Review service charges


Can you negotiate reductions in service charges through the lockdown period and beyond?

Considerations

  • Are there any major and long-term changes in the provision of services to or within your building? What effect does that have on service and cost?
  • Are there any savings your landlord may be able to make as a result of long-term reduced occupancy levels? Could they be reflected in your service charge?

Insight

Service charges as a proportion of the total occupancy costs can be significant for certain properties such as offices, ranging from 10% to up to 30%, depending on scope. Regardless, it is likely to be a material cost element when aggregated for larger portfolios.

Many multi-let buildings are likely to see reduced levels of occupancy even beyond the period of lockdown. We may potentially enter a ‘suppression and lift’ cycle, where buildings may see periodic peaks and troughs of occupancy.

While there are essential services required to maintain and secure buildings, you should investigate if there are reduced costs for running and maintaining those buildings, whether they are offices, shopping centres or industrial estates. In the past, following closer reviews, we have seen an average of 13% savings against payables achieved.

A starting point should be a forensic review of the annual budget, lease and current services. These can include marketing, utilities, staff costs, waste collection, window cleaning, consumables, flowers, landscaping and major works programmes.

Our specialist team can support in the immediate climate and beyond to advise on opportunities to mitigate your Service Charges.

Do you want to get better control of your water management and reduce costs?

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For more information please contact:

Nicky Knight Associate Director Property Management nicky.knight@avisonyoung.com