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Publication of retail service charge report announced

29 January 2018

The seventh annual report on the retail sector's service charges has been published by commercial service charge consultancy provider Property Solutions.

Created from the analysis of data from "a diverse group of contributors", academic oversight is provided by MSU Denver professor of accounting Dr Andrew Holt.

Of particular interest this year is the need for compliance with the RICS Code of Practice (CoP) by members of RICS, according to Property Solutions managing director Andrew Morley.

The Service Charge Operating Report (SCOR) for Retail 2017 is presented as a detailed methodology for the benchmarking of service charges for the sector.

Results of the research includes analysis of the total cost of management, including fees and site management resource costs.

These have remained consistent with previous studies at a level of 60% for security, cleaning and environmental categories, which are identified as the most significant components of shopping centre total service charges.

While stating that these therefore require close monitoring, the report also suggests that certificates include more details about fees and charges, which are required within the RICS CoP.

The report provides further analysis of the RICS cost categories for the lower, median and upper quartiles, with costs per sq ft divided between London and the rest of the UK.

With the majority of the costs for the 11 categories shown to be "far higher" in London than the rest of the UK, the SCOR for Retail says that this is driven by "unexplained" factors and needs further investigation.

Although higher wages in London is a contributing factor, the report says this is only a partial factor and higher profit margins or over-allocation of overheads could be driving the greater costs of management in the capital.

Further analysis of the size of facilities and whether they are covered, part-covered or uncovered are also included within the study.

Results include the result that larger, covered centres show a 12% lower service charge cost than smaller facilities.

However, the report states that further research is required to determine the reason for lower total service charge costs for smaller facilities that part-/uncovered.

Readers wishing to download the report from Property Solutions, part of the Bellrock Group, can do so here.

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