Total service charge by building location and by building size
Total service charge by location
We commented in earlier years that there seemed to be a progressive reduction in costs the further away from London a property was situated. However, there now seems to be a relatively uniform stepdown in service charge between Central London (City & Docklands and the West End) and the rest of the country, particularly in respect of air-conditioned buildings, i.e:
| Central London | Other locations | |
|---|---|---|
| A/C | £7.80 per sq ft | £5.60 per sq ft |
| Non A/C | £6.90 per sq ft | £4.60 per sq ft |
We shall keep this trend under close review going forward, but suggest that this phenomenon is linked to the quality of service delivery and requirement, rather than an underlying issue of supply cost-base.
Total service charge by size
We continue to note that there are clear economies of scale in the management of larger buildings. CHARTS 17 and 18 demonstrate that the larger the building the lower the average service charge. For example, in respect of Air-Conditioned space the average service charge for a building under 10,000 sq ft is £8.52 per sq ft whilst that for a building over 100,000 sq ft is £5.61 per sq ft.
Caution is needed in some of this analysis due to low sub-sets of data in certain areas.
Differential between air-conditioned and non air-conditioned costs
For any given location
The differential between the average air-conditioned and non airconditioned costs for each location vary quite dramatically (£0.25 to £3.05), although three of the six locations have a differential of c. £1, which compares closely to last year's findings.
For any given size
As with the average cost by location, we find a wide range of differentials in the average cost of service charge by building size (£0.94 to £2.85). However, there is a clear indication that the differential increases with building size. We feel that this is more likely indicative of a relative increase in the quality of service provided in larger air-conditioned buildings compared with the non air-conditioned stock, rather than a suggestion that the economies of scale are more pronounced in non air-conditioned stock.
National average
Air-conditioned costs exceed non air-conditioned costs by £1.41 per sq ft (compared with £1.15 per sq ft in the previous year).
Variation between upper and lower limits
This is the range between the middle 50% of values. The variations can be summarised as follows:
By location
Air-conditioned
Average range between upper and lower limits: £4.36 per sq ft (or ±35% from the mean).
Non air-conditioned
Average range between upper and lower limits: £3.55 per sq ft (or ±35% from the mean).
By size
Air-conditioned
Average range between upper and lower limits: £4.29 per sq ft (or ± 30% from the mean).
Non air-conditioned
Average range between upper and lower limits: £4.15 per sq ft (or ± 39% from the mean).
Last year's results suggested a greater variance, in relative terms, in the cost of servicing non air-conditioned buildings. However, we are now seeing a more consistent range in results across all property types, locations and sizes (i.e. centering around ± 35% from the mean). We are keen to see if this consistency in range is found in subsequent years. If so, we are perhaps beginning to quantify what may be regarded as an acceptable scale of charges geared to service quality.
CHART 13
Component service charge by building location - year end 2006
CHART 14
Component service charge by building size - year end 2006
CHART 15
Total service charge by building location A/C buildings (spread of middle 50% of service charge costs)
CHART 16
Total service charge by building location Non A/C buildings (spread of middle 50% of service charge costs)
CHART 17
Total service charge by building size A/C buildings (spread of middle 50% of service charge costs)
CHART 18
Total service charge by building size Non A/C buildings (spread of middle 50% of service charge costs)
