Industry Insights | Coordinating Enterprise Resources to Meet Personalized Needs: IFM Will Be the Next Home for the Property Sector?

Integrated Facility Management (IFM) refers to the service provided by integrating facility management work into a unified team, which can be applied in engineering to simplify operational processes and improve the efficiency of management tasks.

According to the definition by the International Facility Management Association (IFMA), IFM is a multidisciplinary profession that ensures the realization of built environmental engineering through the integration of people, space, processes, and technology. It is an organizational function aimed at improving the working environment of enterprises and enhancing core business productivity.

IFM provides customized services based on customer needs to address different pain points of customers across various industries. The clients of IFM mainly concentrate in eight sectors: automotive & new energy, internet information industry, retail business, semiconductors, industrial manufacturing, healthcare, education, and government public construction.

For the clients served, IFM's one-stop solution can improve enterprise production efficiency, save customers' time and effort on screening and purchasing, reduce operating costs. At the same time, it can improve the enterprise's production and working environment, enhance the work experience, and increase employee satisfaction.

On the other hand, for enterprises providing IFM solutions, it enables them to expand their business space, enhance customer stickiness, and boost customer loyalty. This deep 'bundle' model can further improve the competitiveness of enterprises and promote long-term cooperation between them and their customers.

Compared to traditional property management companies, IFM requires its team to have higher capabilities and a larger scale. In addition to basic property management skills, it also demands professional talent resources, strategic global perspectives, strong resource integration capabilities, and leading comprehensive facility management theories. IFM is gradually transforming from a supplier to a strategic corporate partner, providing customers with all-around services. Its business scope covers planning consulting, investment promotion and property services, operation and maintenance, asset management, and technology services.

Source: Analysis by Frost & Sullivan

From the perspective of industry evolution, the property management industry has developed from asset management (AM) to property management (PM). It mainly serves the management of public areas, focusing on the daily operation of assets, providing timely services to tenants, ensuring the continuous income and cash flow of properties. It involves the scientific management of entire property assets. Subsequently, the business gradually expanded to facility management (FM), covering various aspects such as work environment management, facility equipment operation and maintenance. It effectively plans, arranges, and maintains the human living environment using the latest technology, organically combining people's workplaces and tasks.

Integrated Facility Management (IFM) goes a step further than Facility Management (FM), integrating diverse content from both the supply and demand sides. In the 21st century, under the backdrop of globalization, with the increase in multinational companies and organizations, property owners tend to outsource non-core businesses at the national level to reduce transaction costs. This has also prompted facility management companies to continuously expand their business scope, covering more geographical areas and service content, from single real estate management to the outsourcing of entire business processes, up to current strategic planning levels of outsourcing services.

Source: Analysis by Frost & Sullivan

The development of facility management in our country started relatively late, with FM services beginning in the 1990s. As a large number of foreign-funded enterprises and institutions entered the domestic market, the demand for high-end facility management services continued to expand. Foreign professional facility management organizations have entered the market one after another. Among them, the five major foreign-funded real estate companies (CBRE, JLL, Deloitte, KPMG, and Savills) are representative of the earliest batch of companies that began to transition into the IFM field in 2020. Their clients are mainly the top ten high-tech unicorn enterprises in China, such as Huawei, GE, Alibaba, etc. Today, real estate companies represented by local leading enterprises like Vanke and Greentown, various traditional residential property management companies, equipment management professional companies, and other capital new forces (such as Longfor, GSN Janssen, and Jiaxin Liheng), each with their own unique services, have entered the IFM field. They are learning while practicing, hoping to gain a foothold in the vast IFM market.

Source: Analysis by Frost & Sullivan

According to the National Bureau of Statistics, China's urbanization rate increased from 60.2% in 2017 to 65.2% in 2022. The concentration of the population in urban areas has increased the demand for urban spatial environment experiences, including office spaces such as parks and office buildings. In order to provide better work and urban spatial environment experiences, IFM service providers are committed to continuously expanding and optimizing their service capabilities, thereby promoting the development of the IFM service market.

Due to the fragmented and diversified needs for enterprise facility management, if one seeks service providers of various types, the communication costs with each provider can be high, leading to increased operational costs for enterprises. On the contrary, entrusting IFM service providers can effectively reduce operational costs while saving on timeliness and communication expenses. In addition, through IFM services such as energy conservation management, enterprises can further save on operational expenses. Therefore, the demand for enterprises to reduce operational costs will drive the development of China's IFM service market.

IFM services provide a one-stop solution, integrating resources to manage the entire enterprise and all facilities under a single team's supervision. This extends from single services to outsourcing across entire business processes, even to strategic planning levels. As a result, more and more experienced IFM service providers continuously enhance their resource integration capabilities, bringing higher benefits to the entire market.

As a highly integrated business, IFM services can be carried out through various software and auxiliary tool devices, enabling better management and supervision. For instance, with the help of IoT devices and other digital applications, IFM service providers can obtain real-time updates and create dynamic cleaning schedules, making cleaning services more efficient. Therefore, the application of new technologies such as IoT can improve service efficiency by reducing unnecessary work for personnel.

In 2022, the market scale of China's IFM (Intelligent Financial Management) market reached approximately 338.3 billion yuan. By 2027, the market scale of China's IFM will grow rapidly to 974.9 billion yuan, with an annual compound growth rate of about 23.6% from 2022 to 2027. It is estimated that by 2027, the potential IFM market (TAM market) in China will reach approximately 7.0 trillion yuan, with the overall Chinese IFM market approaching 8.0 trillion yuan.

Source: Analysis by Frost & Sullivan

The development of the IFM market in China is not yet mature and is still in its blue ocean phase. The penetration rate of IFM services internationally is about 50%, while in the Chinese market it is currently only 8%, leaving a 42% development gap compared to the international average. IFM entered the domestic market relatively late, with a small market base, but its growth rate has exceeded the global average by two times, indicating tremendous potential for the IFM market. In the future, as market acceptance of IFM continues to increase, the scale of the Chinese IFM market will grow rapidly. With the deepening of urbanization, IFM is expected to become the next value growth point in the property management industry, focusing on cost reduction and efficiency improvement to enhance corporate experience.

The importance of facility management fluctuates with macroeconomic growth and contraction, showing a certain degree of correlation. In the coming period, facility management will exhibit the following three development trends:

IFM's business is to outsource facility management services to clients, requiring a deep understanding of the strategic value of facility management in the eyes of clients. In IFM's business, clients have multiple concerns. Therefore, in addition to continuously improving customer satisfaction and ensuring the long-term stable operation of facilities and equipment, helping property owners increase rental returns and achieve asset preservation and appreciation, IFM should upgrade from a service relationship to a strategic partnership with clients, integrating space management, asset management, and human resource management into property services to provide clients with one-stop service solutions.

Change management includes business changes, building expansions, continuous demands for efficiency improvement, and regular changes. Change is inevitable, and with the acceleration of digitalization and technological revolutions, more complex requirements are placed on integrated facility management. Programmatic changes within core organizational operations, policy and legal changes, and operational environment changes require facility management to respond quickly. Facility management professionals need to maintain close contact with facility clients, detect changes as early as possible, and activate decision-making systems. They should provide clients with plans and strategies to save time and costs during organizational operations, relocation, and space changes (additions or expansions), while maintaining the mobility of buildings and organizational flexibility.

The application of digital facility management is a future trend. Its role is to improve operational efficiency, increase unit output, and re-engineer management processes, thereby further optimizing service plans. The application of digitalization not only enhances the operational efficiency of IFM companies but also optimizes service plans. In specific applications, Wulianghang has used digital means to intelligently monitor and analyze building energy consumption data, providing practical assistance for commercial buildings to save energy, reduce carbon emissions, lower costs, and enhance space value, while also creating greater 'green value'.