Millions of pounds saved in retail service charge reduction pilot

Landlords British Land and Land Securities at their Meadowhall shopping centre, Sheffield, and White Rose Shopping Centre, Leeds have cut costs as part of a trial to reduce service charge.

The landlords and retailers ‘Working Group’, which was formed to develop initiatives to help each other cope with the deteriorating economic environment, revealed British Land’s Meadowhall shopping centre will deliver budgeted cost savings of more than 18% in the first year, rising to 20% in year two, reducing the service charge operational costs by more than £2m a year to around £7.75/sq ft.

Land Securities’ White Rose shopping centre will deliver a 13% reduction in its annual service charge, reducing the budget to £7.25 /sq ft.

The range of measures include:

-more efficient delivery of security, cleaning and customer services.

-a renewed focus on energy saving measures and revised preventative maintenance plans.

-better integrated centre management and managing agents reporting structures.

The cost savings are the result of three months collaborative work between the landlords, the shopping centre management teams, managing agents and major retailers.

The lessons learnt from the exercise will be extended across the rest of the Working Group’s retail portfolios, helping to deliver further cost reductions.

Andrew Varley, group property director at Next, said: ‘We are delighted with the savings that British Land and Land Securities have identified. The landlord and retailers Working Group has been very productive in looking at ways to reduce service charges without impacting on customer service levels.'

Varley added: ‘I believe significant savings will be achieved in the other pilot studies we are carrying out with Prupim and Capital Shopping Centres at Cribbs Causeway Bristol and Westfield at Merry Hill Shopping Centre in Dudley.

'I am very hopeful that the information gained from these studies can now be used to reduce service charges across the majority of shopping centres in the country for 2009 and beyond.’

Andrew Jones, director at British Land, said: ‘It is equally beneficial to landlords and retailers to keep service charges at realistic and appropriate cost levels regardless of the trading environment. While there is no ‘one size fits all’ solution to reducing shopping centre service charges, by mutually identifying changes to service requirements and realigning resources to those that add value, we will achieve these savings without impairment to customer service levels.’

The savings are part of a pilot undertaken at a number of shopping centres including Land Securities at White Rose, Leeds; Prupim’s and Capital Shopping Centres at Cribbs Causeway in Bristol; British Land at Meadowhall in Sheffield and Westfield at Merryhill, in the west Midlands.

The Working Group was set up to look at changes to rent payments, reductions in service charge and changes to lease structure and further announcements on the trials will follow.