Since the publication of the Assure Index 2023 and following analysis of the latest quarterly figures, we can report a reduction in the annual equivalent rate of service charge inflation across the retail sector but not offices… why is that?

Our latest research led us to compare budgets across three different sectors:  Shopping Centres, Retail Parks and Offices.  We compared average increases for the year ending December 2023 against the year ending March 2024.  Our findings are demonstrated on the graph below:

The above graph shows the average budget increase for Shopping Centres has reduced from an inflation busting +14.9% for December 2023 budgets down to +8.3% for March 2024, with Retail Parks reduced from +10.8% to +7.9%.  However, Offices budgets have increased on average from +14.2% to +20.6%.

For a deeper understanding of the percentage changes, we looked at the different cost headings, and found that utilities costs were the primiary factor.

The graph shows the average increase in utilities costs for Shopping Centres reduced from +77.6% for December 2023 budgets to +25.9% for Mar 2024 budgets. Retail Parks reduced from +50.1% in Dec 2023 to +21.7% in Mar 2024.  However, Office utilities costs increased from +37.4% to +87.1%, when adopting the same comparison.

On a first look, Retail Managing Agents appear to have been more effective at controlling costs and budgeting when compared to Office Managing Agents.  This could be due to (i) efforts to reduce consumption (ii) a greater focus on passing on the immediate benefit of government relief schemes (iii) possible differences in energy procurement cycles and/or (iv) timing issues associated with approving budgets being different, with some schemes not accurately reflecting more recent reductions in utilities costs versus earlier forecasts. 

One thing is for sure, there’s still a lot that can be done to get the utilities estimates in line with changing forecasts to get some immediate relief to occupiers, possibly in the form of mid-year budget adjustments, particularly in the office sector.

If you’re looking to take control of your occupancy costs,  fill out the contact form below: