In light of current state of challenging economic environment, which significantly reduced spending capacity of an average shopper, retailers need to be mindful of the costs associated with their business more than ever.  Service charges are part of this cost for tenants and despite common belief they are not a fixed overhead. Accurate budgeting, one of the most important means of control for financial risk exposure, as well as competitive prices for utilities, security and other services have become even more important.

Property Solutions (UK) Ltd together with Kingston University London has decided to conduct a benchmarking exercise focusing on the UK’s largest shopping centres. The analysis will include cost benchmarking, breaking down service charge expenditure into categories and comparing the costs across the sector. The research will also look at compliance of budgets and reconciliation statements with the RICS Code of Practice. Finally, we want to look at certain accounting aspects of service charge management, which is an important area albeit being frequently neglected by the industry.

Overall, we believe that retail sector is likely to show better compliance than the office sector, primarily due to higher level of cooperation between landlords and tenants as well as work carried out by institutions such as the PMA and BCSC.

The purpose of this initiative is to conduct a pilot exercise which could later be applied to a much larger dataset. In the under-regulated sector commercial service charge benchmarking (related to both costs and compliance) could be a powerful tool in improving industry standards.  We hope that the results of our study will contribute to other initiatives by industry participants in raising awareness of significance of commercial service charges issues as well as yet again emphasise the importance of measuring industry performance.