Change is the law of life. In present day, Change is very common in the competitive, economic, financial and regulatory conditions which call for changes in the organization to meet the new business environment. Very often such changes require revamping the organizational structure of a firm by going through reorganization and restructuring. As a result, Asset Life cycle has become one of the emerging disciplines in the modern World.
The management of an asset throughout its lifecycle includes planning and support for the investment decision, acquisition, access and ongoing maintenance, through to replacement or retirement planning. The objective of asset lifecycle management is to optimise asset acquisition, maximise the use of the asset and reduce associated service and operational costs resulting in increased asset performance and a lower total cost of ownership.
People are generally the single biggest cost centre for any business or organisation and its biggest asset. Having good people means there is capacity, effective and efficient productivity and chances for success are enormous (Rick Best et al: 2003). The purpose of this project is about the importance of Facility management, Asset management, Property management and Corporate Real Estate, its evolution and importance in the modern world and understanding various management techniques.
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Introduction to Facilities Management
Facilities Management (FM) is an age-old practice which for many years has been undervalued simply because its importance has not been understood to the organisations. It emerged as a profession or discipline in the mid-20th century to bring together professions related to management buildings and services.
The definition of facilities management is broad as many different disciplines are involved and it is the co-ordination and management of these services and their suppliers.
It is defined as:
"An integrated approach to operating, maintaining, improving and adapting the buildings and infrastructure of an organization in order to create an environment that strongly supports the primary objectives of the organization". (Brian Atkin & Adrian Brooks, 2002)
In practice, Facilities Management covers a wide range of services including real estate management, financial management, change management, human resources management, health and safety and contract management, in addition to building maintenance, domestic services (such as cleaning and security) and utilities supplies (Figure 1).
Figure 1: Fields of application FM
Facilities Management is fundamental to all organisations. Without the buildings, the equipment, the services and the environment being delivered to best practice standards, the organisation itself could not produce the core product, as it would like.
Management of facilities is basically the strategic arrangement of three elements: subjects / objects (space) in property, people and processes.Â These three elements integrate at the level of decision-making.Â
It is a complex and confusing business understood by too few people who have an influence on it and the way in which it is deployed within organisations. The fundamentals of this discipline are constantly being rethought with new ideas and theoretical approaches in order to build its image and to ensure that it is planned, organised and implemented to match the organisational need.
A facility manager organizes and manages the teams specializing in different jobs within the company. It is important facility managers keep up to date with the latest technologies and trends in the industry.Â It's the role of the facility manager to coordinate and oversee the safe, secure, and environmentally sound operations and maintenance of a building in a cost effective manner, improving performance and creating a productive workplace.Â Â
Evolution of FM
The term Facilities Management originated in late 1960's in USA as a result of the growing practice of banks outsourcing responsibility for processing of credit card transactions to specialist providers, required a new set of problems of intelligent communications which allowed the merchants to obtain immediate credit information and also to record and process all information relevant to a scale (Lord, Emergent Behaviour in a New Market: Facilities Management in the UK)
In the early 1970's its development took place because of two significant events - the use sophisticated systems furniture in the office environment and the introduction of computer terminal into the workstation.
The office atmosphere was getting complex, many international organizations were unable to embark upon the problem. The initiative of first organization occurred in 1978Â the furniture manufacturer Herman Miller convened the meeting where he discussed the development trend in the spatial / office design terming them "Facility Management" and later, formed many associations. (Rick Best, 2003)
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International Facility Management Association (IFMA) and British Institute of Facilities Management (BIFM) are the largest and most widely recognized associations for FM industry which are dedicated to managing the workplace and aimed at developing and supporting FM as a critical, professional and strategic discipline. (Facilities Management Industry FM)
There is a rapid development in this field due to the increased awareness about the work environment, the development of office automation, and the desire for increased productivity.
Benchmarking in the Facilities Management Industry
Benchmarking provides an effective means of measuring performance and cost, leading to a better understanding of value for money. It is inclined to be focused on measures rather than practices, and against the competition, in an attempt to identify how organisations perform comparatively rather than what they actually do to deliver the performances. (Brian Atkin & Adrian Brooks, 2002)
As a result of the recent trend in outsourcing, facilities management industry has emerged in its own right as a relatively recent management discipline sector. This trend has established three primary roles:
The in-house service provider;
The external service provider;
The in-house buyer.
This changing dynamic has highlighted a number of issues- in various sectors it was observed that there was in general a poor understanding of the relationship between facilities and the core business objectives of the organisations that use them and also whether they were supplied by in-house and/or by external providers. (Rick Best, 2003)
This may lead to a situation where it would be difficult to the facilities managers to demonstrate the commercial value of both their role and the FM function to the business they support. It also drives down the inherent value of their potential offering and thereby cost/prices for the trend to outsourcing and for the service providers,
The aim of the benchmarking study of the FM Industry is to identify good practice that is transferable within the industry in order to benefit the growth of the industry as a whole and to give organizations the competitive edge necessary to survive in the worldwide market. (Facilities management resources benchmarking)
For the past quarter century, the asset management business has been rapidly growing and evolving.
Asset management is a complete and structured approach to the long term management of assets (inventory, plant, equipment and other facility contents are distinct from property and buildings) as tools for the efficient and effective delivery of community benefits. (What is Asset Management?)
It is a well-organized process of maximizing the utility of assets for a longer period of time by providing benefits to the community. It involves engineering and business concepts that maintains the quality and usability of assets through a framework. Assets were initially managed through registers, specifications, location, warranty, maintenance requirements
An Asset Management system should be:
â€¢ Customer focused
â€¢ Mission driven
â€¢ System oriented
â€¢ Long-term in outlook
â€¢ Accessible and user friendly
Evolution of Assets Management - Past, Present and Future
Asset management is found to have its beginning in the defence forces for managing the complex equipments and the infrastructure and then as an international standard on quality management (ISO) which provides a highly organized structure of operations and aims at customer satisfaction. (Rick Best, 2003)
There is a constant change in business strategies and tactics, technology, work practices, processes, customer services and people. As a result, the organisation's infrastructure is constantly changing.
"If you are not an active revolutionary within asset management, you are risking not only the assets you manage but also your own professional effectiveness." (Macbeth, 2000)
The major trends of change affecting asset management are -
The change of the role of government is from trade development leadership to administrative support.
The change of market from big business domination to consumer driven
The evolution of female paradigm of economic & social values
The base of power is shifting from production control to process control
The change of management base from tangible assets to intangible knowledge.
The Future of Asset Management lies in Strategic Thinking (Macbeth, 2000)
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Effective asset management relies in understanding what the present and future needs are, understand what they imply in terms of facilities and services and opt for a most cost effective approach to managing the delivery and operation of those facilities and services
A successful asset manager will be a strategic manager incorporating strategic thinking, strategic planning, and strategic systems implementation and look for long term benefits of all the resources and assets within a changing organisation which is within an ever changing world.
Property has been increasingly recognized as a key resource which, if well managed, contributes to an organization's success.
Property management involves the execution of the day-to-day tasks in order to enable the real estate assets to function properly. These tasks include three broad property management areas, namely;
Administrative; which involves rental collections, record keeping and reporting
Marketing; management comprises the marketing strategy, tenant selection and rental schedules and
physical management; concerned with maintenance and rehabilitation or renovation of the real estate assets (Liow Kim Hiang)
Effective property management embraces myriad services varying in accordance with the type of focus; i.e., strategic, investment, operational and occupational. The main focus of Property management is on building maintenance, and concentrates on fulfilling customers' needs and satisfactions.
Definition of Property Management
Property management is the integration and management of various human activities or interactions arising from the use or occupation of premises for one or more of the following purposes:
(a) To generate and maintain capital and the rental revenue to the landlord;
(b) To provide a property resource as an input for the production of goods and services;
(c) To provide a decision making process to resolve conflict between owners in multiple ownership premises and to maintain owner's assets. (surveyors, 2008)
It is also defined as, "the total care of the building during the operation stage; the extent of management service will vary according to the building's use, quality, size, location and age, the ownership profile, and the capability and strategy of the property management company itself" (Zaiton Ali, 2000)
The golden age of real estate management took place from 1965 through 1980 when an ever-increasing stream of newly independent adults needed a place to live, to work and to shop. During this period, a high demand for real estate was seen and rate of new household formationÂ was plummeted. This brought havoc to the entire industry and to the property managers. As a result, managers have experienced reduced income (fee), increasing competition from syndicators and developers, ownership that is increasingly institutionalized and many more. These factors have brought about more change in property management during the past five years than the previous thirty. (Bentsen, 1994 )
The property which brings a rate to return to the holder particularly in the case of free hold or long term lease like any other asset is the Investment property . Operational property serves as the activities of business the property is going to undertake e.g. in the case of hospitals or hotels. This sort of property is also known as corporate property (V Edwards & L Ellison, 2004)
With a basic description of the property, the manager can set about evaluating the property against certain criteria and this will be inextricably linked to the extent to which the property contributes to delivering the organisation's objectives.
Property Management Objectives
Not only the financial value, but also the cultural, ecological and social value are maximised. Whether the property is of Investment or operational the value of the property should be kept high.
As an investment the holder should get the maximum return on the capital. The value equation for is given as
Capital value = Rent - operating costs x 100/yield
Many investment managers are happy to sit back and collect the rent from their investment properties because lack of Strategic Approach
Property User's Characteristics
Identification of the user community and its requirements i.e. who are the users, how big the company is, how much staff the company hold, whether they have any plans of future expansion, the owner of the company.
To assess the roles and functions of a building the purpose/ function the building is made for i.e. whether it is made for a hospital or some commercial purpose etc.
The role of institutional arrangements enables users to exchange information and aid decision making concerning the property.
Positive impact dialogue with key property users can have for strategic development and implementation.
Corporate Real Estate
Corporate real estate management (CREM) is an emerging property discipline that is evolving towards managing operational property more strategically
Corporate real estate management (CREM) is defined as the optimum use of all real estate assets utilised by a corporation in pursuit of its primary business mission. (Zaiton Ali, 2000)
This term describes theÂ real propertyÂ held and used by aÂ business enterpriseÂ or organization for its own operational purposes. It also describes the functional practice, department, and profession, deals through various activities including property planning, acquisition, management, administration, financial analysis and miscellaneous activities such as leasing, development packaging, and brokerage of real property on behalf of a company. (Zaiton Ali, 2000)
Even though it is looks related toÂ facilities managementÂ andÂ property management, corporate real estate as a concept is usually broader in corporate functional scope but narrower within the real estate sector. (Corporate real estate)
In Corporate Real Estate department's greater emphasis is on multi-site long-range planning, often referred to as "portfolio planning" or "strategic planning". However, Corporate real estate is almost exclusively focused on commercial properties types (mostlyÂ office, with industrial and retail depending on the company); residential properties are rare in a corporate portfolio.
Corporate Real Estate managers are Property specialists with financial and management background, who perceive Strategic or Tactical skills of management.
The management of CRE itself has evolved significantly over the last several decades, from the trend of custodial approach prior to 1970s to the current trend of strategic approach in which the real estate function is moving towards growth, efficiency and effectiveness.
Until the 1990s, real estate facilities were viewed by many organisations as a by-product of business
strategy that required maintenance and occasional upgrading. Obsolete facilities were disposed of or left vacant by individual business units or departments. Ingenious real estate solutions emerged in response to thorny business problems but were often hard to replicate.
Corporate efforts to reduce costs and improve customer service have also driven major restructuring's, with significant challenges to CRE organisations. Organisations are dropping non-core businesses permanently or replacing them with new alliances to gain leverage and cost improvements. CRE issues are a significant factor that require attention early in these decisions.
In recent years CRE has taken on a higher level of importance as the "fifth corporate resource" after capital, people, technology and information. (Liow Kim Hiang).
The current situation of companies requires a group-wide adoption of responsibility for the
real estate management. In this process the following tendencies can be observed:
In future, the classification of real estate will have a stronger focus on the features of
efficiency and usability than in the past where the emphasis was rather on operational
Characteristics of corporate real estate
Depending on the type of business being carried out by the respective companies, the composition of corporate real estate varies. The property type and amount owned is determined by the nature of its operations. (Ting Kien Hwa, 2003). Fig XX shows various types of CRE's for respective business functions.
Two major types of real state are owned by a firm to support in the classifications of CRE i.e.
strategic property; owns and controls for its operations and long term business strategy e.g. manufacturing plants, warehouses etc. and
core property; needs to control for its existing and or future operations and for medium term business strategy e.g. commercial, industrial or retail facilities from which the company operates.
Benchmarking of corporate real estate
For the successful provision of supporting property services and in order to continuously improve the quality and efficiency of real estate provision, the benchmarking of corporate real estate is essential and this process requires accurate comparison of metrics between facilities. The most common basis of measure for the corporate sector, with its greatest expenditure within the commercial office market, is a measure of lettable area, more commonly referred to as the Net Lettable Area, (NLA). (Warren, 2002)
From the review of literature, it can be concluded that