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Costs of maintaining commercial properties are skyrocketing. A 45% increase in just 4 years

REAL ESTATECosts of maintaining commercial properties are skyrocketing. A 45% increase in just 4 years

The average service charge budgets in commercial properties in Poland have increased by 45% between 2019 and 2024, according to analysis by international advisory agency Cushman & Wakefield. Such significant increases were mainly due to the dynamically rising cost of utilities, which grew by 105% within the service charge. While there are only minimal increases of 2.4% in the budgets contracted for 2024, property owners and managers should double their efforts to change their structure and optimize long-term media consumption costs.

The service charge budget, or otherwise called the operational cost or common cost budget, includes maintaining cleanliness and technical infrastructure, security, repairs, insurance, management, administration, taxes and perpetual usufruct, as well as utilities.

Up to 2019, service charge budgets were relatively predictable, but everything began to change from 2020. According to data analyzed by Cushman & Wakefield, the rise in common cost budgets over the past four years averaged 45%. The critical years for the retail property market were 2022-2023, explains Paulina Bauer, Head of Retail Asset Services, Cushman & Wakefield.

In discussing what happened between 2020 and 2024, they emphasized that the past few years have been one of the most dynamic, if not the most challenging, moments in the history of the global retail property market. Between 2020 and 2024, the sector experienced temporary closures due to the pandemic, trade restrictions, high inflation, uncertainty caused by the outbreak of war in Ukraine (which directly affects the availability of workers, especially in the construction sector), an increase in the price of steel, electricity, and gas, as well as the annual increase in the minimum wage level.

The dynamic growth of nominal budgets began in 2021. According to their estimates, in 2022, service charge budgets increased by almost 14% year on year, and in 2023 – by about 25%.

In analyzing the costs in specific budget lines, the biggest increases are observed in the category of media consumption.

Without the pressure related to electricity or gas prices, the increase in service charge budgets would be in line with the inflation factor but always below the average annual rates announced by GUS. It is worth emphasizing that the reaction to increasing costs in the category of so-called independent costs should always be a series of activities undertaken by owners and managers resulting in specific changes in the structure of budgets, says Agnieszka Bobela-Musiał, Regional Shopping Center Director, Cushman & Wakefield.

Finally, they added that efficient energy optimization and the application of intelligent systems monitoring media consumption are crucial for the budget security of properties and have a considerable impact on minimizing the negative impact of properties on the environment. This is key to achieving very ambitious ESG goals.

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