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Expenditure on operation and maintenance service and rental income of commercial buildings

Expenditure on operation and maintenance service and rental income of commercial buildings Purpose – The recession in the late 1990s in Hong Kong has triggered many commercial building owners to cut operation and maintenance (O&M) cost via outsourcing. The purpose of this paper is to investigate the dominant expenditure on O&M service and examine the relation between extent of outsourcing and rental income of the buildings. Design/methodology/approach – Experienced O&M practitioners were interviewed to collect both quantitative and qualitative data of the commercial buildings they looked after. The in‐house and outsourced O&M costs, air‐conditioning energy costs, rental incomes, and management and air‐conditioning fees for the buildings were analysed. Findings – The total air‐conditioning O&M cost is the principal cost item, with the energy cost being the dominant element. The analysis reveals that the extent of outsourcing bore little correlation with the air‐conditioning O&M cost and the rental income. Research limitations/implications – Further work may take a similar approach to identify the extent and effect of outsourcing other kinds of services that underpin the core business of an organisation. Practical implications – Varying the extent of outsourcing O&M service was found to be unpromising for enhancing rental performance or cutting O&M expenditure. This is an important point that the building managers should address when considering whether to go for outsourcing. Originality/value – The findings imply that in the building O&M service industry, it would be more economical to outsource or undertake in‐house the vast majority of O&M work. The focus for cost minimization should be to improve building energy performance rather than reducing labour resources through outsourcing. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Facilities Emerald Publishing

Expenditure on operation and maintenance service and rental income of commercial buildings

Joseph Lai; Francis Yik; Phil Jones
Facilities , Volume 26 (5/6): 24 – Apr 4, 2008
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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0263-2772
DOI
10.1108/02632770810865014
Publisher site
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Abstract

Purpose – The recession in the late 1990s in Hong Kong has triggered many commercial building owners to cut operation and maintenance (O&M) cost via outsourcing. The purpose of this paper is to investigate the dominant expenditure on O&M service and examine the relation between extent of outsourcing and rental income of the buildings. Design/methodology/approach – Experienced O&M practitioners were interviewed to collect both quantitative and qualitative data of the commercial buildings they looked after. The in‐house and outsourced O&M costs, air‐conditioning energy costs, rental incomes, and management and air‐conditioning fees for the buildings were analysed. Findings – The total air‐conditioning O&M cost is the principal cost item, with the energy cost being the dominant element. The analysis reveals that the extent of outsourcing bore little correlation with the air‐conditioning O&M cost and the rental income. Research limitations/implications – Further work may take a similar approach to identify the extent and effect of outsourcing other kinds of services that underpin the core business of an organisation. Practical implications – Varying the extent of outsourcing O&M service was found to be unpromising for enhancing rental performance or cutting O&M expenditure. This is an important point that the building managers should address when considering whether to go for outsourcing. Originality/value – The findings imply that in the building O&M service industry, it would be more economical to outsource or undertake in‐house the vast majority of O&M work. The focus for cost minimization should be to improve building energy performance rather than reducing labour resources through outsourcing.

Journal

Facilities – Emerald Publishing

Published: Apr 4, 2008

Keywords: Property; Operating costs; Maintenance; Outsourcing; Hong Kong

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