Market Trends of Saudi Arabia Facility Management Industry
In-house Facility Management to be the Fastest Growing Type of FM
- In-house facility management refers to a wide range of tasks and responsibilities related to maintaining and operating a company’s buildings, equipment, and infrastructure by a dedicated team of employees hired directly by the company instead of outsourcing to external vendors.
- Government initiatives such as Saudi Vision 2030 focus on diversifying the economy and infrastructure development, fueling the growth of construction projects requiring the need for facility management services. According to the Ministry of Finance, the budget allocation for housing, infrastructure, and transportation sectors in FY 2023 was reported to be around SAR 34 billion (USD 9.06 billion). Increasing investments in commercial buildings and mega-projects like NEOM are expected to drive demand for in-house facility management services to maintain and operate buildings, utilities, and other infrastructure needs.
- Government regulations in the healthcare and finance sector emphasize an increased focus on control over facilities, making in-house management a strategic consideration for compliance.
- Several factors, such as increased economic activity, consumer spending, and tourism activities in Saudi Arabia, have increased the occupancy of hotels and commercial spaces. This has, in turn, increased the need for better management of the facilities, thus driving the growth of the segment. In June 2023, the Minister of Tourism stated that the tourism sector’s contribution to Saudia Arabia’s GDP reached 4.45%, and the country will invest over USD 800 million in the upcoming ten years. This growth and plans of investment in the tourism sector are likely to benefit the facility management industry with demand for in-house facility management services.
- The growing number of companies looking to consolidate in the facility management market and rising investments in large-scale infrastructure projects are expected to drive the demand for in-house facility management services in the country. Saudi Arabia is home to many Muslim holy sites, resulting in many visitors and travelers each year and creating opportunities in the hospitality and construction industry.
- Overall, factors such as increased economic activity, consumer spending, and tourism activities have led to an increase in the occupancy of large residential layouts/projects, hotels, and commercial spaces, resulting in an increased need for better management of the facilities.
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Manufacturing and Industrial Industry is Expected to Witness Significant Growth
- The manufacturing and industrial sector covers major applications across the manufacturing industry, such as food and beverage, electronics, automotive, mining, and oil and gas industries. Saudi Arabia has one of the fastest-growing manufacturing industries in the region, owing to several projects by the government, low taxes, and business-friendly regulations favoring automation and the advancement of the manufacturing sector. Saudi Arabia aims to shift from its oil-based economy and is in talks with Jordan and Egypt for a USD 500 billion industrial zone powered by renewable energy. Known as NEOM, the zone will focus on industries such as energy and water, biotechnology, food, and advanced manufacturing, propelling the demand for facility management in the country.
- Many projects also drive advanced control systems and automation in infrastructure development. Focus on the manufacturing sector led by Industry 4.0 indicates the company's readiness to adopt new technologies to boost production output at a better quality, further augmenting the growth of the FM market in the country. For instance, in November 2023, the Vedanta group established a new copper unit in Saudi Arabia for SAR 1 million (USD 0.3 million) through its subsidiary Malco Energy Limited. The group announced in an exchange filing that Vedanta Copper International (VCI) Business Limited is the new entity's name.
- In October 2023, to establish an automobile manufacturing factory in Saudi Arabia, South Korean automaker Hyundai announced that it had teamed up with Saudi Arabia's Public Investment Fund (PIF). In accordance with this, PIF will own 70% of the company, and Hyundai will own 30%. An annual production capacity of roughly 50,000 automobiles is the goal of this facility's setup. Production at this factory is expected to start by 2025.
- Based on offering type, the manufacturing and industrial sector in Saudi Arabia is expected to witness increased demand for soft FM driven by the need for efficient facility management, workplace safety, and adherence to environmental regulations.
- Thus, the Saudi manufacturing and industrial facility management sector is characterized by a resilient, innovative, and adaptable environment. According to Tophotelprojects.com, in Saudi Arabia, in 2022, 24 out of 167 planned development of hotel projects were expected to be completed by the year end. 40 projects, which means 24% of total hotel projects, were due to be completed by 2025 at the earliest. The strategic significance of facility management services in preserving operational effectiveness, safety, and sustainability is expected to become even more apparent within this vital and dynamic industry as the nation continues on its trajectory of industrial growth.
