Retail & Leisure Park. OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks

Transcription

1 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks

2 2 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Foreword In this challenging market, occupiers of Retail and Leisure Parks require landlords to provide clean, safe, well managed and environmentally efficient estates to carry forward their businesses in a sustainable way. Owners of property are meeting these challenges by providing detailed operational plans via transparent service charge budgets and reconciliations. With this in mind, I am delighted to be asked to write the foreword to this year s Retail and Leisure Park OSCAR. In this the eleventh year of publication, Retail and Leisure Park OSCAR is recognised as the leading benchmark of data for both budgets and reconciliations throughout the United Kingdom and has become an invaluable reference point for the industry. Matt Jarvis MRICS Fund Manager Legal & General Property I hope you find the information contained within this report of interest and a useful tool in assessing service charge costs. I would like to acknowledge the considerable amount of assistance provided by BDO in the analysis of the data. On behalf of JLL, I would also like to thank the many contributors who have provided their service charge information.

3 3 Contents Introduction 4 Executive summary - Retail Parks 5 Executive summary - Leisure Parks 6 Data Contributors include Standard Life Investments, Aviva Investors, British Land, B&Q, LaSalle, Henderson Global Investors, Gallagher Developments, Land Securities, Hammerson, Legal & General, SWIP. The Retail Park database 7 Average service charges 2013 and budgets Service charges dependent on size 11 Trend analysis Service charges 2014 by location, size and park classification 14 Budgets 2014 by location, size and park classification 17 Leisure Parks 20 Definition of terms 22 Geographical areas 23

4 4 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Introduction We are pleased to publish this the third edition of Retail and Leisure Park OSCAR. Following eight years of Retail Park OSCAR this represents the most extensive survey of service charges for multi-let Retail Parks and Leisure Parks throughout the United Kingdom. The survey this year covers 208 Parks which represents a 7.8% increase in the sample size over the previous year and accounts for approximately 15% of multilet Retail Parks across the UK. Retail & Leisure Park OSCAR 2014 provides research on 2013 reconciled service charge costs and 2014 service charge budgets. Following requests from clients and occupiers we have presented both the overall data and matched data which compares Parks which we included in last year s edition. We have continued the guide benchmarks for both reconciled service charges and budgets on Retail Parks with varying classifications, sizes and locations. Following positive comments for both occupiers and owners we have retained the research on smaller Retail Parks (under 50,000 sq ft). The analysis on Leisure Parks is by classification but not broken down by size and location because of the smaller number of Parks. We are particularly pleased to acknowledge the significant contribution made in the analysis of data by BDO and look forward to working with them in future years. We also wish to thank our contributors and their managing agents for providing the data on which this year s analysis is based.

5 5 Executive summary - Retail Parks The overall database for this research increased by 7.8% over last year and this edition covers 208 Parks, which now represent some 15% of multi-let Retail Parks (as identified by Trevor Woods Associates) in the United Kingdom. Data has been provided on 52 Bulky Goods Parks, 93 Retail Parks and 63 Shopping Parks covering reconciled service charges for 175 Parks and service charge budgets for 160 Parks reconciled Service Charges summary All Parks Bulky Goods Retail Shopping All Reconciled Service Charges for 2013 Across the full database are 1.03 per sq ft The effects of the economic environment on property managers operating Retail Parks continue to be reflected in the results for 2013 with: 2.9% reduction between the 2013 actual service charges and those for 2012 ( 1.06 per sq ft to 1.03 per sq ft) 6.8% overspend between the 2013 budgets and 2013 actual service charges However, in respect of Budgets for 2014 there is: A decrease of 10% from the 2013 Budgets ( 1.17 per sq ft to 1.05 per sq ft) A rise between 2013 actual service charges and 2014 Budgets of 4.9% On a like for like database (using the same properties for 2013 and 2012) are 0.99 per sq ft, 9% up from The average spend on Bulky Goods Parks is 0.60 per sq ft, on Retail Parks is 1.00 per sq ft and on Shopping Parks is 1.39 per sq ft In respect of the like for like properties the figures can be further analysed as follows: Management costs increased by 3% overall with Administration Costs covering site costs, audits and Health & Safety rising by 20% whilst Management Fees decreased by 5% Retail Parks under 50,000 sq ft have service charges 8% less ( 1.24 per sq ft) than those between 50,000 and 100,000 sq ft ( 1.25 per sq ft), although the data set was particularly low for shopping parks <50,000 sq ft thus potentially skewing this figure. Utilities have decreased by 1% following a 15.4% reduction in the previous year Soft Services remain the largest element at 58% of spend with an increase of 3% over the year. There is also a significant increase in the cost of promotions (111%), hard services (41%) and income (46%)

6 6 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks 2014 Service Charge Budgets summary All Parks Bulky Goods Retail Shopping All Service Charge Budgets Are on average 1.08 per sq ft Management cost and management fees have increased by 5% and 9% respectively whilst administration costs and soft services have remained unchanged Utilities, cleaning/landscaping and security have decreased by 4%, 3% and 1% respectively Hard Services costs have increased by 14% in the year Income has increased by 61% Of this, Bulky Goods Parks average 0.66 per sq ft, retail parks are 0.87 per sq ft and shopping parks are 1.63 per sq ft In respect of the like for like budgets, the figures can be further analysed as follows: Executive summary - Leisure Parks Reconciled service charges for 2013 average 1.30 per sq ft, which represents a significant decrease over the previous year, where the average was 1.57 per sq ft 2014 service charge budgets averaged 1.43 per sq ft (a fall from 1.91 per sq ft for the previous years) On a like for like basis from 2013 to 2014 reconciled service charges fell from 2.14 per sq ft to 1.72 sq ft representing a 20% reduction, whilst budgeted costs fell from 1.81 to 1.40 representing a 23% decrease

7 7 The Retail Park database The total number of Retail Parks included in the analysis for this edition is 208, an increase in the database of circa 6% which represents around 15% of multi-let Retail Parks in the UK (Trevor Woods Associates). Total Database Class All Service Charge 2013 Budget 2014 Bulky Goods Retail The classification of the parks included in the research is: Reconciled Service Charges 2013 Class Total Spend Number of Parks Number of Units Area (Sq Ft) Bulky Goods 3,184, ,741,458 Retail 10,609, ,356,777 Shopping 10,344, ,377,124 Total 24,139, ,724 23,475,359 Shopping Total Reconciled Service Charges 2013 common with 2012 Common Databases Class All Service Charge Budget Service Charge 2012 Service Charge / / 2013 Budget 2013 Budget 2014 Bulky Goods Retail Shopping Total Class Total Spend Number of Parks Number of Units Area (Sq Ft Bulky Goods 1,852, ,097,491 Retail 7,866, ,885,816 Shopping 7,253, ,203,937 Total 16,972, ,128 16,187,244 Budgeted Service Charges 2014 Class Total Spend Number of Parks Number of Units Area (Sq Ft) Data is presented in imperial units with metric conversions, and this year s analysis is based on: Overall (all Retail Parks included in this research) a total floor area of 23.5 million sq ft Overall 1,724 units Reconciled Service Charges Retail Parks A total spend of 24.1 million in 2013 Service Charge Budgets Retail Parks A total budgeted spend of 24.7 million in 2014 Bulky Goods 4,643, ,421,788 Retail 7,377, ,909,699 Shopping 12,678, ,396,152 Total 24,700, ,658 22,727,639 Budgeted Service Charges 2014 common with 2013 Class Total Spend Number of Parks Number of Units Area (Sq Ft) Bulky Goods 1,490, ,259,522 Retail 5,060, ,828,325 Shopping 8,643, ,344,361 Total 15,195, ,036 14,432,208 Tenant user has been assessed for each Unit and this has been analysed to provide a classification for each Park (see Definition of terms)

8 8 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Average service charges 2013 and budgets 2014 Average Service Charges 2013 Average service charge rates Main Range Mid 50% Class Average Service Charge Rate 25% 75% Bulky Goods 0.67 per sq ft Retail 0.93 per sq ft Shopping 1.40 per sq ft Total 1.03 per sq ft Average service charge components by percentage across Parks common to each year are: Average Service Charge Components by % across Matched Parks Each Year In 2013 (comparing the service charges from the same Parks in each year) there was an increase of 9% from 2012 with an average of 0.99 per sq ft Rate/sq ft 2012 Rate/sq ft Management 12% % 0.12 Management Fee 8% % 0.08 The average service charge for Retail Parks has therefore fallen to 1.03 per sq ft from 1.06 per sq ft in the previous year. Reconciled Service Charges by Component Percentages The reconciled service charges have been analysed on individual service lines using the headings recommended in the RICS Code of Practice. Average service charge components by percentage across all Parks this year are: Administration 4% % 0.03 Utilities 7% % 0.07 Soft Services 58% % 0.56 Cleaning/Landscape 31% % 0.30 Security 27% % 0.26 Promotions 1% % 0.00 Hard Services 25% % 0.18 Income -3% % Total 100% % 0.90 Component Percentages 2013 Expenditure Rate per sq ft Management 17.3% 0.18 Management Fee 8.0% 0.08 Administration 9.3% 0.10 Utilities 7.3% 0.07 Soft Services 55.4% 0.57 Cleaning/Landscape 29.2% 0.30 Security 25.4% 0.26 Management Management Fees have remained static again this year following that for the previous year. Administration costs have increased this year which follows a small fall last year but only reflects a small proportion of the overall costs. Administration includes site management costs covering rates, insurance and site managers costs, audit fees and health & safety. Promotions 0.8% 0.01 Hard Services 23.9% 0.24 Income -4.0% Total 100% 1.03

9 9 Utilities The utilities costs have remained static between 2012 and This follows a slight reduction in the previous year. We believe there will be a continuing downward pressure on utility costs going forward. The average rate for each class based on the database of service charges in 2013 is: Main Range Mid 50% Landscape/Cleaning 25% 75% Average per space Rate Per Car Space Bulky Goods Retail Shopping All Class Bulky Goods Retail Shopping Average Rate 0.06 per sq ft 0.07 per sq ft 0.09 per sq ft Security - Comparing like for like Parks in 2012 and 2013 security costs increased by 3%. Security costs increase for all categories of Parks. The highest use of utilities remains in Shopping Parks as would be expected on a qualitative basis and equally the lowest utilities use is still with Bulky Goods Parks. Soft Services Landscape/Cleaning costs are static between 2012 and 2013 overall. The average rates are below: Security Class Average Rate Bulky Goods Retail Shopping Class Average Rate Bulky Goods 0.22 per sq ft Retail 0.30 per sq ft Shopping 0.34 per sq ft Landscape/Cleaning Rate Per Car Space This index is provided as a useful comparison of cleaning and landscaping costs measured against the number of car park spaces (as a rough measure of the extent of the external areas of a Retail Park). On the Parks where we have the number of car spaces the costs of cleaning and landscaping have been combined and then divided by the number of car spaces to show rates per car park space. Promotions A limited number of Parks have reported promotional expenditure again this year and this element remains a very unusual feature in Retail Park service charges representing only 1% of the total reported expenditure. Hard Services Repairs including exceptional expenditure have increased by 41% between 2012 and 2013 taking like for like Parks in each year. We have previously noted considerable volatility in repair costs and that they do not necessarily vary according to the qualitative effect of the class of Park, but as earlier research has shown are more strongly influenced by previous lack of repairs, lease responsibilities and improvements or refurbishments. While there is a wide range in the figures and rates that result, the figures are provided as a rough comparative on the landscaping and cleaning costs for Parks as follows:

10 10 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Repair Costs by Park Classification Income Class Average Rate Bulky Goods Retail Shopping Class Average Rate Bulky Goods Retail Shopping This supports the conclusion reached in previous editions that age alone is not the major determinant in this spend. Income Income in the form of bank interest on service charge funds or arising from commercialisation on parks is credited to service charges by a growing number of Landlords. These items have the effect of reducing service charges payable by tenants. Income in service charges has increased for the first time in three years with a 50% increase over the year. It remains the case that the level of income for some Parks is such that service charge average rates are being distorted.

11 11 Service charges dependent on size Last year we confirmed that there was a significant cost increase related to service charges for smaller Retail Parks and this year we have again undertaken that analysis. Set out below are the benchmark for Parks under 100,000 sq ft (as repeated in the later detailed benchmark tables), the analysis for Parks under 50,000 sq ft and the results for Parks over 50,000 sq ft and under 100,000 sq ft. Benchmark Average Average <50,000 sq ft 50,000 sq ft < Average < 100,000 sq ft < 100,000 sq ft Class psf psf psf Bulky Goods Retail Shopping All Average budget service charge components by percentage 2014 Budget Rate per sq ft Management 17.0% 0.18 Management Fee 8.7% 0.09 Administration 8.2% 0.09 Utilities 7.0% 0.08 Soft Services 56.8% 0.62 Cleaning/Landscape 30.0% 0.33 Security 25.1% 0.27 Promotions 1.7% 0.02 Hard Services 23.5% 0.26 Income -4.3% Total 100% 1.08 Parks under 50,000 sq ft are 0.8% less expensive than the benchmark for Parks under 100,000 sq ft compared to a 14.4% increase last year. Bulky Goods Parks under 50,000 sq ft are 20% more expensive, Retail Parks under 50,000 sq ft are 20.6% more expensive however Shopping Parks under 50,000 sq ft were considerably less expensive, although the data set was particularly low for Shopping Parks < 50,000 sq ft thus potentially skewing this figure. Service Charge Budgets 2014 The overall average service charge budget rate was 1.08 per sq ft for Retail Park OSCAR 2014 calculated from the total database. Budgets for the same Parks in each year (103) decreased by 2% from 1.03 in 2013 to 1.05 per sq ft for Average 2014 Budget Rates Main Range Mid 50% Class Average Service Charge Rate Average budgeted service charge components by percentage across Parks common to each year are as follows: Average Budgeted Service Charge Components by % across Matched Parks Each Year 2013 Rate/sq ft 2014 Rate/sq ft Management 17% % 0.17 Management Fee 9% % 0.08 Administration 8% % 0.09 Utilities 7% % 0.08 Soft Services 59% % 0.62 Cleaning/Landscape 31% % 0.34 Security 26% % 0.28 Promotions 1% % 0.00 Hard Services 22% % 0.20 Income -4% % Total 100% % 1.03 Bulky Goods Retail Shopping All

12 12 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks 2014 Budget Components by Park Classification Bulky Goods Retail Shopping Service % Sqft Rate % Sqft Rate % Sqft Rate Management 19% % % 0.23 Management Fee 10% % % 0.11 Administration 9% % % 0.12 Utilities 8% % % 0.09 Soft Services 56% % % 0.83 Cleaning/Landscape 30% % % 0.38 Security 23% % % 0.43 Promotions 3% % % 0.03 Hard Services 24% % % 0.26 Income -6% % % Total 100% % % 1.35 Budgets between 2013 and 2014 decreased overall by 10% with each class showing varing increases Bulky Goods Parks by -8%, Retail Parks by -1 % and Shopping Parks by 5%. Comparison of reconciled service charge budget 2013 to budgeted service charge 2014 This section compares the Reconciled 2013 service charge figures with the Budgeted 2014 service charge figures for the same Parks to assess likely future variations in costs. Database Park Class Reconciled 2013 Budget 2014 Difference Common Overall % Common Bulky Goods % Common Retail % Common Shopping % Year on year comparisons Reconciled 2012 Service Charge with Reconciled Service Charge 2013 This analysis shows an increase between budgets and reconciled service charges in the same year overall of 5% and ranging from 8% for Retail Parks to 3% for Shopping Parks. Comparison Between Budget 2013 to Reconciled Service Charges 2013 Database Park Class Difference % Difference Common Overall % Common Bulky Goods % Common Retail % Common Shopping % Database Park Class Budget 2013 Actual 2013 Difference Common Overall % Common Bulky Goods % Common Retail % Common Shopping % Services charges reduced between 2012 and 2013 for all classes of parks by 1% and there were falls in each class varying from -3% for Shopping Parks, 9% for Retail Parks and -11% for Bulky Goods Parks Budget Comparison to 2013 Budget Overall there was a 1% increase from budgeted 2013 to actual 2013 expenditure with Bulky Goods Parks showing an increase of 4%, Retail Goods Parks showing a decrease of 2% and for Shopping Parks, an increase of 2%. Database Park Class Difference Common Overall % Common Bulky Goods % Common Retail % Common Shopping %

13 13 Trend analysis The records of service charges over the last 8 years have been analysed to provide an indicator to the likely progression of service costs on Retail Parks. We have taken as a measure of the annual changes over that period percentage increases reported each year on like for like datasets between each year. To these we have applied the retail prices index for all services as representative of the level of inflation. Rates per sq ft Retail Park OSCAR Headline Rates against RPI (all services) Reconciled Budgets RPI The graph highlights the progression of budgets since 2010 and probably illustrates attempts by property managers to retain the value of their service charges by trying to allow for inflation. The progression of reconciled service charges since 2010 seems to tell a very different story, that of continuing saving by property managers to minimise the impact on tenants in difficult economic conditions. This now means that service charges are at levels seen in 2006 notwithstanding the effects of inflation. The fall in reconciled service charges in 2013 was greater than we were expecting and equally the increase in the 2014 budgets was higher than we had predicted as property managers appear to be recognising that service charges cannot keep reducing. With increasing optimism being expressed in the recovery of the economy over the last couple of months it is likely that the decline in reconciled service charges will be reversed for 2013/14 with small increases and budgets will at least continue to track or exceed inflation. The Index shows that the differential between budget and reconciled year end service charge costs, which was increasingly widening over the last three years has this year narrowed. However landlords are still, on average, ensuring there is a circa 10% under spend in actual expenditure against budget Year

14 14 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Service charges 2014 by location, size and park classification Analysis has taken the variants of size and location and applied these to service charge cost expenditure within the different classifications of Parks and overall to provide a simple benchmark. The usefulness of these results is very dependent upon the size of the individual database in each classification and the number of Parks in each group is shown in the table in brackets alongside the appropriate rate. Park Classification Size Service South North National Average Number of Parks Bulky Goods < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income

15 15 Park Classification Size Service South North National Average Number of Parks Retail Parks < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income

16 16 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Park Classification Size Service South North National Average Number of Parks Shopping Parks < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Comment The highest rate was 1.75 per sq ft for Shopping Parks in the South, under 100,000 sq ft (the most expensive class last year was Shopping Parks in the South over 200,000 sq ft), while the lowest was 0.34 per sq ft for Bulky Goods Parks in the South between over 200,000 sq ft (last year it was Bulky Goods Parks between 100,000 sq ft and 200,000 sq ft in the South).

17 17 Budgets 2014 by location, size and park classification Analys is of this data has included the size, location and classification of Parks and applied these to budgeted service costs to provide a simple benchmark. The number of Parks in each category is shown in the table in brackets alongside the appropriate rate. Park Classification Size Service South North National Average Bulky Goods < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income > < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income

18 18 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Park Classification Size Service South North National Average Retail Parks < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income > < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Retail Parks > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income

19 19 Park Classification Size Service South North National Average Number of Parks Shopping Parks < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks > < Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Number of Parks Shopping Parks > Management Management Fee Administration Utilities Soft Services Cleaning/Landscape Security Promotions Hard Services Income Comments The highest rate was 1.97 per sq ft for Shopping Parks in the South under 100,000 sq ft (the most expensive class last year was Shopping Parks in the South over 200,000 sq ft), while the lowest was 0.45 per sq ft for Bulky Goods Parks in the South between 100,000 and 200,000 sq ft.

20 20 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Leisure Parks Leisure Parks Database The database contains 19 Leisure Parks, which represents around 9% of the Leisure Parks (as identified by Trevor Woods Associates) across the United Kingdom. Data has been provided by our contributors showing: A total spend of 3.5 million in 2013 A total budgeted spend of over 4.3 million in 2013 A total floor area of 3.2 million sq ft Overall a total of 220 units recorded across 19 Parks Reconciled service charges by component percentages The reconciled service charges have been analysed on individual service lines using the headings recommended in the RICS Code of Practice. Component Percentages 2013 Expenditure Rate per sq ft Management 14.1% 0.18 Management Fee 9.2% 0.12 Administration 4.8% 0.06 Utilities 8.5% 0.11 Average rates Reconciled Service Charges 2013 The average rate for all 2013 reconciled service charges across the Leisure Park database is 1.30 per sq ft and based on common Parks for each year is a 20.8% decrease on the previous year, but this is on a small dataset. Soft Services 59.4% 0.78 Cleaning/Landscape 20.7% 0.27 Security 37.8% 0.49 Promotions 0.9% 0.01 Hard Services 18.2% 0.24 Income -0.2% 0.00 Total 100% 1.30 Average service charge components by percentage across parks common to each year The reconciled service charges have been analysed on individual service lines using the headings recommended in the RICS Code of Practice Rate/sq ft 2012 Rate/sq ft Difference Management 9% % % Management Fee 8% % % Administration 2% % % Utilities 15% % % Soft Services 55% % % Cleaning/Landscape 23% % % Security 32% % % Promotions 0% - 0% - #DIV/0! Hard Services 20% % % Income 0% % % Total 100% % %

21 21 Budgets 2013 The average rate for 2014 budgets is 1.43 per sq ft. There was reduction of 23% from the 2013 budgeted service charges comparing common Parks in each year. Service charge budgets by component percentages The budgeted service charges have been analysed on individual service lines using the headings recommended in the RICS Code of Practice. Component Percentages 2014 Budget Rate per sq ft Management 15.0% 0.21 Management Fee 9.3% 0.13 Administration 5.7% 0.08 Utilities 6.5% 0.09 Average Budgeted Service Charge Components by % across Common Parks Each Year 2014 Rate/sq ft 2013 Rate/sq ft Difference Management 16% % % Management Fee 9% % % Administration 7% % % Utilities 6% % % Soft Services 54% % % Cleaning/Landscape 26% % % Security 28% % % Promotions 0% - 0% - 0% Hard Services 24% % % Income 0% % % Total 100% % % Soft Services 58.4% 0.83 Cleaning/Landscape 23.6% 0.34 Security 33.4% 0.48 Promotions 1.4% 0.02 Hard Services 21.2% 0.30 Income -1.1% Total 100% 1.43

22 22 Retail & Leisure Park OSCAR 2014 Service Charge Analysis for Retail Parks and Leisure Parks Definition of terms Types of Retail Parks: The research in earlier years has shown that planning user which is exhibited in the use of each retail unit, is the major determinant in the generation of footfall on Retail Parks and thereby the principal influence on running costs. Hence at one end of the scale a DIY unit will have a different level of footfall and require a different level of servicing than a fashion outlet. Analysis of the unit user information (tenant analysed as trading in Bulky Goods, fashion or retail ) on each Park has determined the dominant classification of that Park. Bulky Goods Parks (65%+ of unit users are in Bulky Goods ) and 48 Parks are in this classification Retail Parks (under 30% unit users in fashion and clothing and not above 65% of unit users in Bulky Goods ) and 99 are included Shopping Parks (30%+ of unit users are in fashion and clothing or usually found in high street locations, but not more than 65% in Bulky Goods ) with information from 46 included Size Bands These have been selected as follows Under 100,000 sq ft Over 100,000 sq ft but not more than 200,000 sq ft Over 200,000 sq ft OSCAR is an acronym for Office Service Charge Analysis Research. This analysis was commenced by JLL nearly 30 years ago covering initially only office service charges. This was joined by Retail OSCAR after a few years dealing with shopping centre service charges. The OSCAR name has been retained for Retail & Leisure Parks OSCAR. Data - The data on which Retail & Leisure Park OSCAR is compiled is from the service charge costs paid by occupiers to owners of Retail and Leisure Parks. The costs do not include direct costs borne by occupiers in relation to the maintenance, repair and use of their own demised unit. Information has been provided on both reconciled service charges and service charge Budgets. Reconciled Service Charges - The data for the reconciled Service Charge analysis is drawn from audited or certified Service Charge accounts with year ends falling within the 2013 calendar year. All costs are net of VAT. Service Charge Budgets - The data for Budget analysis comes from budgets issued to tenants with year ends falling within the 2014 calendar year. All costs are net of VAT. Cost-Rates - The cost-rates have been calculated by dividing the total Service Charge costs by the gross internal floor area of the retail units within the park. Expenditure Definitions Management Management Fee charged for the management of the Park Administration - Site supervision, Health & Safety compliance, auditing accounts and costs of any site staff. Data for this heading is provided in various headings from different contributors. The use of this summary heading while not referred to in the Code of Practice enables results to be shown in a consistent manner for comparison Utilities Costs of electricity, gas and water paid for by the Landlord Soft Services Landscape/Cleaning Cleaning and Landscaping. These two headings have been combined as they often overlap and some Operators will put spend under one heading and some in the other. We have sought to avoid this confusion by pulling the figures together Security Cost of security cover and security equipment Promotion Any promotional costs recovered via the service charges Hard Services Fabric, Drainage and M&E repairs and maintenance. This also includes exceptional expenditure Income Any income credited to the service charge usually from lettings or interest Insurance Insurance premiums have been excluded from this analysis as in a lot of Parks insurance costs are not included in service charges Exceptional Expenditure Within this publication this is included within hard services. These cost headings have been prepared to follow the RICS Code Of Practice Service Charges in Commercial Property.

23 23 Geographical areas Location The geographical areas have been chosen as follows; South London and South East, South, South West, Wales, Midlands and East Anglia North North (area north of Cheshire, Derbyshire, Nottinghamshire and Lincolnshire) Scotland and Northern Ireland This selection was adopted because of the lack of a major influence on cost of services for Retail Park OSCAR, of London and the South East, which is contrary to both Retail OSCAR and Office OSCAR service charge analysis. A straight North South divide has therefore been adopted as above Leisure Parks No geographical analysis has been undertaken on the leisure park data in this edition.

24 Contacts Property & Asset Management BDO Nigel Wheeler Chairman +44 (0) Nick Lees Lead Director +44 (0) Catherine Lambert Chairman Shopping Centre Management +44 (0) Duncan Ashman Partner Service Charge Accounting +44 (0) Ros Oxley Director Retail Management +44 (0) Lucy Oldham Director Retail Management +44 (0) JLL Office JLL 40 Bank Street Canary Wharf London E14 5EG +44 (0) jll.co.uk COPYRIGHT JLL, IP, INC All Rights Reserved. While every effort has been made to ensure accuracy and completeness, we cannot offer any warranty that factual errors may have occurred. JLL cannot accept any legal responsibility for any damage or loss suffered by reason of any inaccuracy or incorrectness concerning information and material in this report.