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The rise of facility management
Written by: David Friday & Klára Smolová

As outsourcing in the Czech real estate sector becomes more sophisticated, the development of a new service has become evident. The facility management trend is likely to grow as clients gain a greater understanding of the service's full benefits.

LET'S START WITH a business center - pick any from a multitude that have opened in Prague in the last few years. To bystanders it may seem like once the scaffold comes off, the building is finished. But for the tenants inside, life in the building has just begun. From replacing lights, repairing scratches, and cleaning windows, to maintenance and repair of complex heating and ventilation equipment, a level of constant upkeep is essential. And it doesn't stop there. Hypermarkets, hotels, warehouses, and shopping malls - all of which have mushroomed in the last few years both in and out of Prague - need to be looked after and maintained to keep tenants or customers happy. The responsibility for this upkeep, which formerly lay in the hands of the property owner, is increasingly being outsourced to companies that make such maintenance their specialty.
One of the most widely accepted terms for this specialization is "facility management" (FM). To define the term precisely is a challenge: various FM providers market themselves differently and may be serving similar clients but at different points along the subcontracting chain. For example, the service range listed above is often referred to as "technical FM" (TFM). Some FM providers extend the range of service to include security and cleaning; still others include gardening, mail, and responsibilities directly involving tenants, such as rent collection, or direct tenant services.

Ondřej Fukal

How to save money?
One of the clearest examples of a technical facilities manager is Optimal. The company was established in the Czech Republic eight years ago, and expanded to Slovakia, Hungary, and Romania. "To operate in several countries in the same region makes sense considering the customers we have, particularly hotels, which need to keep a standard," says Eric Balloffet, Optimal's sales director for central Europe. Optimal's clients span virtually all sectors of property. In office buildings alone, they manage facilities of more than 250,000 m2 of property, including the Florenc Office Centre, Koospol, Millenium Plaza, and several buildings of Orco Property Group in Prague. Optimal also provides FM to 12 Carrefour, eight Ahold, three Metro/Makro hypermarkets, and several malls. Its early forte, however, was in the hotel sector. Hotels Marriott, InterContinental, and Renaissance are feathers in its cap.
Optimal began to cooperate with Prague Marriott Hotel prior to the hotel's 1999 opening. At the same time, it also took over FM of the Renaissance Prague Hotel. Both hotels employ an onsite manager and an assistant who have their offices on the premises, enabling them to have a detailed knowledge of the hotel's business. "If you see a man in a Marriott uniform replacing a lightbulb or fixing an electrical panel, he is likely one of our employees," says Balloffet. But the benefit for the client goes way beyond repairs. Intimate knowledge of building systems allows the facilities manager to dramatically reduce the client's energy bill. "You don't need the same amount of hot water at 70 percent occupancy as you do at 100 percent," explains Balloffet. "By doing fine tuning on boilers, you'll save clients huge amounts of money every year."
It's not unusual now for hotels to request energy savings services in the contract, but clients appreciate other benefits as well. "For a fixed amount every month, the service we need is taken care of without having to manage man power," says Marriott's director of engineering Torsten Heyroth. "We cooperate with Optimal in several countries and profit from their contacts, suppliers and experience in many fields."

FM still on the outskirt
Another leader providing FM in the hotel sector in Prague is Dalkia, a European heavyweight in FM. Their roster includes Hilton, Radisson SAS Alcron, Four Seasons, and Riverside, in addition to shopping centers such as Nový Smíchov and Letňany. According to Dalkia's Milan Wagner, the FM market in the Czech Republic has a long way to go before it is fully taken advantage of. It's a sentiment that is shared by most experts in the field.
Ondrej Štrup, Corporate Facility Manager at Skanska Facility Management CZ, established the Czech chapter of the International Facilities Management Association in 2000, the first branch in CEE, and helps teach the first accredited course on the subject at the Prague University of Economics. "In 1999, nobody knew what facilities management was. Today, it is better but people still don't understand it," says Štrup. "They feel it's equal to real estate services such as cleaning, heating, and technical support, but it is a lot of other processes which should support the company and help the management to cover all non-core processes," he adds.
Kevin Craighead, FM manager for Knight Frank, agrees. "Studies suggest that the FM market in the UK is worth in excess of USD 26 billion, and growing more than 10% each year. By comparison, the concept of total FM in the Czech Republic is in its early stages." Štrup agrees and ballparks the development of the Czech FM market so far as something like half a percent, compared to the UK's 60%. "There is great potential for growth here," he observes.
Already entrenched in the property management game are brokers Cushman & Wakefield Healey & Baker. The Prague office, which has been active in the field for 10 years, now has over 180,000 m2 under its management. "It's predominantly office buildings, but we look after significant retail and residential as well," says Jonathan Hallett, managing director in Prague. "We do ING's Dancing Building and Zlatý Anděl, as well as several residential developments, Tesco's Letňany, Plzeň, and Karlovy Vary developments and Europolis's Technopark," he adds.

Radka Kvasničková

Outsourcing is the key
Prague's unabated commercial development continues to fuel outsourcing in FM. "Most firms with FM services are commercial centers because foreign developers are used to them," says Ondřej Fukal, director of the facility management division of Centra, a real estate and FM firm. A Czech firm that began as a transportation company, Centra established its property administration division in 1992 and has since added divisions such as Gardening, Cleaning, Brokerage, Engineering and Facility Management. "Property administration accounts for 98% of the apartment building management business, whereas facility management provides services mainly to commercial clients," Fukal explains. Centra employs about 450 people and manages about 1,300 buildings. Among their clients are Villa Bianca, Zvonařka, Rivercity and Oskarcentrum Vinice. Another firm that began diversification into FM from their core business is Johnson Controls (see sidebar, p. 32), which began in the 1950s specializing in control systems for things like heating, lighting, and air conditioning.
This logical extension into other services is a defining trend in FM. "Companies want to focus on their core business activity, and do not want to bother with support services," says Petr Urbánek, director of developer Europolis Invest. "So FM companies are forced to expand into such services as catering, laundry and dry cleaning, etc." Europolis operates several properties in the Czech Republic, such as Olympia shopping centers and Danube House, and it hires services from Centra or Cushman & Wakefield Healey & Baker. "It doesn't make sense to build technical or maintenance departments when it is possible to outsource them to specialists," opines Urbánek.
According to Craighead, an all-encompassing form of facility management is about more than cost-cutting. "The development of FM in the Czech Republic still tends to focus on technical equipment and building maintenance, while outsourcing such functions as cleaning, security, gardening and catering. There is still a lack of skilled FM consultants and companies providing total FM solutions." This may not hold true for long. "Clients are getting more demanding, expecting new services and sophisticated methods," says Radka Kvasničková, marketing manager of OKIN Facility, a daughter company of the German subsidiary of Vinci. The firm, which is focused mainly on management of technical equipment, cooperating with subcontractors for cleaning, security, and emergency services, launched a call center this spring. "The main innovation is that clients can have feedback on how their request is being processed," she explains.
It appears that there is no where to go but up in outsourcing possibilities for FM, particularly in areas where the trend is in even earlier stages. According to Fukal, there is still a great potential for growth in areas such as health care, army properties, state institutions or industrial enterprises.

More than just catering Alexej Osinin Sodexho Alliance is best known in the Czech Republic as a company that ensures services associated with catering - common dining in companies and the sale of Sodexho pass vouchers. But starting last year it added facility management to its portfolio of services. "In recent years the dynamic development of outsourcing in the Czech Republic has created demand for comprehensive services, as well as a suitable environment for the entry of Altys, a facility management company," claims Alexej Osinin, the development director for Altys, a subsidiary of Sodexho Alliance. In June of 2003 Sodexho Alliance bought Reflexim, which it renamed Altys a couple of months later. The firm's philosophy is to provide services of the highest possible quality while using its own team of expert workers, of which it currently has about 230. "Our solution is to integrate the management of buildings and services under a single contract, realized by a single team of experts," Osinin says. This so-called integrated decision covers management of support of business services such as telephone switching centers, reception areas, postal, conference, and copy services, and other building management services, including technical administration, maintenance, power, access management and security, and, finally, management of services for people, i.e., cleaning catering, fitness clubs, laundry and dry cleaning, and the like. Sodexho Alliance is one of the world's largest facility management (FM) support services providers. In central Europe it initially concentrated on catering for companies, shifting towards comprehensive FM in Poland in the second half of the nineties, where it currently manages 37 buildings, including the Citibank and Microsoft headquarters. In the Czech Republic it provides services in buildings with total space of over 500,000 m2, with annual sales of approximately CZK 100 million. Its largest assignment to date is the facility management of Komerční banka's headquarters and its nationwide network of 300 branch offices. "Our particular target market is the segment including office buildings, multi-function complexes, and modern production facilities, as it is in this segment that there is the greatest demand for comprehensive services," Osinin explains.

Soft and hard service Jan Tůma The American company Johnson Controls is probably one of the oldest facility management firms in the world. It was founded 119 years ago in Milwaukee, Wisconsin, by Warren Seymour Johnson, the inventor of the first room thermostat. The firm's two divisions - Controls and Automotive - currently have about 600 branches around the world and about 110,000 employees. Johnson Controls (JC) has been active on the Czech market since before 1990. At that time its business here was focused on the manufacture and delivery of low-voltage systems (primarily security and fire protection) and measurement and regulatory systems (for water, electricity, air conditioning, etc.). "We started out here selling our systems, for which we also offered service. In 1992 we started adding other services, and the breakthrough came in the mid-nineties," says Jan Tůma, service team supervisor of the facility management department. "Our customers began to request cleaning, security, plant care, and other services. Today they are prepared to entrust us with comprehensive building services," he adds, noting that JC endeavors to treat a building as a whole, and it's able to take care of all ancillary services, from pizza deliveries to IT administration and office planning. JC has 150 employees and eight branches throughout the Czech Republic. "We take care of 90% of our activities ourselves, since they mainly concern technical matters. The other 10% are so-called 'soft services', which are simpler to take care of on an external basis," Tůma explains. The firm focuses primarily on manufacturing companies and shopping/office centers, although it also takes care of apartment buildings and schools. JC's customers include Ateliéry Barrandov and the headquarters of Metrostav and Passerinvest, as well as providing technical equipment service for Zlatý Anděl and the Dancing Building. Its largest facility management customer is LG Philips Display Components in Hranice na Moravě, where 60 JC employees provide all "hard" and "soft" requirements, from total technical management to postal services.