Cost Management
Managing a commercial property portfolio includes monitoring and reviewing all costs and charges relating to the maintenance and general upkeep of premises.
Identify them, ascertain what they are and what they are for, and price-match them. But don’t just look at the £££, consider service, reputation and track record.
Service charge
What are the costs of maintaining and repairing the property.
What is covered by a commercial property service charge will differ from unit to unit, but tenants can typically expect a service charge to include items such as:
- General interior or structural repairs
- Cleaning all areas
- Refuse and recycling collection
- Central heating
- CCTV security
- Air-conditioning systems
- Insurance costs
- Property management fees
Rent
Rent reviews are an integral part of commercial leases.
Typically, rent reviews happen every three to five years, but exactly when they occur will depend on the review clauses in the lease agreement.
In the UK, there are three common methods used to calculate the commercial rent:
- Open market - how much is the property’s current market value
- Periodic - the rent will be reviewed at intervals detailed in the lease, in line with the Retail Price Index (RPI)
- Turnover - how much rent should be paid based on a business’s financial turnover. Turnover-based rental values are used in the retail sector
Utilities
Every organisation should review all its utilities’ costs regularly/annually.
Unlike domestic energy users, they are offered bespoke energy quotes to reflect the needs and consumption patterns of the organisation, which means that business prices will vary and shopping around pays dividends.
When checking your utility charges, pay particular attention to the unit cost and the standing charge, as they make the biggest difference to the amount you pay for gas and electricity.
- Unit cost - how much you will be charged for each kWh of energy used
- Standing charge - a daily amount that covers the cost of transporting energy to your premises and maintaining the National Grid
For the latest information on the average business energy rates, visit the UK Power website.
Business Rates
Business rates are a tax on property applied to non-domestic premises.
Although your local council calculates and collects your business rates, they cannot change your rateable value or the multiplier - these are set nationally.
Whilst it can be difficult to change the amount you have to pay, you are within your right to challenge it. It might be worth speaking to a Business Rates Specialist.
