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News Release

Dublin

Focus on Service charge levels in era of cost management & value of money

Pace of growth in service charge costs slows in 2008 whilst Jones Lang LaSalle aim to reduce costs in 2009


“In the current climate of cost management and the provision of value for money, the annual service charge survey by Jones Lang LaSalle provides some welcome good news by showing that the pace of increase of service charge costs has slowed in 2008; during 2007 service charge levels increased by 7.7% while in 2008 the increase dropped to 5.5% to €72.26 per m2”, said Dr. Clare Eriksson of Jones Lang LaSalle’s research department which, in association with their Property Management Department, compiles the annual survey of office service charges in Dublin.  The report is intended to help office owners, occupiers, developers, investors and facility managers study and compare detailed information on key items of running costs for office buildings.

In 2008 the main components of the average service charge were power and light at €12.18 per m2, heating and air conditioning (€11.72 per m2), security (€11.45 per m2) and cleaning at €11.39 per m2. 

Michael Miland, Director of Property Management at Jones Lang LaSalle, advises that “it is now increasingly important for savvy landlords and tenants, to be aware of issues relating to the ownership and management of properties, such as Building Energy Ratings, the energy price freeze, changes to VAT, increases in security and cleaning costs, asbestos management, and the current state of the property owners insurance market.  A main aim of analysing service charge costs is to provide greater levels of transparency in relation to costs incurred in the management of buildings.” 

He further states that the rising costs over recent years largely stem from external forces including energy cost increases and labour costs; however he advises that Jones Lang LaSalle’s focus for 2009 is to reverse the trend and reduce service charge costs.

The primary external influences currently impacting service charge costs include changes to fuel prices and the Joint Labour Committee (JLC) regulations which affect security costs.  International fuel prices of gas, coal and oil are a large cost component in determining the price of electricity and therefore significant price rises have a knock-on effect on electricity costs.  In December 2008 the Commission for Energy Regulation (CER) released a statement stating that there will be no increases in the price of gas or electricity in 2009 which is welcome news to all commercial occupiers.  Changes to the JLC regulations imposed by the labour court has had the effect of increasing the base cost of providing security within buildings by 23% over the three year lifetime of the JLC agreement.  In order to offset these increases in security staffing costs the Jones Lang LaSalle property management team have, where possible, rationalised security services within buildings introducing technology solutions to reduce man hours.

The report shows that Irish service charges continue to offer good value in comparison to the UK.  The average service charge for Dublin is approximately 17% less than those charged in the UK.  Costs in Dublin are lower than in the UK for the majority of the cost contributors including cleaning, security, maintenance, heating & air conditioning and power & light.

In an environment where “Cash is King” and tenants total occupancy costs are now under the microscope Jones Lang LaSalle believe that landlords and tenants working together towards minimising service charge costs is the way forward.