tools and equipment safely and to stop using any item immediately if it requires maintenance or repair.
All of these activities can now be sourced to a facility management company, reducing the burden on the management team. Each organisation should be responsible for health and safety compliance, so it is important to have full confidence in the expertise of anyone providing such services.
Facility management has developed into a thriving business sector and as a discipline continues to grow across the world. Well-managed sites and buildings enable organisations to function at their most efficient and effective level, achieving collaborations and offering real added value to the organisation’s core business. So it’s really important to include facility management companies in the business.
Time for global facility management companies to set up in Sri Lanka
University of Auckland Head of Department of Property Prof. Deborah Susan Levy at CREMV-2017 stated: «Property management or how we use our buildings is very important. We can have all the wonderful layouts and top buildings, but if we do not manage them properly, people aren›t going to enjoy working in them and be productive.”
From her statement it’s clear that maintaining the property is really important and to achieve that we need facility management companies. At the Wealth Insights Series of investor events held on 7 November, a keynote speaker stated that according to the current market landscape it was necessity to include other amenities like a gymnasium and swimming pool and it should be a main feature of high-rise residential buildings.
To maintain these facilities we need facility management companies. I think this is the perfect time for many global facility management companies to enter Sri Lanka, following in the footsteps of JLL and Fonda Global who are already offering their services over here.
Benefits of embracing facility management companies
In today’s tough economy, most companies often cut facility management thinking it is too expensive. But in reality facility management actually provides greater savings in the long run for any company. Some of the benefits of having a facility management company are as follows:
Cost savings: Buildings and land are usually the second largest expenditure of any business. By effectively implementing sound facilities management practices, a business can save millions annually. These measures include keeping all building systems and equipment up to date and running efficiently and maintaining security.
Customer satisfaction: While many people would not admit it, they are far more likely to visit (and revisit) a company that takes pride in its appearance. By keeping the site well-maintained, a company shows that it pays attention to detail and will go the extra mile. Compliance: As we all know, today’s society is more litigious than ever and government standards are always changing. An effective facility management system, by documenting operations, can serve as evidence that your company is striving to provide a safe environment.
Personnel retention – Having a productive workforce is invaluable, and by maintaining a safe, comfortable and happy environment, a business can see the true potential of its employees.
Safety: Safety in the workplace is a must nowadays, standards are always increasing and employees expect them to be met. Outsourcing to a facility management company ensures that safety is not compromised.
The real estate sector will continue to be strong, and there will be a greater range of risks and opportunities for real estate investors. It’s an exciting time for the real estate sector and other sectors that are linked with the real estate sector.
Facility management really does have benefits as many companies are now experiencing. Developers and property owners are usually interested in seeking to increase the occupancy rate of their buildings and maximising the lifecycle of their assets while corporate organisations usually target to reduce overhead costs, improve people productivity and operate their businesses efficiently.
These goals can be achieved with the involvement of an effective facility management company.
With the latest budget proposals encouraging “foreign buy” by removing restrictions of foreign participation in the real estate sector, the industry is set to grow and therefore the environment is an encouraging one for setting up real estate support services. This not only gives an opportunity for entrepreneurs to own new streams of businesses, but will also assist the booming real estate industry to have growth which is also sustainable.
[The writer is an expert realtor and Senior Manager at Fonda Global, a global facility management company. She holds a Bachelor of Business Administration from the University of Madras and an MBA from the University of West London].