For us to understand what will happen to Service Charge budgets in 2022, we need to look back. In 2021 service charge budgets reduced by 9% for Shopping Centres and 4% for Retail/Leisure Parks.  This was mainly due to the withdrawal of major works and reduced marketing throughout the lockdown periods.  There was relatively little in the way of reduced manpower costs, despite Furlough, so that’s one to look out for as we await the final reconciled service charge accounts.

By using Shopping Centre service charges bills for 2020 as a Base year of 100, we can predict that 2021 would be 91 (a 9% reduction). But where is 2022 likely to land?  Early indications are that it will be somewhere between the two.  However, there remains a great deal of uncertainty.

The clear concern is the impact of deferred major works. A PPM program can be re-scheduled, but that has its limits. As a result, there could be a build-up of maintenance needs giving rise to more significant costs in later years. We suspect that will be further down the line, beyond 2022.

For the benefit of both tenants and landlords (faced with service charge shortfalls & struggling tenants), we feel that there are 3 key areas where meaningful cost reductions could be achieved:

– Tiered service provision and management fees – Landlords appoint managing agents who (i) recruit management staff and (ii) employ facilities managers, before contracting out key services to firms that then subcontract to firms to deliver the service.

– Re-examination of manpower services – new technology is beginning to present some opportunities.

– Consultation on major works – what is the right solution and best approach given the changing dynamic and structural challenges of the market.

This will be a subject for debate at our free Webinar on 9 November.

To register and book your place on the Assure Consulting Service Charge Webinar, or to receive a copy of the recording post-event please contact us.