• Foreword
• Executive summary
• The database
• The sample structure
• National average component service charges
• National average component service charges by percentage
• Total service charge by building location and by building size
• Component service charges by building location
• Service charge trends 1983-2006
• Looking to the future
• Definition of terms
• Geographical areas
• Data contributors
• Contact us
• Download OSCAR PDF

Executive summary

The accurate measurement and monitoring of costs set out in the OSCAR report is an essential tool for the Chartered Surveyor in developing effective property management strategies and measuring management performance. RICS has worked closely with Jones Lang LaSalle to ensure that the new industry Service Charge Cost Categories are compatible with those used in OSCAR.

The highly respected OSCAR work is a considerable contribution towards our objective of more consistency and transparency within the property management sector.

The RICS believe that now so many managers have adopted the industry standard cost classification the size of the sample in OSCAR will grow thus making this data even more relevant.

Christopher Edwards
Chair, RICS Service Charge Group
Chair, RICS International Commercial Property Faculty

Introduction

OSCAR was first published in 1983 and this edition is the 24th in the annual series. We are grateful to all our in-house clients and the important external contributors who provided the data to enable us to carry out our analysis.

Looking at the past 10 years of data, Water costs have remained totally 'flat,' but we do not anticipate this trend to continue. Water costs have increased well above inflation in 2006 and although minor in real terms, we predict further above inflationary increases in future years.

On 1 April 2007 the RICS Service Charge Code was introduced. The service charge expenditure categories recommended within the Code were an evolution of those utilised in our OSCAR reports. This year we have adapted our Office OSCAR headings to align with the Code and have introduced greater analysis of Electricity and Gas costs. We fully anticipate that all Landlords and their agents will follow the requirements of the Code in the future and this will make it easier to make a balanced and accurate analysis of service charge costs.

Background

The data analysis within OCSAR primarily observes the influence of building location, size and air-conditioning upon cost. However, other important variables influence cost, such as hours of operation, levels of security, reception services, number of lifts and in particular the qualitative standards of management. These factors are the primary drivers that should be taken into account when benchmarking against the spread of values displayed within this report.

This year's principal findings

• Service charge costs for non air-conditioned buildings have risen on average for the last 5 years at 8.3% pa, or 5.5% above RPI.
• Service charge costs for air-conditioned buildings have risen on average for the last 10 years at 5.1% pa, or 2.3% above RPI.
• The cost of running non air-conditioned properties relative to airconditioned properties has remained remarkably static at approximately 70% for the entire duration of our OSCAR dataset. However, in the last two years, this has stepped up to approximately 80%, which supports our notion that issues of obsolescence are being addressed and service quality increased in non air-conditioned properties.
• We are seeing evidence of there being a 'core' service charge cost to run a building regardless of whether it is air-conditioned or non air-conditioned. Over and above this, increased Electricity and M&E Services costs arise on air-conditioned properties. Finally, additional variations in cost then occur driven by service expectation, although there still remains a strong link between service expectation and geographical location.
• M&E Services and Security continue to be the two categories which constitute the highest spend in both air-conditioned buildings and non air-conditioned buildings.
• Gas and Electricity costs have increased significantly above the rate of inflation and are forecast to continue this trend in the foreseeable future.
• Water costs have also increased well above inflation, but this is minor in real terms. Looking at the past 10 years of data, Water costs have remained totally 'flat', but we do not anticipate this trend to continue and predict a period of increases of above inflation.
• There continues to be clear economies of scale in the management of larger buildings.
• There was increased spend on Security in air-conditioned buildings in the South East. There is evidence that tenants, particularly in larger buildings housing multi national companies, are now demanding similar levels of security service to those found in the City, Docklands and the West End.
• There is a significant step up in costs of running air-conditioned buildings in the City, Docklands and the West End compared with other areas of the country. This is driven by different service delivery expectations in the different regions.
• The costs relating to Site Management Resources have increased in Greater London and the South East reflecting the desire to employ higher qualified staff in these areas.