Concerns mount as rising vacancies, rent default deepen facilities managers woes

Among professionals in the facilities management industry, concerns are mounting as the slowdown in the economy takes tolls on households and organisations, leading to an increase in rent default by tenants and high vacancy rate in both residential and commercial real estate, which they service.

Facilities managers, by their nature and function, are real estate services providers engaged by landlords and sundry property owners to provide maintenance and management services for buildings, which may be residential apartments or commercial such as office space, industrial or retail facilities.

The downturn in the economy has badly eroded household income and lowered the productivity of organisation, making tenants who work in these organisations unable to meet up their obligations in terms of paying their rents and service charge.

Before now, the major challenge for facilities managers was rising cost of maintenance, which increased sharply to between 30 percent and 40 percent in the last 12 months and, according to Erejuwa Gbadebo, MD/CEO, Cluttons Nigeria, sooner than later, cost of maintaining a building might outstrip rents charged on the building.

“We are gradually approaching a stage where cost of maintenance will overshoot rent charged on a building and that is a dangerous development because, apart from settling for substandard services, landlords may decide to stop maintenance altogether,” Gbadebo lamented.

Femi Akintunde, MD/CEO, AMFacilities, agreed, noting that unemployment was increasing and because of that, the demand for real estate was getting weaker, “because of the liquidity squeeze in the economy, a lot of credit facilities that had been pre-approved can no longer be disbursed.”

According to Akintunde, service providers are having serious problems from the impact of the slowing economy on serviced real estate, adding that private estates or residential housing requires the services of FM because a lot of the people who live there are middle income professionals who are there to leverage economy of scale to get the kind of services they need.

But a lot of these professionals have lost their jobs, their income has reduced and they are therefore struggling and unable to pay their service charge. Contract for facility management services is being revoked and renegotiated for as low as 20-30 percent downwards against rising cost of maintenance.

“The situation is so critical that FM firms are incapacitated; in an estate of 50 people, only 20 can pay their service charge and the remaining 30 cannot. Now, there are less opportunities in the FM space and where they are engaged, there is serious default in terms of payment, debt profile is rising and as this happens, it impacts on the ability of the FM company to deliver quality service,” Akintunde said.

There is a big problem ahead which people need to watch out for because according him, customers are now coming up with crazy ideas of their own that are not professional, noting that services are now being deferred to a point where even security is no longer seen as critical.

“This is reducing the capacity to respond to an emergency. The rate of deferred maintenance is increasing and the repercussion is long term because it is going to cost more to repair those assets after a long time of neglect. This shifts focus from preventive to reactive maintenance. Apart from mounting pressure on the service provider, this also brings discomfort to the customers and distress to the equipment,” he emphasised.