Facilities management (FM) for the uninitiated are one of those industries which you never pay heed to unless an issue pops up at your office. The FM industry essentially focuses on providing efficient and effective support services for tenants in a building (commercial real estate for the purposes of this article). Eyes dried out from the air-cond blowing in your face? Complain red-eyed to your FM provider; Office feels like a club? Inform your FM provider of the loose lighting (or not); Spiders running around the office? Work with your FM provider to find a new office while you burn the current one down.

In all seriousness, for many, FM as it is now is similar to insurance in that you pay for it in the hopes that you would never have to deal with it until there is a need for renewal. Tenants in a building just want to have the day-to-day operations run without any hiccups so that they can focus on their core business. The FM service industry have popped-up in order to relief companies of this responsibility. Companies are willing to pay the premium for the convenience and value which service providers present. In many cases, having a service provider might actually be cheaper than hiring a full headcount to manage all their service contracts while also minimizing their liabilities in this case.

At its core, service providers play a market-matching role in the FM industry. Service providers have strong established networks with vendors as they are able to leverage their economies of scale. Vendors are willing to quote lower prices to service providers as they bring in more business without the vendor having to source for additional clients. Although this is essentially a middleman role which is hated by decentralization purists, the goal of introducing blockchain here is not to replace the middleman but rather streamline the existing processes. Moreover, given the heterogeneity of real estate (RE), there will always be a demand for such services. One benefit that might be realized through blockchain adoption is that barriers to entry will be lowered therefore providing the industry with more options pushing the focus away from a pure cost basis.

For the large majority of companies, FM is just another major cost of doing business. It is a long term commitment to a significant cost with minimal room for negotiation once agreed. Additionally, FM costs will usually be among the top spends for such companies. When coupled with the fact that the complexity of FM is all but flattened into a single number in their financial models, clients are extremely price sensitive. This focus on pricing often overshadows other considerations and has resulted in a race to the bottom for many service providers. What’s more is that the industry faces competition from the rise of co-working which provides significant flexibility with regards to costing and contracts. Moreover, they will only have to deal one provider in this case instead of managing their leases and service contracts separately.

The good news is that the CRE industry is slowly waking up to the fact that FM has the ability to actually drive returns in their core businesses via increases in employee productivity. You would just have to look at the multi-hectare campuses which many tech companies have built in the past decade to see this trend. The rise of such campuses has also resulted in employees demanding more of their employers when it comes to their workplace. The advantage which FM providers have is that they can leverage their experience in the space to aid their clients in coming up with a FM model that suits the client’s strategy. This is arguably the most valuable service which the FM industry should provide and blockchain technology will enable the industry to focus on just that.