The management market in our country is very young, dating back to 1993. Since that time we have seen tremendous steps forward, but there are still plenty of niches left to fill. Specialists, at any rate, are certain: this situation will change soon. In time the market for Russian management companies will stabilize and saturate.

A Life of Study

It’s by no means a secret that perhaps the freest of niches on the property market in general is the provision of high quality services. This is not just about the management companies – quality constructors are also having trouble getting on their feet. These troubles are linked. “We have a tremendous deficit of professionals and a low level of consumer and producer culture,” says Denis Gaba, general director of Gaba Estate. “These niches are probably going to be flapping open for a long time.” Marina Velikoretskaya, general director of Colliers International FM, agrees that, “Of course, there are services which are not provided at the Western level, but don’t forget: the management sphere is a very young business. It’s only fourteen years old, and we’ve already managed to do a great deal.”

The deficit of professionals ought to be stimulating the market toward the creation of specialized study programs. But the big “ought to” isn’t being materialized somehow. “This niche is depressingly empty,” asserts Gaba. “Today everybody is trying to solve the personnel problem on their own. But this is not so effective. There is still no general system of human resource development standards.”

Without question, this situation didn’t come out of nowhere, and specialists are confident that today we are reaping the fruit sown in the 90s. “Where did all those young people run off to?” asks Marina Velikoretskay. “Everybody wanted to be a lawyer, an economist, or a market analyst. We lost a whole layer of important professionals. There just aren’t any engineers, planners, or architects – no young, professional specialists with the proper understanding of new trends.”

Denis Gaba is confident that those who find the recipe for training young management specialists for small and mid-sized businesses is sure to be in the black for a while. And this isn’t necessary the most difficult thing to pull off. “At any rate, there is very specific experience,” according to Gaba. “In the west there are specialized institutes where a system of management training is in place. These sorts of businesses could do wonders in the personnel world.”

Insufficient attention is being given at the present time, according to market experts, to the questions of training, seminars, and the qualifications of personnel. This area is extremely important for the creation of a management service market and requires more intensive development.

Facility Management

Today, according to Boris Avksentiev, the managing director of Cushman & Wakefield Stiles & Riabokbylko Management, the management of everyday office functions is a far from perfected process, including the organization of call centers, the use and exploitation of equipment, IT services, the organization of business trips, and relations with tenants.

“This kind of services exist on the management market, but you wouldn’t call them high quality and you wouldn’t say that they meet the demands of the clients,” says Boris Avksentiev. “The fact is that facility management services in our country were not in demand for a very long time,” he adds. “Large management companies worked very carefully in Russia and opened a maximum of one or two offices. This is just not the volume that might stimulate serious interest in Facility Management services. Now the situation has changed. The country’s economy is growing and many companies are expanding their presence here, opening offices in Moscow and even in the regions. Because the management of these offices is getting more expensive, the people who want to concentrate in their own basic business are approaching the specialists themselves.”

Facility management services to a great degree are essential for Western corporations, says Boris Avksentiev. “They are used to operating according to a certain schematic in the West. Russian companies even now prefer to operate on their own terms and with their own resources. This is connected first of all to the reluctance to show the insides of your business to the world.”

Budget Organization

There is an enormous layer of real estate which has expanded unfettered by professional management of any kind. We are speaking about schools, hospitals, polyclinics and many other state facilities. The reason is quite simple. “These organizations just don’t have the money necessary to hire a management company,” says Boris Avksentiev. “The management of these sorts of organizations, as a rule, is the sphere of filial groups set up by the city property services or by the companies created by the owners for a specified property.”

It’s worth pointing out that the financing being provided to these kinds of companies is growing. But this investment doesn’t always yield results. “Our company (one of the first to start managing properties in this sphere) has participated many times in the operation of these structures,” says Denis Gaba. “It’s not easy. The problem is not just the financing. There’s also an absence of integrated approach and even an elementary system of monitoring. They often buy up unnecessary equipment or double the utilities systems, and have no incentive to plan their work for the long-term.”

Today, many specialists are certain that the problems connected with asset management agree that you can’t leave these problems to solve themselves, even in state-financed organizations. “Every year we are seeing the risk of technical difficulties rising. Many properties are crammed full of equipment left over from the Soviet Union,” explains Denis Gaba. “Management is going to move very slowly into the management of that sphere.” We point out that the situation is made more complicated by the absence of unified standards of equipping these sorts of properties.

Far from everything, however, is so bleak in the state-financed projects. “One of our clients, the Institute for Space Research, has a unique approach toward property management for a state-financed organization,” says Denis Gaba. “They worked out a system for managing property on a base of specialized variants for programming provision.” Relations with tenants, according to Gaba, from the very beginning were built on a legal basis for the state-financed organizations, and so the closed box became an extremely important option. Though this, of course, is more of an exception than a rule. “They naturally had no corrupt element,” added Denis Gaba.

Management in the production real estate sphere is quite a bit more problematic. Management companies, specializing in the given real estate segment are few. “Though in the west industrial management services are a lucrative business which calls for specialized, niche companies,” says Marina Velikoretskaya, “We simply haven’t seen much of it here.”

Trouble with Utilities

According to Denis Gaba, one of the weakest areas in the Russian management company market is the implementation of high technology. “The pace of construction is quickening and developers are going after more complicated properties, on which there is a real need for the most modern engineering systems, while there just aren’t enough specialists to go around,” agrees Marina Velikoretskaya. “This lack is being felt especially sharply just now. There aren’t enough professionals working with the nuances of skyscraper management, for example.” The endlessly sophisticated coordination efforts also can provide bureaucratic barriers to normal market development, rather than helping to bring about progress. Marina Velikoretskaya assumes that this situation influences the quality of projects in the most direct way: “Investors and developers have trouble fighting their way out of their original plans sometimes.”

Often this leads the management companies or proprietors to keep a cadre of engineers on the property. “This situation, of course, is not ordinary,” says Velikoretskaya. “But it can be necessary. Somebody has to fix the mistakes that were made during construction. In the West there may not be a need for staff engineering services, since the Building Management System there can minimize the number of necessary personnel. There is no reason to fear that the building does not meet the proper documentation, and so on.”

Specialists admit that even the most serious development companies approach the management question without the necessary attention. “Some years ago an Israeli company that had creating a unique programming provision which allowed them to manage tremendous volumes of property, was trying to enter the Russian market,” explained Denis Gaba. “Though they were already working in the USA, Europe, and Asia, nobody was interested in their services here. The market just wasn’t ready. Developers couldn’t see the economic need.”

The big owners of property abroad have long ago understood that their work simply can’t move forward without an integrated system of management to control what happens on their millions of square meters. Many large holdings are scattered around the world across seven continents and, in some cases, may have to deal with such complicated engineering nightmares as airports and hospitals. “Many large developers have to create their own IT departments,” says Denis Gaba. “With their help they can operate their properties from any point in the world. Everything must be operated in detail, right down to the intensity of the lighting arrangements in their offices.”

The products developed in varying modules allow more than just the assemblage of visual data. With their help business processes can be modulated and the financial effectiveness of this or that decision can be judged up front. Interestingly, in the USA and Israel it is the state that initiated the creation of this technology. “The Israeli army was required to use detailed programming provisions by the Ministry of Finances. In this way, the opportunity to use non-transparent schemes for budget specifications was a reality,” explained Denis Gaba. “In the future this strategy will be used by commercial property management companies as well. This will prevent things from turning out as they did with us a few years ago on Dubrovka. In these extreme situations, it helps us to look for plans and emergency exits and so on.” It is worth pointing out that we in our own time had a lot of this sort of technology sorted out for us by the KGB.

Experts agree that soon there will be Russian companies working according to these effective schemes. When the area of a property is especially great, the financing given to programming provisions has to be taken care of with special attention. And when unexpected costs begin to mount up, modern technology can come in to lend a helping hand. “In general the management market is developing as a cost savings mechanism for developers,” says Denis Gaba. “In 2009 there will be an excellent stimulus for development, when the tax on property goes up. Marina Velikoretskaya also supposes that we will get ourselves on the professional track only when the property market is finished with its formulation, and we will see the tenant’s market once again.”