Office 2023 Budget Increases:
A sign of what's to come?
One of Assure’s key strengths is research into lease expenses and many will be familiar with the Assure Index, with separate editions covering Offices, Retail Parks and Shopping Centres, that is published annually.
More recently, Assure looked ahead to predict potential increases in service charge costs in 2023, holding a seminar in London during October, followed by a webinar, with both events being very well attended.
Tim Parkin, Director of Building Consultancy, who leads on the office sector, regularly undertakes detailed analysis and benchmarking of service charge costs. The results are used by clients to help inform their strategic property decisions, and by Assure in support of our efforts to reduce occupancy costs for our clients.
Tim is currently undertaking a significant piece of work for several clients to forecast energy costs for 2023, and the key findings from the data that is being gathered via this exercise will be reported on in a future blog.
An early indication of what is to come in relation to occupancy cost increases in the office sector, can be seen from the budgets that Assure are starting to receive on behalf of our clients. We have reviewed circa thirty budgets received so far, where the year-end is 30 June 2023 or later, and the median percentage increases to overall budgets and key cost categories is summarised in the table below:
Category | Percentage Change |
Overall Budget | +17.0% |
Management | +2.6% |
Utilities | +52.8% |
Soft Services | +3.8% |
Hard Services | +11.6% |
However, there is significant variation within this small dataset, as the table below shows:
Category | Largest Increase | Largest Reduction |
Overall Budget | 100.1% | 30% |
Management | 241.7% | 29.3% |
Utilities | 347.1% | N/A |
Soft Services | 63.2% | 34.4% |
Hard Services | 100.3% | 27.6% |
It is notable, albeit to be expected, that no budget received so far has shown a reduction in utilities costs. Whilst the median increase in utilities is 52.8%, the average is 75%, indicating that many properties are faced with a significant increase in energy costs, bearing in mind that these increases also affect directly consumed energy as well.
We will issue an update to this blog in the New Year, by which time we will have received many more budgets and the data we report will be more reflective of the cost increases affecting the office sector.
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