Rising Costs, New Tech and Changing Regulations:
What’s Ahead for Offices in 2025
Office Sector in 2025: Challenges and Opportunities Ahead
With Q1 of 2025 past and following the launch of the Assure Index, we will present a series of articles looking at the challenges and opportunities facing the office sector this year.
Service Charge Costs on the Rise Again
The Assure Index, which was launched in March, indicated that office service charge costs are on the rise again, after a year of being relatively flat, with a 3.6% increase being predicted. Energy costs have reduced further but are still two to three times higher on average than they were five years ago. The benefit of this has been blunted by increases in the ‘people’ based cost categories, including building management, security and cleaning.
Budget & Reconciliation Performance Remains Concerning
The Assure Index also indicates that performance in issuing service charge budgets and reconciliations on time remains poor, with only 29% of budgets and 21% of reconciliations complying with the timescales stipulated in RICS guidance. This leads to cost uncertainty for many occupiers and potential delays in credits being returned when the service charge is underspent.
Occupancy Costs Are Under Pressure
These and other cost pressures have led to service charge becoming an increasingly large proportion of overall property occupancy costs. In light of this and continuing cost pressures, it is more important than ever that service charge costs are fully and properly scrutinised.
Looking Ahead: Pressures and Possibilities
Over the course of several articles over the coming weeks, we will be considering further pressures that the office sector will be facing, but also opportunities as well. We are all aware of how technology and in particular the rapid growth and deployment of Artificial Intelligence (AI) has changed and is continuing to change our lives. This is also coming to a building near you, with smart buildings and building automation being phrases that you will increasingly hear.
Tech-Driven Efficiency, But at What Cost?
Whilst the implementation of these technologies will reduce energy consumption and improve the working environment in many buildings, this will come at a cost. Another area where cost pressures may emerge is in relation to the Heat Network Regulations and upcoming changes to Energy Performance Certificates (EPC). We will cover this in detail in an upcoming article, but the Heat Network Regulations, which require landlords to directly meter and invoice occupiers for all of their energy usage (e.g. heating/cooling) are being further revised this year.
EPC Requirements Are Tightening
For a commercial property to be legally let, a minimum EPC rating of E is currently required. This is set to change to a C rating from 2027, which is a big jump and may require substantial expenditure to achieve. As ever, the question is who should pay?
Stay Tuned for More Insights
This provides a flavour of what is to come, and we will be covering this in more detail, along with other topics over the coming weeks.
Get Control of Your Occupancy Costs
If you are an occupier looking to gain control over your occupancy costs, the team at Assure Consulting are here to help. With our expertise and proactive approach, we can uncover opportunities for savings and ensure fairer allocations for your service charges. To get started, simply fill out the contact form below, and one of our specialists will be in touch to discuss how we can assist you.