Face-to-face: John Stevens, MD, Asteco
With service fee collection as top most priority, real estate manager Asteco sheds light on the need of specialised FM services in favour of integrated services
Asteco managing director John Stevens is at the helm of a large real estate management company that has its pulse firmly on the property and FM market in the UAE.
Stevens’ firm manages a significant chunk of the real estate in the country — 20,000 units to be precise — out of which 70% of its portfolio is residential, a little more than 20% is commercial and 7% to 8% is in the retail.
He says Asteco engages with a wide range of FM / maintenance companies but it depends on the kind of property involved. “We manage ‘Grade A’ buildings to developments in older more established areas of Dubai, up to Sharjah and the Northern emirates.
“For example, Oceana on the Palm demands premium service with a premium FM operator on site. But, in case of a client who has a handful of buildings, they may not even have an FM company on board because they require maintenance to be done on an adhoc basis,” Stevens tells fmME.
In the October issue of fmME, Ian Harfield of Cofely Besix Facility Management said that the “residential sector is on a race to the bottom”. Harfield was referring to the intense competition coupled with challenges surrounding service fee collection.
Asteco’s has a major share in the residential sector and Stevens weighs in on the matter. He says: “The challenge that’s been voiced by the FM sector is because the market is majoryly landlord represented rather than owner’s association, and they are being squeezed on price. And when it comes to building operational expenses the FM companies are in a harder place than we are. There’s no doubt about that.”
A building’s utilities constitute a majority of its running costs — anywhere from 60% to 80% — “that cannot be brought down by more than 30% to 40% by energy savings measures”.
“I don’t think a lot of the landlords appreciate that a higher quality of service from the FM company will get you higher levels of occupancy, rents and tenant satisfaction. A handful of service providers may appear to be costlier in the short term but a building is a long term asset that you need to invest in.
“It’s probably the single largest contract a lot of FM companies have and that’s why it’s under pressure most of the time. Hence, you end up with lower quality at a lower price point often with lesser skilled technicians which puts pressure on tenants and the asset. Maybe there are quick savings to be made in maintenance but if you are not looking after the asset well, you eventually end up with high repair costs,” he says.
Asteco’s strategy, for the assets they look after, has seen them move away from integrated FM services in favour of more single services. “The challenge we face is that we cannot use our influence to buy bulk services. We cannot have a relationship with a single FM company because in most cases a building is tendered individually. We have no full service FM contracts, all of our buildings are individually tendered and we manage each function accordingly — hard and soft services.”
He adds that quite often landlords and owners have an existing relationship or an interest in working with a particular FM company or security company, and have to invariably work them.
Moreover Stevens isn’t too impressed with FM service providers billing the ‘one-stop shop’ solution. He explains: “FM companies are not always offering integrated services — they might be good at doing security and cleaning or MEP but not HVAC. Whereas if we tender individually there is a better possibility of getting the best in each field. And whilst on larger scale developments there is a certain value, I cannot see it being too viable from a landlord’s perspective,” he explains.
Prior to working in the Middle East, Stevens was involved in the Asian and Far East property sector. And he recalls the sophisticated nature of FM operations in those markets prior to 2004. “The last agreement I entered into before I left for Dubai was a five-year fixed price contract which covered everything in a TFM agreement — from elevators, MEP to cleaning. The company spent eight months auditing the asset thoroughly, from the stage a pump’s life to when the smallest piece of equipment was expected to fail under their maintenance.”
The readily available records made it possible to carry out a detailed analysis, and Stevens says he was “met with blank looks” when he first came to Dubai and enquired about records. “Today the contracts that I see in the UAE aren’t as advanced as the ones I saw in Asia. The market has definitely improved but I still don’t see the demand of that top level analysis from a sufficient number of clients. And whether FM operators have the capability and the information to be able to deliver is a different aspect altogether.”
Speaking about performance-based contracts, Stevens says that the UAE FM sector is getting up to standards that have been prevalent in the East. “I was dealing with output-based contracts 15 years ago and we are only starting to get there now because we have been pushing for them to happen in this market. Technology has entered the market but it’s dependent on the competencies of the property managers to make use of that data for the betterment of the asset.”
Stevens says there is a difference between implementing the latest CAFM / building management system (BMS) and whether they are being used in an optimal manner. “Around 15 years ago people were buying BMS because it was a nice idea, and they bought what the supplier suggested rather than buying what they needed. Today, the challenge in the UAE is allowing the property managers and facilities managers to have a truly active participation during the design stage of the building.
He explains: “Majority of the developments aren’t ‘Grade A’ buildings that wouldn’t necessarily benefit from this sort of early involvement. Most buildings have a much different focus. But the market segment is there to consider these complexes of involving PM and FM companies early. If you are looking at a multi-building development or master community you would certainly look at doing it. But a developer of a 90-unit tower in Deira or Barsha South might be less inclined about those facilities because the plant and equipment you have less,” Stevens says.
For a while now Dubai’s Real Estate Regulatory Authority (RERA) has been mulling a rating system for buildings. The idea behind it was to help tenants and landlords fix on the right price and help tenants make the right decision. The rating system would also, in essence, help arrive on fixing accurate service fees. But Stevens says the rating system, which was suggested by RERA, is subjective in nature. And hence the data from the Ejari mechanism would have made a viable option to classify the building either five-star or otherwise.
“We were involved with RERA before discussion of the building rating system happened. And we suggested that it would be a lot more practical to use the Ejari data (in order to grade buildings) rather than the inspection process they were considering. Because every building in a residential community is already registered through the system and Ejari is taken into account for the rental review calculator. The new leases and rents that are to be quoted can be extracted from there,” he opines.
The merit to this concept is as follows: Two buildings located besides each other might have a huge disparity in the rents but it should be the market that decides it. And that could be due to the condition of the facilities and amenities instead of an inspector’s subjective analysis. He says: “For instance, a pool that I perceive as five-star might not hold the same value for someone else. Whilst I do appreciate the grading system is beneficial there are several parameters that need to be taken into account.”
A grading system for FM companies was also being discussed. And Stevens believes the ranking will be of use to those who are not directly involved in the sector.
“We already have our own grading system — we are well aware of the capabilities of different FM companies we deal with. Then again a rating system has to be fluid and designed in such a way that it can evolve — quite often the driving force within one company leaves and that might affect the quality of service,” he says.
Asteco will be launching a portal which will enable a range of service providers and suppliers to sign up and register. “Henceforth, we will be able to track their assessment. If I am moving into the higher end (of FM service providers) I want to see the competency of their personnel, their skill set and expertise in the market place. For instance, I am looking at a handyman service to manage smaller compounds, I don’t need an Emrill to look after a compound of 40 villas because it’s far too pricey.”
In conclusion Stevens says FM companies need to know what market segment they are targeting and show their competencies in that field.