Incentive Facilities Management hosted a round table at Capital & Counties’ Covent Garden offices, attended by a cross-section of landlords, managing agents and tenants’ representatives. The panel was asked what way is the market heading – total facilities management, single service provision or in-house?
Catherine Lambert, head of shopping centre management at Jones Lang LaSalle, expressed doubts about the practicalities of implementing total facilities management in the current market. “I would say that the market is starting to move away from that,” she said. “We are moving to single service suppliers, primarily because we haven’t been able to find a supplier, or enough of them I should say, that is capable of doing security, cleaning and M&E as one package across the portfolio.
“We have a restricted market and if you can’t tender, you can’t show the best value for your services to the tenants. So I don’t think you could say the market was mature enough to offer us what we needed.”
But Andrew Thomson, UK operations director at Hammerson is less willing to write off the total facilities management approach. “We run a small number of large assets and we run a single supplier model, generally.” he explained. “But we’ve recently inherited Silverburn which is on a TFM model. In the short term, my view is I’m going to look at it, integrate it, because I have that opportunity and from the auditing work we’ve done, it doesn’t look particularly broken.”
But he added: “I would concur that proving best value to the retailer could prove quite a challenge.”
In terms of the wider market, Thompson shares Lambert’s concerns about the depth of the FM market and the ability of providers to offer all services to a similar standard. “Our experience to date suggests that most of these firms have come from one heritage and that tends to be where their strength is. And the other things that they’ve bought in don’t tend to work.”
John Michell, head of shopping centre management at King Sturge finds himself in a similar position. “We too have inherited a couple of big assets within the last year with TFM models in place. We have then unpicked those contracts and we’ve found a lot of over manning, a lot of management fees on management fees and we just didn’t find it was particularly cost-efficient or transparent.”
However he didn’t rule it out totally: “If you had a really complicated asset with lots of different contracts to manage; and if you could get it right, then I think would be an interesting model. But I’m not convinced at the moment.”
And John Prestwich, head of retail asset management at Cushman & Wakefield, can see some positives for a shopping centre manager. “If you’re going to be able to delegate some of the service management responsibilities away from centre management onto an FM provider, then it frees the centre manager up to perhaps perform some of the other duties,” he said. “Perhaps working closer with the tenants, working on marketing and working on activities that otherwise you wouldn’t be able to do.”
So what of the supplier’s view? Incentive FM’s managing director Jeremy Waud conceded: “I think the lack of supply and people who can demonstrate competence is an issue. I personally think it’s a perfectly good model but I do think it’s a fair point - if an engineer is playing at security then they’re not likely to be terribly good at security. And a lot of the FM companies did emerge from that particular sector.”
And from the tenant’s point of view, John Grey, formerly head of service charges at Next and now an independent service charge consultant, shares Waud’s concerns about the management capabilities of some contractors. “I think people expanded beyond their control base, to the point where they stopped delivering the good service that they had done initially,” he said.
“Then costs became an issue. And I agree there are management fees on management fees which may be acceptable, providing we understand how that stacks up. If you’ve got eight providers doing eight different services at the shopping centre, they’ve all got their margins and their management fees in there. Just because it’s under one supplier doesn’t mean it’s not payable.”
And King Sturge’s Michell raised another concern: “An issue that a lot of our clients have raised is the lack of control where you’ve got multiple contracts underneath an FM contract. If one of the packages underneath the main contract is not performing properly, how can
we bring pressure to bear, other than through the main FM provider?” he asked.
However Philip Osborne, head of central services at Land Securities, believes this is a management issue. “In 2007 and 2008 we implemented a TFM contract across a number of centres,” he explains. “If you have a TFM model, you really need to have the management structure in place to manage it. One of the mistakes we made was to have a management structure that was used to managing single service contracts still managing that total FM contract and that creates massive friction.
“Another point that I think was also made as well is the suitability of all the suppliers to deliver all three services. The M&E side always seems to be the weak point. A lot of the bigger companies have come from the cleaning and security background and then they will buy in the services for M&E which are not always strong.
“Luckily our contracts were worded in such a way that we could take out the service if it wasn’t delivering and that’s what we actually did. In the end we are now back to the single service supply model. We’ve gone back to basics.”
So what of the third option: in-house provision? “I think people have generally accepted that that’s a thing of the past,” said Waud. “But there are clearly some environments where it works, because the team on site happens to be really good.”
“We had two issues with in-house,” explained Michell. “The first was the security side of it. We didn’t want to take the liability for the SIA training so that just went. But we’ve got clients who do employ security, cleaning, the lot in-house. We find that particularly dicey as managing agents, because there’s a bit of a ‘them and us’ situation. Who are they reporting to? Are they reporting to us as the managing agents, or the clients? The experience of in-house has not been brilliant for me.”
