Summer is just around the corner and with high ambient temperatures across the region, heating, ventilation, and air conditioning (HVAC) systems spell big business for suppliers and contractors alike. For the Middle East, HVAC systems are more of a necessity than a luxury, mainly due to the extreme climatic conditions. With many mega construction projects on the anvil and a growing and affluent population, the demand for such systems is set to grow.
The Middle East constitutes one of the largest markets for heating, ventilation, and air conditioning in the world. The HVAC market in the Gulf Cooperation Council (GCC) region is likely to grow at a compounded annual growth rate (CAGR) of 7.4 percent until 2016, according to forecasts from analysts. A recent report by Infiniti Research says that one of the main factors contributing to this market growth is the increasing number of construction activities in the region across the key sectors of commercial, residential, hospitality and retail. The HVAC market in the GCC has also been witnessing an increasing use of energy efficient systems. While HVAC has always been an integral part of any construction, over time there have been a number of other factors that have led to further strengthening the popularity of the region’s HVAC sector. In a recent roundtable discussion organized by FM today, the experts in the sector came together and shared the growth potential of the HVAC market in the region while touching upon the present day challenges and trends.
There are several demand drivers boosting the HVAC market in the Middle East. There is more activity in the projects business now especially after the announcement of the Expo 2020 in the UAE. Then there is FIFA World Cup 2022, which is fuelling the expectations in Qatar.
Looking back at the same industry for the last five years, Yousef Ali BinZayed, General Manager, Business Development and Marketing, Al-Futtaim Engineering and Technologies, expressed that he has seen the market change. “We see a lot of fluctuations taking place. There are many ambitious projects leading up to the events like the World Cup 2022 in Qatar and Expo 2020 in UAE, we have already started seeing the growth with the kind of tenders coming up in the market,” he added.
For Girish Reddy, Manager-Service & Parts, Daikin Air Conditioning, the main change has been in the government regulations and standards. “The last few years we have seen many regulations come into force that has increased the standards in the HVAC market. The quality of lifestyle and initiatives like maintaining energy efficient levels on AC products to star rating has also set benchmarks for the manufacturer to maintain the standards through their products. It’s because of these regulations and new standards that new players who plan to enter the market know what they need to abide by,” he said.
Speaking from the operations perspective, Bart Holsters, Operations Manager, Cofely Besix Facility Management, says that the market has focused a lot more on the energy perspective. “People are getting aware of energy and recognizing the benefits by consciously monitoring the energy levels as well. With emerging new technologies, there is an impact on the reduction of energy consumption as well,” he explained.
Another factor that has driven the market is rising cost. Evie Boustantzi, General Manager, Al Shirawi Facilities Management, says that the industry needs to learn to find the right balance between the service level expectations and cost of offering those. “With the increasing cost factor, alongside the increasing demand for higher quality and smarter service delivery, facilities management service providers need to keep evolving their approach and building up their resilience,” she added.
Evolving regulations and maintaining standards
Boustantzi pointed out that cost is both a market driver and a challenge in the industry, to which Faisal Zaidi, Marketing Manager, Trox Middle East agreed. With most of the projects handled by Trox being from the government or projects that are significant to Dubai, the properties, he says, automatically focus on quality and return on investments. “However, things still need to change. For example, in residential areas not everyone looks at just quality though they charge a certain fee for HVAC; few buildings still compromise on the quality to cut costs and that affects the standards in the market,” he added.
BinZayed, on the other hand, believes that there has been a change in people’s attitude towards the cost. He says that people in the industry are realizing that in order to get the best technology and save energy they have to invest. “Things are changing and people are realizing that once you are ready to invest in the right technology you automatically get quality results and the right solutions in return,” he said, while adding, “When you look at the some of the old buildings out here especially the projects from the recession, they were trying to just finish off the job. So in the long run, they faced many problems in regards to HVAC, water, electricity etc. But rectifying those projects now can be a challenge. That attitude is changing now. I have seen many clients who, when it comes to HVAC, are not necessarily going for the cheapest option; they want quality work as they are aware that it does have a long-term effect on the building.”
In order to not let the quality of standards go down in the industry, government regulations are essential. It was a sentiment that the entire group agreed upon. Many believed that by constantly changing the rules or evolving the regulations and keeping them up to date also keeps the standards on par and suitable to the environment. Giving an example, Reddy said, “We were catering to a hotel where the regulation about smoking areas in the restaurants should comprise 100 per cent fresh air came out and then slowly the regulation evolved and it applied to every area of the hotel and it automatically had a positive impact on the people and the environment. And the regulations also indirectly put pressure on the manufacturers also to deliver according to the municipal norms.”
Boustantzi says that the constant evolution of regulations also keeps those in the market on their toes. “The market is definitely maturing at a fast pace and it is becoming more challenging but at the same time opens up unique opportunities. While things are becoming more user-friendly and convenient, at the same time adapting to changes keeps us on our toes,” she added.
When it comes to newer players entering the market, the panelists felt that the market is open to new people but there are few things that keep the established ones apart. And the main factor is the increasing standard itself. Said Reddy, “The increasing standard is what keeps the established companies from the rest. Those who want quality work that is up to date with the standards are willing to invest in established companies. Most companies in fact, who also have an FM company managing their facility, also insist that the HVAC and elevators are directly dealt with and maintained by the manufacturers themselves. That way no matter what the issue is the manufacturer is liable for it. And the established companies are more equipped to deal with the situation. It’s regulations like these that not only add value to the brand but also filters out the smaller players.”
Zaidi expressed that there should be more standards introduced that cater to the region specifically. “At TROX we have R&D for each and every area relating to air. What would help is specific standards being set by a regulatory authority, it would help companies in manufacturing products that are suitable and based on the local requirements,” he added.
Reddy agreed and added that region-specific standards are coming through as well. “For example, the specifications for a project in Kuwait. Their standards and specifications are completely different from other GCC countries. And now most international players are introducing a range specifically for this market. The positive thing about the standards set in the region is that while they may be cut-copy from other countries, we must keep in mind that they do evolve over time and see what works, review them and change them accordingly,” added Reddy.
Ready for Expo 2020
In the run up to the Expo, transportation and infrastructure will be the drivers for growth in the HVAC segment, and the panel believes that the industry is more than ready to handle the demand. At the same time, BinZayed pointed out that one has to keep in mind the kind of impact it will have. “The demand is going to increase, but I believe the industry is ready to take it on. We also have to keep in mind the kind of impact it will have on the environment, the space it utilizes, etc. However, having said that the industry is now implementing VRN systems that not only reduces the use of energy but also utilizes less space, cuts out on the sound levels etc.,” he added.
Reddy also felt that the market has changed since the announcement. “There was initial resistance, especially with the dropping oil prices but now big projects are coming through. We ourselves have got three big projects. But in order to be prepared, there needs to be clarity on the number of hotels, buildings, etc. that are expected as this will lead to inflow of population as well. And we need to keep in mind the energy consumption and water consumption that will take place leading to the Expo. So we need to look into conserving resources as well,” he added. While the demand is growing in the sector, Boustantzi averred that there will soon be a lack of skilled technicians in the market. “Now with the kind of growth we are experiencing there will be a need for technicians with more sophisticated knowledge while most of them have standard MEP knowledge. As the market turns toward new technology and smart systems, systematic training and development need to be on the agenda so that we handle the growing demand,” she added. Holsters agreed that training is an important aspect in the HVAC sector.
“Efficient and integrated training has to be provided at project handover stage as it enables the person to handle the operations while taking over the building and use the SMART technology in a performant way,” he added. One of the goals for Trox is improving indoor air quality through its Xsmart Air initiative. Zaidi explained that with individuals in the region spending more than 90 percent of their time indoors, it’s about time people started focusing on the quality of indoor air. “Through our initiative, we are planning to make individuals and the government aware of the problems that they can face due to the quality of air in their indoor environment.
When you see some of the products in the market, they are researched and manufactured to the standards set in their countries of origin. However our goal from the indoor air quality perspective is to analyse the area and then design our products centered around the climate we are catering to and base our solutions to those local requirements’. The standards of indoor air quality will increase only if people become more conscious and aware of its impact on their health and wellbeing,” said Zaidi. “Air is one of the key elements of life. Nobody would be willing to drink a cup of soiled water but have you ever considered the purity of the air you are breathing indoors? We need to be more conscious about the air we breathe.”
Trends and technology
It is said that the upcoming smart building projects in the Middle East will significantly drive the demand for stateof- the-art HVAC systems. Especially with the smart technologies taking over, Holsters said that it is becoming easier to keep track of status and energy performance of a building. Reddy too felt that now with new technology entering the market, things are becoming more user-friendly and making it less cumbersome for service. “But you don’t want to sell something that is too technical if you don’t have the manpower to support it,” he explained.
When it comes to the service industry, a trend Boustantzi observed is that there is a drive towards more efficiency and lean operations throughout the business. “We as service providers need to be more efficient, use resources and systems smarter than ever before. Through this process we need to make sure that the high quality standard is maintained. Continuous training, on technical and soft skills is a key focus and so is our continuous improvement framework. There is a drive to introduce new innovations and we are developing new systems/applications that enable us to create long term value for our clients. Long term value for both sides is definitely the way forward,” she added.
While there are new innovations coming up with less service intervention at the field and with a focus on reducing manpower, Holsters summed up by saying, “No matter what technology is introduced, the MEP job itself will still not change as you still need people to handle the maintenance of the HVAC equipment, inclusive of the SMART technology. The reduction of manpower will lay within the ability to apply Condition Based Maintenance strategy rather than the Scheduled Maintenance Strategy.”