The cost of shared services in commercial properties has risen as much as 25% in the past four years, according to a new report.
A survey of 199 multi-let offices in Property Solutions’ Service Charge Operating Report revealed service charge costs per sq ft have increased each year since 2012.
At the lower end of the scale, service charges have soared by 25% from £4.12 to £5.16 per sq ft over the past four years, while the most expensive have risen 10% from £9.35 to £10.34 per sq ft.
Properties in London have seen the largest increases, with median service charges of £9.45 per sq ft compared to £5.83 per sq ft in the rest of the UK.
The report states: “It is understood that operating a business in London has higher costs associated such as accommodation costs and salary levels. This does not, however fully explain the higher rates per sq ft in categories such as management fee and site management resources.”
It concludes: “Although we expect rates to be higher in the capital as compared to the regions, we would not expect them to be so marked on a purely commercial basis.”
The report also highlights a continued lack of compliance with the transparency requirements of the RICS Code of Practice for Commercial Service Charges after analysing a sample of 100 service charge certificates.
There were improved levels of compliance related to the charging of a fixed and transparent management fee and a certificate being signed off by a qualified individual, but just 34% disclosed their accounting principles and only 59% offered a timely delivery of documents.
Denver Metropolitan University professor Andrew Holt said: “The results show that the quality and consistency of financial reporting practices for commercial service charges are generally poor.
“This raises the question of whether voluntary adoption works, even with the added weight of the legal protection it offers against negligence claims.”
