Introduction

OSCAR was first published in 1983 and this is the 25th edition in the annual series. We are grateful to our in-house clients and the important external contributors who provided data to enable us to carry out our analysis.

On the 1st April 2007 the RICS Service Charge Code was introduced. The service charge expenditure categories within the Code are a direct reflection of those contained within the OSCAR reports produced prior to that date. Our analysis indicates that the large majority of major landlords and their agents have embraced the requirements of the Code, which has provided a more uniform presentation of service charge data to occupational tenants.

Background

The data analysis within OSCAR primarily observes the influence of building location, size and air-conditioning upon cost. However, other important variables influence cost such as hours of operation, levels of security, reception services, number of lifts and in particular the qualitative standards of management. These factors are the primary drivers that should be taken into account when benchmarking against the spread of values displayed in this report.

This year's principal findings

Average costs for running air-conditioned buildings have increased by 1% to £6.94 per sq foot, whilst non air-conditioned building costs have remained almost static (£5.47 per sq ft for this year against £5.45 per sq ft the previous year).

The cost of running non air-conditioned buildings relative to air-conditioned space is 80%. This continues the trend seen in the last two years and moves away from the relationship of 70% which has been relatively consistent since OSCAR was instigated in 1983. Our view that landlords are having to address issues of obsolescence, both in terms of fabric and M and E in older, non air-conditioned stock, is supported in these findings. Also, we are seeing increased parity between air-conditioned and non air-conditioned buildings across many heads of expenditure.

We have seen the highest proportionate increase in spend on electricity and security (15.5% and 9.6% respectively) for air-conditioned buildings. This is reflective of the market pricing for electricity and the requirements of tenants for increased levels of manned security and associated increases in unit labour costs.

The highest proportionate increases for non air-conditioned space is in respect of Site Management Resources. If the trend is analysed since 2003 then this shows an average year on year increase of circa 4.5%. The exception to this was in the previous year’s analysis where the costs showed a decrease and it appears this figure reflects anomalies in last year’s data. We believe this year’s figures reflect a more accurate overall trend, but we shall keep this under close review. The costs have risen due to working time directives, licensing and general wage increases.

M and E Services and Security continue to be the two categories which constitute the highest level of spend in both air-conditioned and non air-conditioned buildings.