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The “total FM” model is failing in the shopping centre environment because of a lack of good suppliers.
That was the message from a roundtable debate between FM and property professionals operating in the shopping centre marketplace held late last month.
There aren’t enough Total FM suppliers operating in the market to enable us to tender work on that basis, argued Catherine Lambert, head of shopping centre management at Jones Lang LaSalle. “If we can’t tender it then it is difficult to show best value to the retailers.”
Jeremy Waud, managing director of Incentive Facilities Management, which hosted the debate, agreed. “It seems that there are not enough companies offering a TFM model and this makes land agents uncomfortable about working in this way and makes it hard to put it out to tender.”
Total FM contracts tend to be overpriced and are not transparent, added John Michell, head of shopping centre management at King Sturge. “We use single service suppliers but recently inherited a TFM run centre. When we unpicked the contract we found significant over manning, fees on top of fees and a total lack of transparency. That said, I do believe that the TFM model is a good one if you have the right supplier.”
Philip Osborne, head of property services at Land Securities, argued that if you have a TFM model in operation then you need a different management structure in place than if managing single suppliers. “The requirements are totally different.”
The downward pressure on service charges was also a keen area of discussion following a year where the retail sector faced major challenges and the focus fell on reducing service charges – often by more than 10 per cent.
“While the service charge needs to be competitive it is important that we differentiate between ongoing savings and short-sighted savings that are achieved by deferring things,” argued Andrew Thomson, UK operations director for Hammerson. “Next year is going to be a challenge for all of us as the pressure to reduce costs will continue, yet all the low-hanging fruit has gone and our centres just keep getting older.
John Prestwich, head of retail asset management at Cushman & Wakefield agreed. “There is immense pressure to keep the service charge low and in some cases this is being done by postponing work that needs to be done to keep the charge artificially low.” Incoming tenants are getting wise to this and are asking for specific areas of work to be excluded from their charges, he said.
The only way that further reductions can be made in many cases is by cutting out necessary maintenance which is very risky, argued John Gray from John Gray Service Charge Consultants. “For example, with escalators where the lack of a planned maintenance programme can shorten the life of the equipment by many years. This is just storing up cost and problems. But in some cases it is necessary as retailers are struggling to pay the charges.”
But a well-maintained centre, which is invested in, will benefit both landlord and retailer, all the participants agreed. All retailers are competing for customers and the environment is extremely important, added Lambert. “Soft services such as front-of-house and toilets are vital for this.”
Paul Lancaster, general manager at Lakeside Shopping Centre, agreed. “You need to continually invest to attract new retailers and be proactive and visible. Potential retailers always notice how many cleaners and security staff they have seen.”
And a poorly maintained centre could deter potential retailers or cause them to question the service charge, argued Gray. “When we visit a centre with a client the chances are if it looks alright we will sign the deal. If it looks scruffy and badly managed the client starts to think about capping the service fee, having a condition report and refusing to pay for some elements.”
This article was also featured on http://www.fm-world.co.uk |
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