Cleaning up
By : Chris Rivituso
The glass and marble of Warsaw's main new skyscrapers symbolize growing commerce and economic development for many but nobody sees these new buildings quite like Jacek Bilski.
For Bilski, owner of Clean Service, those long, pristine halls mean one thing: money. Or rather, fees from the contracts his company has to dust, mop, buff, shine and vacuum these enormous new spaces.
"There are more buildings than cleaning companies," said Bilski, whose company cleans the TVP-TAI building in downtown Warsaw as well as Okecie Airport.
Like many companies, Clean Service, which started in the 1980s as one of the few privately owned cleaning companies, has benefited from the tidal wave of new office space that has hit the Warsaw market in the last year. The office market has grown an average of 30% annually for the past two years and the pace is set to continue in 2000. Total office space should hit 500,000 square meters by the end of 2000, those in the property industry have estimated.
That new space has helped Bilski grow his business from the mere four people he started with in the 1980s to more than 40 today. Bilski refused to disclose the firm's past or present revenue, but he did say that monthly profit currently stood at about zl. 10,000.
Like many companies interviewed for this article, Clean Service said that its monthly earnings were fairly flat, despite the growing demand for cleaning services. Like all cleaning companies, Clean Service is now bumping up against increased competition on the market as many as 30 or more companies now exist, with about five to 10 being of substantial size. The sector nationwide is estimated to be worth about $200 million annually and growing, although at a rate nobody can seem to detail.
The market's now significant size has also attracted well-known foreign firms in the past year. Those new entrants, particularly the smaller and medium-sized ones, are pushing down prices and slicing many cleaning companies' margins, companies said.
"Our big problem now is middle-sized companies," said Tomasz Sikorski, branch director of German company Piepenbrock, which has cleaning contracts at the Warsaw Financial Center, Wisniowy Business Park and Jerozolimskie Business Park. "We are not afraid of big companies because they show they have the same level of prices."
At the same time, the building managers themselves are feeling pressure to lower their own costs as the glut of new space forces rents down. The massive building of new office space has meant that the market is now faced with a 20% vacancy rate. Cutting the cost of cleaning services is one way of keeping the facility financially healthy, as such services can account for up to 18-22% of a building's operating costs, said Antoni Krzatala, general manager of Real CDC Warsaw, which manages the Atrium Tower.
Many building managers refused to detail how much they spend on cleaning services, and the companies themselves were also coy on the issue. "It varies tremendously on the type of building you are talking about," said Peter Maitland, director of property management for AIG Lincoln.
Factors that play into the cost include the building's total amount of space, types of finishes such as glass or more durable material, which require various cleaning materials and chemicals. Some buildings, such as those with glass exteriors, need to be cleaned more often than others.
The fees the buildings pay typically only cover the cleaning of common areas, including halls, washrooms and the like. Tenants for the most part arrange their own cleaning services, although the building's management can arrange the service for a fee.
From scratch
Many of the cleaning companies now on the market come from humble beginnings. Piepenbrock came to this market when it purchased GP Cleaning company around 1994. Three university friends had started GP in 1991, Sikorski said. "They started from zero, zero, zero," he said.
The three built the business the old-fashioned way, winning one contract, working hard and eventually getting good reviews from clients, he said. Today, the company employs up to 500 in Warsaw and an additional 200 in Poznan, Lodz, Katowice and Szczecin. In the initial years, the company had only 100 employees, Sikorski said.
Personal wealth, however, has not necessarily followed, or at least not for all the owners. Stanislaw Pysz, president of Continental Group Services, said that he has rolled all of his company's profit back into the enterprise. Founded in 1990, Continental employs 1,000 people and has contracts to clean Daewoo's offices, the Sejm offices and Ruch's premises.
"Well, you know I can live on it (the profit), but how do you define rich," he said, adding that he's been developing the business with the extra money.
While owners may not be reaping the rewards for their work just yet, they have had the benefit of being able to find investors to help fund their start up. Continental Group Services, for example, started off as a joint venture, but in 1993 was bought out by Pysz.
The market is still dominated by Polish firms, despite the entrance of foreigners recently. Foreign firms such as Piepenbrock, Austria's ISS and Germany's Morwar, currently account for 40% of the market, Pysz said.
That presence is not worrying Polish firms, though. "We are not afraid, it means that we have to work better," said Janusz Mikolajczyk, director of Continental Group Services.
Some said the presence of foreign cleaning companies might even help the market's development. "It might give them more resources (or) provide them with investment," Maitland said.
Price war
The booming business that built many of these companies has waned slightly this year, many companies said. Years ago, fewer companies existed and they had an easier time of winning building contracts. Now, though, bidders have to go through drawn-out tenders for prime contracts and are feeling the effects of how price conscious building managers have become.
"We find it more difficult now," Sikorski said.
"Of course our turnover is more than it was a couple of years ago," he said, but profit margins have dropped compared to previous years. He would not say how much those margins had thinned.
One reason for that is building managers are often riddled with offers, and many time face much cheaper proposals from smaller or medium-sized companies, facilities managers said.
"When we start with a new building we receive a lot of offers," Krzatala said. He refused to say how much the building he manages, the Atrium Tower, spends on cleaning.
More established companies questioned the business practices of some of the smaller and medium-size competitors. Some firms cut costs by paying workers under the table, therefore avoiding hefty social security taxes, or putting disabled personnel on their roster to receive the appropriate tax break, companies said.
"It's their way of competing," said Joanna Kajdanowicz, marketing manager for Centrum Uslug, a cleaning company. "Sometimes the prices are so low that it's even impossible to pay the people."
But this all could change if President Aleksander Kwasniewski signs the tax reform bill that is in front of him. That bill would do away with tax exemptions for companies employing the disabled.
Facilities managers are charged with the task of evaluating which companies are above board, a task that they said can be difficult at times.
"It's of course one of the problems of managing a building," Krzatala said.
He said it was hard to determine whether a bidder's good price is the result of efficiency or questionable practices.
One way Krzatala solves the problem is to immediately toss out both the highest and lowest bids he receives for a building. "Both probably are not very good," he said.
