Why now is a good time to be in facility management
Facility management is an industry that may not always get the attention and appreciation it deserves. Providers are often the unsung heroes of big organisations. They are the oil that keeps everything running smoothly, keeping everything ticking over and ensuring employees can carry on with their work, whatever that might be.
The best sign of good facility management is that you don’t even know it’s happening. It’s when it goes wrong that you really start to appreciate their work.
It has gained significance in recent years as managers appreciate how valuable good facility management can be in keeping other residual costs down.
The value of facility management
Facilities management can act as an organisation’s first line of defence against aging equipment, tired buildings, and ailing systems. While good management can extend the lifespan of amenities, when the time does come for the equipment to be replaced facility managers will help protect the client from outside contractors taking advantage of a company’s budget.
They are also integral to keeping energy costs down and ensuring the sustainable and green running of facilities. A 2016 study published in Science Direct found the operational strategies of facilities management can contribute to reducing building energy use.
The results showed that proactive operations and maintenance strategies in existing buildings contribute towards significantly improving energy performance. Given the significant impact the role can have, the researchers called for increased training for facility management professionals to ensure high levels of competency at the organisational as well as the national policy level.
Perhaps most importantly, facility management is key in ensuring environments are safe and equipment is up to standard, thereby guaranteeing a safe working environment for everyone in the organisation.
By providing day-to-day analysis, and ensuring all aspects of a corporation are working in unison, they keep the organisations running at peak efficiency, saving money on bills, resources, and ensure sustainability targets are met.
University building boom
This valuable input is obviously an essential feature in any large organisation, and universities and colleges are no exception.
Universities are not just a large organisation like any other business. In many cases they can span a whole collection of facilities and buildings, adding up to the size of a small town in some cases.
It is their sheer size and wide-ranging variety of facilities – from science laboratories to gymnasiums – that make them such a valuable client to nab.
And there’s no better time than now to approach universities to offer facility management services.
Higher education has had two periods in recent history that are marked by major building booms and the mass construction of new facilities.
The first one was between 1950 to 1975. The second is still going on today.
Following the global financial crisis in 2008, universities have been adding new facilities in a bid to tempt back financially cautious students. This meant outdoing the competition leading universities to one-up each other with ever more lavish accommodation, ever more cutting-edge amenities, and ever more exciting facilities.
This is a fairly global phenomenon. In a report published in October 2017, the Higher Education Funding Council for England recorded that the sector had spent £27.9 billion (US$35 billion) on improving its physical infrastructure since 2006.
In just 2015 alone, US universities and colleges spent US$11.5 billion on construction, an all-time high according to Dodge Data & Analytics. While some of that was for renovations, it also paid for 21 million sq ft of new space.
Record-breaking facility management spending
All of this investment in new facilities also sent the facility management costs through the roof, pushing colleges’ capital investment into facilities to its highest in more than a decade.
According to a new report by Sightlines that pulled data from 360 campuses, facility management costs reached nearly US$5 per gross square foot in 2017, and more will be needed in the future.
Not only is money needed to support the new facilities, but the older buildings from the first building boom are also in dire need of upkeep.
As the report puts it, “an avalanche of capital needs is imminent.”
“The ‘demographic’ profile tells us that within the next 10 years, these two cohorts [the 70s and 2000s building booms] of buildings will both be demanding high levels of capital investment at the same time,” the report reads.
“This means the largest demand for capital investment that higher education has ever seen is bearing down on us, whether or not the resources to meet that demand exist.”
Managing the age profile of a campus can be a balancing act; one that many universities have failed to achieve.
Any space that’s over 25 years old, a college risks having facility failures and lacking space for the natural growth of the institution. Too much young space, below 25 years, and you risk overspending in the near term and creating a significant problem in the future as all that space becomes old simultaneously.
While this may produce challenges for universities, this is a great opportunity for facility management providers.
Universities have misjudged it to the point that there is now a significant backlog in the need for facility management services.
A report from First American found schools have overspent on new construction at a rate that has outpaced enrolment growth, causing them to push back required maintenance to old buildings and creating a bottleneck.
For any facility management providers in the student accommodation sector, business is especially booming.
An April report from property experts Savills recorded student housing investment in the US at US$10.8 billion in 2018 – an all-time high for the sector. According to Real Capital Analytics (RCA) investors have “discovered” the student accommodation sector in recent years causing it to swell over the last decade.
The investment has sent the price per bed soaring to over US$90,000.
The bubble bursts?
While the facility management spending spree is very much in full flow now, there is the danger it could be shortlived as colleges and universities battle with funding issues of their own.
University enrolments have plateaued in the western world, dropping off from the boom in applications a decade ago.
According to the National Student Clearinghouse Research Centre, total postsecondary enrolment in Spring 2019 decreased 1.7 percent, about 300,000 students less from the previous spring, marking the eighth year in a row that enrolment has declined in the US.
Education funding in the United States is also on the decline. States have collectively scaled back their annual funding of public colleges by US$9 billion since 2008, according to the Center on Budget and Policy Priorities.
These two factors combined – falling tuition and gutted state funding – placed revenue growth below 3 percent at more than half of public colleges in the US, with the median value falling to 2.4 percent from 2.9 percent a year ago.
As colleges start to feel the pinch, the building boom that has fuelled the facility management spending will likely be on the wane. So for facility management providers, the time to capitalise on the higher education client market is now.