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Structural issues hold Spanish facilities management firms back – for now
Spain’s facilities management economy continues to grow steadily, and many Spanish service providers are extending their operations around the world. South of the Pyrenees, a variety of regulatory obstacles have made the sector’s growth slower than it has been in northern Europe, but that may be about to change.
On the surface, progress is advancing. Integrated facility services groups are now ready to offer a broad suite of services, but they have not yet convinced their customers to adopt and pay for them. Other factors such as the lack of flexibility in the labor market, with dozens of different collective agreements for the same sector, and a lack of mobility for multi-skilled employees among different service areas, as well an excessive preoccupation with short-term cost reduction, have kept price the main differentiator.
The UK, Denmark, and the Netherlands have all been pioneers in developing models of public/private collaboration, which have given GM companies a new set of opportunities. Meanwhile, regulators in France, Germany, and Ireland have given property owners in countries more leeway in the range of service that can be negotiated, giving facilities managers a wide range of possibilities as well.
But not in Spain.
In Spain, the sector still remains fragmented and dominated by small, not always efficiently-managed companies. Furthermore, in a number of sectors, cost reduction remains the only important issue for the facility manager. As a result, many still have little interest in the long-term maintenance of buildings, or the long-term efficiency gains that may be obtained by an integrated FM plan. Instead of focusing on the advantages of FM in encouraging sustainable maintenance, service buyers still want to focus on price.
But a major acceleration in the market may be on the way:
- The growing participation of real estate groups such as CBRE or JLL in the provision of facilities services. While in other regions of Europe this offer has been incorporated internally through acquisition of facility service operators (such as the purchases of Johnson Controls and Norland Managed Services by CBRE and Integral by JLL in the UK), in Spain, these groups have become white label “facility managers” who will seek contractors and auction the different services to attain the best price.
- The appearance in Spain of new specialists and services related to regulatory compliance. This is a sector where building security, occupation, certifications, and inspections keep getting increasingly strict. As air quality, energy efficiency, and fire prevention rules get tougher, compliance services will become an increasingly important specialty.
- A growing internationalization of suppliers, due in part to the demand by some multinational groups for an integrated and standard offer for all their premises, ideally from one multi-service supplier. While many groups’ efforts to offer services internationally have been achieved through organic growth or through alliances, cross-border acquisitions have played a significant role in the internationalization of FM suppliers, helping them to gain new clients, market know-how, and market share.
Until now, FM has not offered great returns for investors in Spain. Except for a few consolidation plays within the sector, financial investors and private equity firms have made very few deals. The most common have involved the sale of divisions of companies going through restructuring, such as the acquisitions of Imtech, Spie Technical Services (now Atrian).
In the short run, we expect deals will continue to be driven by a desire to lower cost or to offer a more integrated suite of services. A number of strategic buyers are likely to specialize in new areas such as compliance, building information modeling, or the management of a growing base of vacation or vacant apartments. At the same time, some service business owners will be trying to discard services that have not delivered previously anticipated results.
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