Average service charge
Retail OSCAR enables owners and occupiers of shopping centres to benchmark the service charge payable on their individual centres against industry recognised average figures.
The average service charge (including exceptional expenditure) has increased from £4.04 per sq ft to £4.45 per sq ft in 2007, an increase of 10% (see CHART 5).
CHART 1
Size and type (no. of centres)
CHART 2
Location and size (no. of centres)
CHART 3
Location and size (sq ft)
CHART 4
Region and type (no. of centres)
CHART 5
Average cost class and type (£ per sq ft)
CHART 6
Variance from average for cost class as % (excludes income)
CHART 7
Average service charge progression by cost class (£ per sq ft)
Average service charge progression by cost class (£ per sq m)
CHART 9
Average service charge progression by cost category (£ per sq ft)
The most expensive type of shopping centre is unsurprisingly 'Enclosed/Air-Conditioned'. The average service charge for this type of centre is £5.61 per sq ft, an increase of 5% from 2006.
Findings
The most expensive type of shopping centre is unsurprisingly 'Enclosed/ Air-Conditioned'. The average service charge for this type of centre is £5.61 per sq ft, an increase of 5% from 2006. The gap has however closed between enclosed/air-conditioned centres and enclosed/non air-conditioned centres. The difference between the two enclosed types is 44p per sq ft , whereas the difference was 76p per sq ft in the 2006 report. We suspect this is due to a milder winter meaning less heating was used in the enclosed/air-conditioned centres and increased M&E refurb works in the enclosed/non air-conditioned centres as a result of the aging UK stock.
The cost of Utilities has risen over the past year by 18.5%, mainly due to a volatile energy market. With environmental issues coming to the fore in the past two to three years there has been a real drive to steady or reduce energy consumption in shopping centres. It is our opinion that utility expenditure increases are a direct result of rising unit prices as opposed to higher levels of consumption. The rolling introduction of Energy Performance Certificates which was due to commence on 6 April 2008 will further focus the minds of owners, agents and tenants on energy consumption.
Soft Services remain the most expensive cost class accounting for 45.73% of total expenditure, followed by Management (25.26%), Hard Services (17.39%), Utilities (6.48%), Exceptional Expenditure (4.25% ) and Insurance (0.88%). The figure is slightly below the average of 47-48% shown in the past 5 years.
This year's data has shown a large increase in Exceptional Expenditure from an average of £0.02 per sq ft in 2006 to £0.19 per sq ft in 2007. We believe this is a result of owners and agents becoming more familiar with the new RICS cost classes and stripping out works that would previously have been included under the heading of Hard Services as M&E or Fabric Repairs. This theory is backed up by the decrease in Hard Services average expenditure in 2007 from £0.86 per sq ft in 2006 to £0.83 per sq ft. Another very important variable to consider is that any very large items of exceptional expenditure centres incur within service charge years as per their Planned Preventative Maintenance schedules can skew the average figures to a degree. Income generated across the centres has increased from an average of £0.09 per sq ft in 2006 to £0.12 per sq ft in 2007. We consider this is most likely being driven by changes in the RICS code of practice, placing an emphasis on interest from service charge accounts being credited to the service charge. Another explanation could be revenues generated through increased recycling.