Addis Ababa University

School of Graduate Studies

Ethiopian Institute of Architecture Building construction and City Development (EiABC)
Program: Masters of Science in Construction Management

Review paper on Facility Management

Submitted to: Instructor Asregdew Kassa (Ph.D.)

Prepared by:
Demewez Asfaw
GSR/1338/11

February, 2020 G.C.

Addis Ababa, Ethiopia
Acknowledgments

My deepest gratitude goes to Instructor Asregdew Kassa (Ph.D.) for his kindness and for providing
me with enough time to review an in-depth literature regarding the topic.

i
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
Table of Contents
Acknowledgments............................................................................................................................ i
Abbreviations ................................................................................................................................. iv
1. Introduction ............................................................................................................................. 1
2. Real estate management .......................................................................................................... 1
3. Real property management ...................................................................................................... 1
4. Facilities management ............................................................................................................. 2
5. Corporate real estate ................................................................................................................ 2
6. Property management .............................................................................................................. 3
7. Capital asset management ....................................................................................................... 3
8. Asset management ................................................................................................................... 3
9. Similarities and differences ..................................................................................................... 4
9.1. Corporate Real Estate Management vs Facilities management ....................................... 4
9.2. Property management vs Real estate asset management ................................................. 4
9.3. Real property management vs real estate management ................................................... 4
9.4. Asset Management vs Property Management .................................................................. 4
9.5. Asset management vs Facilities Management ................................................................. 5
10. References ............................................................................................................................ 6

ii
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
List of tables

Table 1, Function and level of corporate real estate source:(Farahiyah Fadzil, 2011)……………2
Table 2, similarity and difference among CREM,PM and FM, Adopted from(Deyan and Frics,
2015)…………………………………………………………………………………………...….5

iii
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
Abbreviations

AM…………………………………………………………Asset Management
CREM ………………………………………….….………Corporate Real Estate Management
FM………………………………….…………………….. Facilities management
PM…………………………………………....…………….Property Management

iv
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
1. Introduction
In this paper the definitions, functions, objectives, services and processes of real estate
management, real property management, facilities management, corporate real estate, Property
management, capital asset management and asset management are critically analyzed and their
similarities and differences are highlighted.

2. Real estate management

Real estate management refers to the process of maximizing the value and return on investment of
a property(Alexi Karani, 2018). The author mentions that finding the highest and most consistent
sources of revenue, reducing expenditures and risk management are the concerns of real estate
asset management. “Real estate” is defined as “the land above and below the earth’s surface,
including all things that are permanently attached to it either natural or artificial” (Ariyawansa,
2016). The primary role of real estate management is to ensure facilities maintenance activities
are, collect rent, find renters when properties are vacant and handle dispossessions.
The objective of property management can be short term including activities which are daily tasks
garbage disposal, housekeeping or gardening as well as long term objective of policy making and
interpretation. It is also about programmed formulation, implementation and activation
(Wikipedia, 2017).
Real estate asset management includes tasks such as: finding lenders and working with them,
negotiating property agreements and leases on behalf of the property owner, providing due
diligence for the purchase or disposition of property, determining the value of the property and
ways to increase its value, marketing an asset for revenue growth etc. (Wikipedia, 2017).

According to (Kłosowski, 2018) the first phase in the real estate management process is planning
the strategies and goals of the real estate portfolio. The second phase is identifying the transaction
scenarios from the portfolio, the third phase is documenting the clauses, options, and terms for the
lease or purchase transactions by creating their records in the application. The fourth phase
includes maintaining contracts by sending and receiving notifications about upcoming dates, and
revising each contract through proposed changes and amendments. The final phase includes
managing the scheduled payments, one-time payments, pass-through payments, payment
adjustments, accounts payable, and accounts receivable (Kłosowski, 2018).

3. Real property management

Real property is the land and tangible features on the land and permanent improvements. “Real
property” is defined as the interests, benefits and rights inherent in the ownership of real
estates. Real property includes the surface, subsurface and airspace as well as the surface rights,
subsurface rights and airspace rights(Ariyawansa, 2016).

According to (Hartmann et al., 2007) in real estate property management there are four major
functions: These are marketing and financial, tenant and occupancy, facility and administration &
risk management responsibilities. It will maximize the return on investment of the property
through the efficient performance of these four functional areas of responsibility.

1
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
4. Facilities management
Facility Management is defined as: “Integration of processes within an organization to
provide and develop the agreed services to improve the effectiveness of the primary processes
of the organization.” (Keith Alexander, 2003). As defined by the author it is a process by which
an organization ensures that its buildings, systems and services support core operations and
processes as well as contribute to achieving its strategic objectives in changing conditions.
According to (Management, 2015) facilities management is responsible for planning, designing
and management of buildings as well as their systems, equipment and furniture to enhance an
organization's ability to compete successfully. It focuses resources on meeting user needs to
support the key role of people in organizations, and strives to continuously improve quality,
reduce risks and ensure value for money (Keith Alexander, 2003).
FM has two complimentary objectives reducing the risks and constraints that properties impose on
organizations and their workers and that of promoting the benefits that the property might
provide(Koleoso et al., 2015). Facility management tasks includes providing, maintaining and
developing a number of different services such as: property strategy, space management,
communications infrastructure, building maintenance, testing and inspections, building
administration, contract management, and EHS (environment, health, safety).
An ambience of quality through facility management ensure that core business processes are well
integrated and supported in an operational environment the workplace. The process is cyclical and
relates needs to a result that can be tested against user satisfaction with the service(Keith
Alexander, 2003).

5. Corporate real estate

Corporate real estate is the real property held or used by a business or organization for its own
operational purposes (G&K Management Berater, 2015). According to (Farahiyah Fadzil, 2011)
corporate real estate (CRE) comprises land and buildings owned or leased by companies not
primarily in the real estate business. It becomes a part of the overall investment portfolio that the
management must deal with in order to maximize shareholders wealth.
Level of corporate
Function
real estate
Task master Procure cost efficient facilities
Controller Standardize space needs to minimize facility occupancy costs
Deal maker Creative space-needs, problem solving and negotiation re specific assets
Entrepreneur Provide real estate services as a competitive service provider
Integrate workforce, workplace and technology trends into overall business
Business Strategist
strategy
Table 1, Function and level of corporate real estate source:(Farahiyah Fadzil, 2011)
According to (Hartmann et al., 2007) the main objective of CREM is the creation of a return from
real estate without distracting the focus from the firm’s core business. CREM works to maximize
the wealth of the shareholders, enhance employee productivity, create flexible environment to
allow the employee to work anytime, anywhere, reduce workplace costs, increase innovation,

2
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
increase employee satisfaction, profitability growth. The long term objective of the CREM process
is to ensure an increase of the economic efficiency of the entire organization(Kłosowski, 2018).
A major task of CREM is to identify strategic challenges focusing the company and to manage
their effects on corporate real estate. CREM identifies and evaluates the economic and technical
trends driving the firm’s real estate portfolio, improving the firm’s competitiveness (Kłosowski,
2018). Considering (Kłosowski, 2018) presentation ,four main sub-processes constituting the
corporate real estate management process can be identified. It includes the CRE planning sub
process, CRE organizing sub-process, implementation sub-process CRE control sub-process

6. Property management
Property management is the operation, control, maintenance, and oversight of real estate and
physical property (Wikipedia, 2017). It is stated that it can include residential, commercial, and
land real estate.
As mentioned in (Wikipedia, 2017) the main function of property management is to have higher
quality tenant, to increase the value of the investment through preventative maintenance, for
security and safety of property management as well as for maintenance management to create an
availability performance which is suitable for production demands in the organization.
According to (Wikipedia, 2017) PM is concerned with the smooth daily operation of property,
such as identifying tasks that need to be accomplished, hiring and supervising appropriate
personnel and taking care of day-to-day expenses. It has also long term objectives such as: making,
interpreting and carrying out policies for long-term success.

The main tasks of property management is to draft lease agreements, collect rent and other charges,
paying the ordinary operating costs of the property, enforcing property rules and regulations,
servicing eviction notices in case of non-payment, financial reporting, risk management(Alexi
Karani, 2018). The property management process includes: Setting the rent, marketing property,
tenant selection, tenancy agreements, rent collection, routine inspections, repairs and maintenance
and the end of the tenancy (Ray White Picton, 2020)

7. Capital asset management

According to (GFOA, 2018) capital assets can be defined as the assets that include properties such
as stocks, bonds, homes and investment, etc. The author defines capital asset as “anything which
one owns for investment motive” and states that money received from rent and from the selling of
the property is excluded.
According to (Wikipedia, 2017) capital assets management facilitates the control and custody of
institute property and permits the assignment of direct responsibility for custody and proper use of
specific capital assets.

8. Asset management
According to (OECD, 2001) a definition of asset management is: “A systematic process of
maintaining, upgrading and operating assets, providing tools to facilitate a more organized and
flexible approach to making the decisions necessary to achieve the users expectations”.
The main benefits of asset management as stated by (OECD, 2001) is for successful customer
service, regulatory compliances and the business viability. it includes better operational decisions,

3
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
improved emergency responses, greater ability to plan and pay for future repairs and replacements,
increased knowledge of the location of the assets, increased knowledge of what assets are critical
to the utility and which ones aren't, more efficient operation, better communication with customers,
rates based on sound operational information and increased acceptance of rates. Asset management
aims to achieve identifying waste, improving efficiency, performance, and utilization, facilitating
data collection and maximizing return on investment (Wikipedia, 2017).
Key processes of an effective asset management process include: Preparing an asset register, then
an inventory list of available assets, identify asset conditions and rating system, track asset
depreciation accurately at timely intervals, determine the value of assets and their replacement
cost, move away from reactive to predictive asset maintenance, focus more on change management
to ensure database integrity and eliminate paperwork and automate tasks like data collection, asset
reporting(USDT, FHM, 2009).

9. Similarities and differences

9.1. Corporate Real Estate Management vs Facilities management
CREM is perceived as strategic management of buildings and portfolios, whereas FM is perceived
as operational management of buildings-in-use (Suyker, 1996) cited in (van der Voordt, 2017).
CREM is perceived as managing of accommodating people by aligning asset management, cost
control and FM to general management. FM is perceived as management of buildings in use. Both
have a strong focus on the end user (van der Voordt, 2017). While FM is characterized by its focus
on non-core business services, workplaces and their management CREM has its foundation in the
integration of asset management, general management, facility management and cost control (van
der Voordt, 2017). Another difference is that CREM has its focus on real estate as a physical and
economical asset utilized by an organization, while FM has a wider service focus including
demands related to space and infrastructure as well as people and organizations (CEN, 2006a)
cited in (van der Voordt, 2017).
9.2. Property management vs Real estate asset management
According to (Alexi Karani, 2018) property management, unlike real estate asset management,
only focuses on overseeing the daily operations of the property. The roles of a property manager
are usually centered on oversights and making sure that certain tasks are done, and that the property
is up and running. It involves the systems, processes, and manpower needed to manage the life
cycle of the property, including procurement, accountability, control, responsibility, utilization,
maintenance, and disposition(Alexi Karani, 2018).
9.3. Real property management vs real estate management
Real property includes real estate, and it adds a bundle of rights. It grants property owners the
ability to use their property as they see fit. Real property includes the physical property of the
real estate, but it expands its definition to include a bundle of ownership and usage rights (TROY
SEGAL, 2020)

9.4. Asset Management vs Property Management

Property management and asset management are two different professions. Property management
focuses on the daily operations of managing a property. On the other hand, asset management is
solely concerned with the returns. It focuses on strategy to make operations more efficient and
streamlined.

4
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
9.5. Asset management vs Facilities Management
Asset management is achieved by the systematic management of all decision making processes
taken throughout the life of the asset (UKessays. 2018). Facilities Management is performed
during the operational phase of a buildings life cycle, which could extend over many decades. As
such, it represents a continuous process of service provision that provides support to the
owner/investors core business and is a service where improvement will be sought on a continuous
basis. Essentially, facilities management is associated with day to day running of an asset (Essays.
2018)

Similarities and differences

Objectives Users Skills Level of Activities Manag
Management ement
Manage all
Strategic real Property Strategic/ aspects of real Corporat
estate activities specialists tactical estate; e Real
Corporate ,buildings and Stakeholders with financial acquisition Estate
real estate portfolios and and Manager
management development,
background disposition

Property Tactical/ Day-to-day Property

Building specialist, operational, basis; Manager
Property Building occupies/ business limited administrative
management maintenance tenants administration strategic management,
and marketing
engineering and physical
management
Continuous and Facility
cost effective Building specialist, Strategic, Operational Facility
supply of occupies/ business tactical and management manager
Facilities optimized work tenants administration operational of buildings-
management environment to and in-use
improve engineering
productivity
Table 2, similarity and difference among CREM,PM and FM, Adopted from(Deyan and
Frics, 2015)

5
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.
10. References
Alexi Karani (2018) Real estate asset management vs property management, Mashvisor. doi:
10.1007/978-3-658-08784-5.
Ariyawansa, R. G. (2016) ‘Management of Real Estate : Principles of Real Estate Development
& Management of Real Estate : Principles of Real Estate Development &’, (January).
Deyan, B. and Frics, K. (2015) ‘Facility and Property Management – Find the Differences or the
Points of Convergence We must value the differences , but also be aware of similarities and then
learn from one another to excel in business .’, (33), pp. 1–6.
Farahiyah Fadzil, H. M. A. and A. A. B. (2011) ‘Corporate Real Estate Function : a Review’,
18th European Real Estate Society Conference ERES 2011, June 15 – 18th 2011. Eindhoven,
Netherland, pp. 1–12.
GFOA (2018) ‘Capital Asset Management’, pp. 2–4. Available at: https://www.gfoa.org/capital-
asset-management.
Hartmann, S. et al. (2007) ‘Realizing the value of Corporate Real Estate Management’, Zell and
Lurie Real Estate Center, 13, pp. 21–33.
Keith Alexander (2003) Facilities Management thery and practice. Taylor & Francis e-Library.
Kłosowski, S. (2018) ‘The concept of the process approach in corporate real estate management’,
Real Estate Management and Valuation, 26(4), pp. 5–11. doi: 10.2478/remav-2018-0031.
Koleoso, H. A. et al. (2015) ‘Comparison of the Nature and Strategic features of Facilities
Management and Other Building Support Practices in Lagos 1’.
Management, I. F. (2015) ‘Facility vs . Property Management – Spot the Difference’.
OECD (2001) ‘Asset Management for the Roads Sector’.
Ray White Picton (2020) The Property Management Process Setting the Rent. Available at:
https://raywhitepicton.com.au/propertymanagement/the-property-management-process.
TROY SEGAL (2020) Real Estate vs . Real Property : What ’ s the Difference ? Available at:
https://www.investopedia.com/ask/answers/100214/what-difference-between-real-estate-and-
real-property.asp.
USDT, FHM, O. (2009) ‘Asset Management Data Collection for Supporting Decision
Processes’.
van der Voordt, T. (2017) ‘Facilities management and corporate real estate management:
FM/CREM or FREM?’, Journal of Facilities Management, 15(3), pp. 244–261. doi:
10.1108/JFM-05-2016-0018.
UKEssays. November 2018. Property management, asset management and facilities
management. (Online). Available from: https://www.ukessays.com/essays/property/property-
management-asset-management-and-facilities-management.php?vref=1 (Accessed 18 February
2020).
Wikipedia (2017) Property Management, Property Management. doi: 10.4324/9781315245843.

6
Prepared by: Demewez Asfaw GSR/1338/11 February, 2020 G.C.