LOUGHBOROUGH REPORT 2009 Dr John Calvert Loughborough University Business School

1. LOUGHBOROUGH REPORT 2009 Dr John Calvert Loughborough University Business School

2. Loughborough Database 2009 The Database now has 576 Buildings - up 71 (14.1%) on 2008 This involves 42.7m sq ft – up 7.0m sq ft (19.7%) on 2008

3. Loughborough Database 2009 The Database now has 576 Buildings - up 71 (14.1%) on 2008 This involves 42.7m sq ft – up 7.0m sq ft (19.7%) on 2008 Total commercial office space = 905m sq ft (Govt figures England & Wales 2009) and Multi-let space approx = 690m sq ft so Loughborough 2009 represents approx 6.2% of commercial multi-let space for England & Wales

4. Loughborough Database 2009 The Database now has 576 Buildings - up 71 (14.1%) on 2008 This involves 42.7m sq ft – up 7.0m sq ft (19.7%) on 2008 Total commercial office space = 905m sq ft (Govt figures England & Wales 2009) and Multi-let space approx = 690m sq ft so Loughborough 2009 represents approx 6.2% of commercial multi-let space for England & Wales In the 2009 Database, Mean service charge cost = £6.02 £ per sq ft so Total for the England & Wales Service Charge market = £4.15 billion It is still a large sum of money!

5. Loughborough 2009 – Value for Money Median service charge cost £5.29 per sq ft Only 10% of the variation in service charges is explained by the usual suspects e.g. area, location, air conditioning, year, etc., So the variability is still too large for granular analysis thus:

6. Loughborough 2009 – Value for Money Median service charge cost £5.29 per sq ft Only 10% of the variation in service charges is explained by the usual suspects e.g. area, location, air conditioning, year, etc., So the variability is still too large for granular analysis thus: Tenants should monitor their service charges If the total is above the Warning limit (median) £5.29 per sq ft

7. Loughborough 2009 – Value for Money Median service charge cost £5.29 per sq ft Only 10% of the variation in service charges is explained by the usual suspects e.g. area, location, air conditioning, year, etc., So the variability is still too large for granular analysis thus: Tenants should monitor their service charges If the total is above the Warning limit (median) £5.29 per sq ft And tenants should investigate each item if the total is above the Action limit (upper quartile) £7.80 per sq ft

8. Loughborough 2009 – Value for Money Over the years of the Loughborough study the variability has remained high and so necessitated the use of action limits and warning limits. This year the action limit is slightly lower suggesting that on the basis of certificates received so far tenants should be more vigilant about the entries on their service charge certificates when they eventually arrive.

9. Loughborough 2009 – Code Compliance

10. Loughborough 2009 – Code Compliance

11. Loughborough 2009 – Code Compliance

12. Loughborough 2009 – Code Compliance

13. Loughborough 2009 – Code Compliance

14. Loughborough 2009 – Code Compliance

15. The experience of the years of the Loughborough Studies tells me that Managing Agents need: • Clarity – Recognised cost descriptions • Accuracy – Budgets close to the eventual outcome • Timeliness – Budgets & Certificates • Financial appropriateness - sinking funds kept separate + interest, VAT properly accounted for • Clear Management Fees - basis & value totalled & shown on certificate • Comparability of Data – need for transparency • Data Management Systems – need for benchmarking • and then we can together develop robust industry standards

16. What next: • The Loughborough Database needs to be enlarged to all UK commercial multi-let office space • Data should be publicly available for analysis

17. What next: • The Loughborough Database needs to be enlarged to all UK commercial multi-let office space • Data should be publicly available for analysis • RICS Code needs updating and compliance should be measured at the start and thereafter annually • Code compliance data should be made publicly available to allow analysis