Facilities Management Market for Government Institutions in Australia

Nelly AppelhanzEnvironment & Building Technologies

Frost & Sullivan Asia Pacific6 June 2012

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Today’s Presenter

Nelly has more than 8 years of experience in Marketing and Communications across a number of industries in Europe. She has been working now as a consultant in Australia for 2 years.

For Frost & Sullivan, she delivered projects for clients in Australia, covering the Asian Pacific region. She has worked on a number of topics related to the Australian mining industry.

Currently, she is monitoring the development of the facilities management industry in Australia covering several industries.

Nelly Appelhanz

Consultant - Environment and Building Technologies

Frost & SullivanAsia Pacific

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Challenges and Opportunities for Facilities Management Services

Challenges and Opportunities for Facilities Management Services

Focus Points

Australian Government Institutions Australian Government Institutions

Facilities Management Market for Government InstitutionsFacilities Management Market for Government Institutions

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Australian Government Institutions

Australian governments hold one of the largest property portfolios in Australia. This is because government departments provide an extremely wide range of services - on a federal, state and local level - to the public.

This is a mature market for numerous facilities management (FM) service providers. However, FM services can be provided by external service providers or internal departments, and this varies across the different Australian states, influenced by the nature of the government in each state.

In 2011, around 7 million square meters of office space was occupied by the different government tenants across all levels.

The considerable occupied area and the need to operate and maintain these facilities in line with the unique needs of government, provide significant market opportunities for FM providers.

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Facility Management Industry Structure for Government Institutions, 2011

Source: Frost & Sullivan analysis

Facilities Management Services for Government

Institutions

Government Office Buildings

Outsourced to FM Service ProvidersIn-house FM

Services

Internal Government Departments

Facility Management: Industry Structure Australia, 2011

38.0% 62.0 %

Integrated FM Services

60.0%

Other FM Services

40.0 %

Forecasts provided in the detailed study:

• Total Facilities Management Market for Government Institutions (2009-2018)• Facilities Management Market for Government Institutions by Federal Level - (2009-2018)• Facilities Management Market for Government Institutions by State Level - (2009-2018)• Facilities Management Market for Government Institutions by Local Level - (2009-2018)

In-house vs Outsourced FM services IFM vs Other FM services Hard vs Soft services

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Total Facilities Management Market for Government Institutions (continued)

Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan analysis

Hard FM39%

Soft FM61%

Facilities Management Market for Government Institutions: Hard FM

versus Soft FM services (Australia), 2011

In-house FM38%

Facilities Management Market for Government Institutions: In-house FM versus outsourced FM services (Australia),

2011

IFM60 %

Other FM40%

Facilities Management Market for Government Institutions: IFM versus

Other FM services (Australia), 2011

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Drivers and Restraints

1-2 years 3-5 years 6-7 years

Cost considerations positively impact the outsourcing decision for FM services

Impact: High Medium Low

Facilities Management For Government Buildings: Key Market Drivers and Restraints, Australia, 2011-2018

Source: Frost & Sullivan analysis

Budget restrictions impact outsourcing decisions

Cost considerations positively impact the outsourcing decision for FM services

• Government agencies have to monitor and report costs. Public pressure calling for transparency of government actions prompts agencies to aim for the provision of efficient services. In general, external FM service providers are able to provide a more cost-efficient solution than government departments. Up-to-date FM arrangements are intended to provide benefits such as better planning and information capture, reduced cost of maintaining and operating assets, planned maintenance of government assets to ensure OHS&W and other legislative compliance. Cost savings can also be achieved through continuous improvements and comparative benchmarking of contractor performance.

Budget restrictions impact outsourcing decisions

• In 2012, the Australian Government’s goal to return to a surplus has resulted in significant expenditure cuts in some areas. Tight fiscal conditions can significantly impact general outsourcing decisions that are required to operate and maintain government operations or related tasks. As a consequence, it is likely that in some cases, non-critical FM expenditure will be deferred for a certain time, postponed indefinitely or eliminated completely. While essential maintenance is unlikely to be compromised, it is likely that backlog maintenance levels will increase in the short term and potential projects with long payback periods may be reassessed. This may lead to reduced ongoing revenues for some FM providers, as well as fewer new business opportunities in the short term.

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Challenges For Facilities Management in Government Institutions

Policies and Perceptions

Expectations

Delivery

Major Challenges for Facilities Management in Government Office BuildingsMajor Challenges for Facilities Management in Government Office Buildings

Source: Frost & Sullivan analysis

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Current Key Trends

Aging Building StockAging Building Stock

Efficient Use of Office SpaceEfficient Use of Office Space

Green Cleaning and Improved Efficiency in CleaningGreen Cleaning and Improved Efficiency in Cleaning

Source: Frost & Sullivan analysis

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Conclusion: Key Take-aways

2 Revenue for FM services is expected to remain stable over the next 7 years.

3 Expectations relating to FM service will increase and challenge the industry to retain skilled technical staff.

4 FM for State Government offices provides the largest market opportunities.

5 Local Government offices are the smallest segment, and are a niche for specialized small and medium FM providers.

1 FM for government institutions will be dominated by integrated FM solutions.

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+61 (0) 8247 8927 djeremiah@frost.com

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 5910carrie.low@frost.com

Jessie LohCorporate CommunicationsAsia Pacific+65 6890 0942jessie.loh@frost.com