By Luke Philpott
The relationship between businesses, their workforce, and the office became fractured over the past year as a direct result of COVID-19 and the government’s work-from-home guidance. As such, a significant amount of focus has been placed on the role of the office, its use, need, and indeed its associated costs. To help inform businesses reviewing their workplace strategy, in 2020 DeVono launched our London Office Occupancy Costs report, in which we highlighted seven components of office occupancy costs, not just the three traditional elements of rent, rates, and service charges that our industry typically focuses on. Whilst this document aims to provide a greater level of transparency on office costs, some remain unscrutinised, service charges being one of them.
A service charge typically accounts for approximately 9% of the annual occupancy cost of a space in London. Although not the largest of the seven cost elements, it is a charge that fluctuates from landlord-to-landlord, managing agent-to-managing agent, and of course building-to-building. Used by the landlord to recover the costs of maintenance and repair of a building, in some cases, it can go above and beyond the general wear and tear. So, it is no surprise that during this period of under-utilisation it has spurred on many tenants to question these costs. Whilst the impact of the pandemic in most cases may not be a valid route to challenge them, it is providing businesses with the opportunity to take a deeper dive into costs that are often overlooked.
Service charges are generally taken at face value without much interrogation, but there are occasions that costs are inflated and when this happens, they very often go unnoticed. Several factors could lead to higher costs, ranging from inappropriate technical advice, outdated building specifications, or even a poor selection of contractors to name just a few. A DeVono service charge audit on your existing premises can uncover areas that can all be challenged, in a professional manner, but in such a way as to ensure that only appropriate charges are recovered from tenants through this route.
Whether you are renewing your lease or looking to relocate to a new space, you can still mount a challenge of your service charge, which can be backdated up to six years. DeVono has produced a Service Charge Guide outlining our approach in embarking on an audit, and what potential savings can be achieved from a detailed analysis of every item by our team of experts.
As the UK’s leading occupier-only commercial property advisory firm, we advise businesses on their real estate solutions, working to ensure that occupancy costs remain fair. As we emerge from the pandemic on the path to recovery, businesses need to have full visibility of all costs past and present in order to make the right decisions.
To understand your service charge arrangements, get in touch with the DeVono team today on +(0) 20 7096 9911 or email us at firstname.lastname@example.org for more information.
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