Cleaning companies wipe the floor with a EUR 35 million market

Newsroom 15/10/2007 | 15:34

A clean desk each morning, hot coffee in the kitchen, no snow in front of the entrance after a winter storm, and no dust on the staircases. These may ostensibly have nothing to do with real estate and constructions because they all come after a developer's work is done and tenants have moved in. Add a clean building at the end of construction works and the mix goes more to the roots of the business. It's office building cleaning – a little seen trade as most of the cleaning happens even before the first employee reaches their desk. But it is a business on the verge of a boom, say market players.
Given the large number of office buildings in Bucharest and especially the number of buildings to come, the office cleaning business is expected to see increases due to the high demand.

Acquisitions expected on a EUR 35 million market
Office cleaning is only a part of the building cleaning business, but for the moment everyone is focused on it due to the larger number of office buildings compared to the number of delivered malls or residential projects. This is where the growth will be, say pundits, as many mall projects have been announced. Residential cleaning is already starting to pick up in this field, as some of the announced projects have already been delivered.
Cleaning companies active on the local market make a EUR 35 million market, believes Ben Martens, executive director of the Contract Cleaning Company.
There are around 20 companies doing office cleaning, says Martens, but only four or five quality ones, in his opinion. “These five companies together make a EUR 15 to 20 million market,” says Martens.
Most of the players on the market are local companies, like Cristal Team, which cleans Bucuresti Mall and Plaza Romania shopping centers. Some have foreign investment, such as the Contract Cleaning Company, which was set up in 2005 under the Real Estate Service Group umbrella, a company also active in Hungary.
The only big international name is ISS, a Danish company which has made several local acquisitions to strengthen its position in Romania. Last year it acquired Perfect Clean and Servicii de Intretinere Attensam. Perfect Clean had a EUR 1 million yearly turnover and 200 employees upon acquisition.
Such acquisitions are likely to happen in the future, since the market is made up mostly of local players and this niche is turning out to be profitable. ISS's profit margins in Central and Eastern Europe are the highest in all the regions in which the company is active, reaching seven percent.
In Romania, cleaning activity doesn't offer such big margins, so one needs volume to make a profitable business out of it, believes Martens. The company he runs has 150 contracts for maintenance cleaning, of which 30 have some other services added, while 15 require full service.
Usually, such companies offer more than cleaning services, adding technical maintenance, gardening, special cleaning services and even snow removal to get more of the pie. Some are even offering catering services, but market players believe it is too soon for such services, which are likely to be in demand and turn profitable in five years' time.

After-construction cleaning brings the most profit
In the realm of corporate cleaning, most people automatically see the image of guys suspended from climbing equipment washing windows on the outside of the block. This is part of the business known as special cleaning services, but out of this segment post-construction cleaning gets the most demand. “In Romania, this segment is even larger than in other countries, due to the large number of new constructions,” says Martens. His company is now working on post-construction cleaning for the Radisson hotel, soon to open in Bucharest.
Cleaning companies are usually contracted by construction companies to do the post-construction tidy up, and sometimes by the furniture companies which install the furniture in their clients' offices. “We are working with companies such as Strabag, Summa Romania and Hebberger to do the post-construction cleaning for the projects they have in the works,” says Martens.
A post-construction cleaning contract could be worth between EUR 5,000 and 30,000, says the director, but the sums vary depending on what the other contractors have left at the site. Some companies prefer to use price lists with different prices for cleaning various construction materials left on site and evaluate the cost in stages.
Others have a different approach, based on the time spent on the site cleaning it. “A one-week cleaning project, like an after construction project, may cost RON 20,000 [EUR 5,800],” says Razvan Grigore, general manager of Cristal Team cleaning company.
While one-third of Marten's business comes from post-construction cleaning, for Cristal Team the bulk of the cashing comes from the contracts signed with Anchor Group for the two malls the company runs in Bucharest. The rest is covered, in Cristal Team's case, by apartment cleaning. “We don't have enough resources to cover all the post-construction cleaning demands we receive, we need to turn down some of them,” Grigore told Business Review. This is also the most profitable segment of the business, believes the GM. However, long-term contract bring sure revenues.

Everyday office cleaning in high demand
Maintenance cleaning is the object of one-year long contracts signed between the cleaning company and the building owner or with the building management company. Getting a contract with the building owner opens the door for contracts with the tenants, and in most cases, the company which cleans the communal spaces in an office building will also clean the inside offices for some of the building's tenants. For a monthly fee varying between EUR 500 and 5,000 depending on the services included in the contract, customers can get maintenance cleaning, meaning the day-to-day before-hours, toilet and kitchen cleaning.
Only one-fifth of customers ask for daytime cleaning, which is not very productive, said Martens.
For post-construction clear-up, on-time delivery is the key, as most construction companies are under pressure to finish the work and sometimes the cleaning company must start work while construction workers are still on site.
For maintenance cleaning, the word of the day is efficiency: the building should be cleaned without workers getting in the way of tenants, while also managing to swap between locations in which the cleaning company has contracts.
The high number of workers is a characteristic of this business. Cristal Team, for example, has 200 workers and complains about the lack of resources to gain bigger contracts. The Contract Cleaning Company has 375 full-time workers and plans to increase this number as it has done in the previous years by adding 150 people per year.
Martens believes the key to get good profits resides in the volume of contracts. He now has 150 maintenance cleaning contracts, and has been adding three new contracts per month in the last period. His company cleans office buildings such as Charles de Gaulle Plaza, Bucharest Business Park and Victoria Park, among others, and is currently negotiating to take over the contract for Opera House.
Snow removal is also an important part of the cleaning contracts. The cleaning company needs to invest in snow removal equipment to keep it on the customers' site. The greater the number of customers, the greater the investment, as snow removal machines are some of the most expensive equipment a cleaning company invests in.
“Overall, the investment in setting up the Contract Cleaning Company, with buying equipment and so on, was about EUR 200,000. An additional EUR 50,000 was spent on gardening machines,” says
Cleaning for new residential developments is expected to become an important part of this business once people move into the new residential compounds. Cleaning companies contracted to work on such projects would only clean the communal areas, and not necessarily work for the residents of the buildings.

Corina Saceanu

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