February 9, 2024
Office buildings with the highest efficiency and sustainability ratings tend to have higher than average service charges, a report from accountancy and business advisory firm BDO claims. The firm’s latest benchmarking report suggests that offices with an ‘outstanding’ or ‘excellent’ Building Research Establishment Environmental Assessment Methodology (BREEAM) certification had total service charge costs that were 26 percent higher than the other offices it surveyed. Meanwhile, total service charge costs were 6 percent higher for sustainable offices with an Energy Performance Certificate (EPC) rating of A or B compared to all other offices. The figures come from BDO’s latest PropCost benchmarking report, developed in conjunction with the Royal Institute of Chartered Surveyors, which reviewed £352m of service charge data for 408 office buildings for the three-year period to 2023.
Based on median data, the report found that overall service charge costs were split between soft services like cleaning and security (30 percent) and hard services like mechanical and electrical services (30 percent). This was followed by management costs (21 percent), utilities (18 percent) and insurance (1 percent).
While the report revealed service charges are higher on average for more sustainable offices, the highest costs overall were seen in the least efficient offices (those with an EPC rating of E to G). Overall, BDO found that service charges for office accommodation rose by an average of 10 percent year-on-year in 2023 amid a significant hike in ‘soft’ service costs such as cleaning and sustainability services which rose at a greater rate than other costs such as security.
However, the increase in costs was less pronounced in smaller offices, with the most significant increase in costs seen in the largest offices. This may be because smaller offices were not as impacted by lower occupation during the pandemic, whereas larger offices invested most in amenities as part of the return to ‘normal’ office working. Service charge costs were higher in London than in other regions. On average, office service charge costs in central London were 86 percent higher than for those located elsewhere in the UK.