Globally, Integrated Facilities Management companies (IFMs) are more prevalent in developed economies, due to their higher acceptance and reliance on outsourcing. The United States is the largest market worldwide, with European countries such as Germany, Spain, France and the United Kingdom also having larger market penetrations of IFMs.
The Asia Pacific (APAC) region is a mix of mature and developing markets for Facilities Management (FM), with developing nations seeing the potential for outsourcing more of their support functions to IFMs in the future. The expected IFM market revenue in 2018 is around $19 billion across APAC, with Australia, Japan, and South Korea being the largest markets. Singapore, Malaysia, and New Zealand are also doing well relative to their market sizes. It is also observed that the markets for IFM will increase at higher rates (~9-15% CAGR) in Thailand, Indonesia, the Philippines, and Vietnam, over the next 5 years.
Among vertical segments, the commercial sector is currently the largest and is expected to remain so in the near future. The public sector and healthcare together have reached a similar market size and are expected to grow steadily as well. Meanwhile the industry, education, and energy and resources sectors have a smaller market share but offer potential for growth.
The APAC IFM market currently has around 70-100 players with more than $1 million in revenue, accounting for most of the market share. Among these, a tiny few lead the industry with strong know-how and the ability to deliver integrated and high-level services. A handful of others are domestic service providers with some level of overseas presence, often having a dominating presence in their respective local markets, with moderate capability in delivering integrated services. The rest are mainly concentrating on specialised or local markets, and are hence often subcontracted by the larger players looking to move into these markets.
In terms of overall growth, it is observed that the more mature markets will be growing at much slower rate than the developing markets. This averages out to a steady growth in the whole region. Various booming sectors and MNCs in developing counties are the primary drivers for the adoption of IFMs. Mature markets are moving toward more long-term contract partnerships with IFMs, especially in cases where technological solutions are being provided to enhance their facilities in terms of cost and energy efficiency.
The APAC IFM market opportunities are driven by a few key factors. Among them are the increasing acceptance of integrated services and the increase in outsourcing culture. The rising need for cost and energy efficiencies are helping in creating demand for IFM services. It is also observed that these market drivers differ in intensity across the various APAC countries, with some being more critical in the developing economies, and others in the mature markets.
However, the IFM market still faces a few challenges to higher adoption rates. The primary cause for this is the lack of acceptance of IFMs, and outsourcing in general, by conservative end users. Additionally, the lack of industrial standardization has also led to some expectation gaps from some end users, due to insufficient market education or standards to refer to. This leads to them choosing to manage their operations in-house. Other perceived market restraints are the market saturation from intensive competition in the more mature markets, and the lack of skilled personnel in the IFM field, especially in developing countries such as Thailand and Vietnam.
The above macro drivers and restraints influence the market dynamics in this sector in various ways. The growing importance of building energy management (BEM) is creating new opportunities for energy and resource efficiency, digitalization, and automation. This will lead to a higher demand for technologically advanced IFM solutions in the coming years. This change will happen not only in new buildings, but also in the existing building stock via retrofitting. The more technologically advanced IFMs will also be offering services such as internet-of-things (IoT), blockchain, and real time analytics. These will be adopted by the more mature markets initially and later by the developing markets.
IFM companies will also be looking to increase their capabilities and offerings, both vertically as well as horizontally. This will be done via mergers and acquisitions, as already observed among the larger companies. Companies will also be rebranding themselves to change perceptions among clients from being specialized in a few verticals to offering the more holistic sounding “Smart Building Solutions”.
MNCs in the various vertical sectors have led to higher adoption rates in IFMs in general. This is creating a trickle-down effect on other large corporations in the various sectors, especially the commercial and industrial sectors. Existing building regulations and upcoming energy efficiency regulations are also leading to higher adoption rates here as well. In addition, the public sector’s demand comes from cost efficiency requirements.
The energy and resources sector, despite having a smaller overall market share for IFMs, promises some interesting developments in the near future. The reduced reliance on coal, oil and gas is decreasing new demands, but still requiring the maintenance based IFMs. However, the increased demand for commercial solar energy generation systems is creating new opportunities for IFMs, with a lesser number of players present in the market currently.
Many growth opportunities have been identified for IFMs in the APAC market. One among them is the need for more real-time analytics, which will lead to better cost efficiency and resource optimization. The demand for more environmentally sustainable practices, such as energy efficiency, renewable energy, and circular economy based requirements is also opening some opportunities for new players to enter the market.
Overall, it is recommended to new and existing players to keep an eye on the existing market trends in the various APAC countries and look out for potential opportunities to create partnerships or specialized offerings in the various sectors.
Frost & Sullivan has conducted a detailed study on the Asia Pacific (APAC) IFM market, looking at the market outlook and opportunities in the coming years, and will be publishing it soon.
[1] Countries included: Australia, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand, Vietnam
