Welcome to our sixth e newsletter of 2011.
It’s Wimbledon already and the drought has broken so we take a look at comfort in the workplace to see who and what can make a difference. The occupier is again the focus of high level strategy within the BCO and BPF and we draw attention to this, following recent public declarations. We again find the need to touch on CRC reporting and introduce some potential assistance, up against an end of July deadline and identify new legislation within the Bribery Act which has significance beyond real estate.
It’s Wimbledon already and the drought has broken so we take a look at comfort in the workplace to see who and what can make a difference. The occupier is again the focus of high level strategy within the BCO and BPF and we draw attention to this, following recent public declarations. We again find the need to touch on CRC reporting and introduce some potential assistance, up against an end of July deadline and identify new legislation within the Bribery Act which has significance beyond real estate.
We top and tail the Newsletter with a commentary on the hot topic of Sinking Funds, and close off with our Q and A - Occupier’s security.
Enjoy your strawberries and cream.
Are sinking funds a thing of the past?
The rise of the serviced office network, mobile working and the change in business sentiment towards shorter leases, has seen less and less sinking, reserve and depreciation funds (‘Funds’) being used. Typically new lease terms are generally 10 years and often contain break clauses which, if actioned would reduce the duration of the term. Together with the questions over how these funds are treated for tax, is it not surprising that rarely do we see these funds being used and we ask if there’s a future need for them?
These ‘Funds’ were used as a means of spreading the cost of large scale repairs or replacement of plant and machinery serving the common parts of a property. By smoothing out these potential peaks and troughs in an annual service charge allowed occupiers to better predict costs over the lifetime of the lease but not all landlords were deemed trustworthy and this frequently led to mistrust between the landlord and the tenant on how the money was being held, and more importantly spent. Was the tenant right in believing the landlord was using this money to improve HIS property?
These ‘Funds’ were used as a means of spreading the cost of large scale repairs or replacement of plant and machinery serving the common parts of a property. By smoothing out these potential peaks and troughs in an annual service charge allowed occupiers to better predict costs over the lifetime of the lease but not all landlords were deemed trustworthy and this frequently led to mistrust between the landlord and the tenant on how the money was being held, and more importantly spent. Was the tenant right in believing the landlord was using this money to improve HIS property?
The traditional 25 year lease allowed property managers the chance of introducing an element of certainty to maintenance and repairs within a property. But these ‘Funds’ work best for large projects such as replacing the air conditioning, lifts or heating system, which are expensive, so collecting tenant contributions over a long period of time can prove helpful. Shorter leases however, do not afford the same luxury and increases the possibility of tenants having to meet large scale cost in a single year. But the possibility of establishing a ‘Fund’, collected over a shorter period, for smaller projects and using it for works that would improve the operation of the property may be worthwhile. We see energy efficiency as an area where this could work.
With mounting pressure to see energy efficiency improved in the commercial property market, property investors are looking at ways of meeting the goal set by the Government (cutting carbon emissions by 50% by 2025). This ambitious target will involve a collaborative approach by both landlords and tenants. So to answer our earlier question, we strongly believe a sinking fund approach on a project by project basis over a shorter period will work well in delivering operational changes to the building which could skew a single year’s service charge.
The Bribery Act 2010 – What does it mean for business?
The Bribery Act details both general offences in relation to bribing another person or being bribed and a specific offence relating to bribing foreign public officials, and introduces a specific corporate offence for failing to prevent bribery.
This new crime, ‘failure to prevent’ bribery, will result in companies having to introduce policies and procedures that prevent corrupt practices within their ranks or by 3rd parties on their behalf. The consequences of not being able to prevent bribery are unlimited fines as well as other consequences such as being struck off the register for public/government contracts. Individuals found performing that act of bribery may incur a prison sentence of 10 years and an unlimited fine.
Corporately, the only defence is where you can show that adequate procedures are in place which are designed to prevent bribery occurring. What are ‘adequate procedures’? At the moment it is not clear, but the Act does specify that the Secretary of State for Justice will issue ‘guidance about commercial organisations preventing bribery’. To introduce the right procedures will involve a combination of departments ranging from human resources, internal auditing, legal compliance and finance to name but a few.
In a recent survey conducted by PwC, 75% of Non Executive Directors, Heads of Internal Auditing, Heads of Risk Management and Senior Executives asked said their Boards or audit committees had not considered the implication of the Bribery Act.
Corporately, the only defence is where you can show that adequate procedures are in place which are designed to prevent bribery occurring. What are ‘adequate procedures’? At the moment it is not clear, but the Act does specify that the Secretary of State for Justice will issue ‘guidance about commercial organisations preventing bribery’. To introduce the right procedures will involve a combination of departments ranging from human resources, internal auditing, legal compliance and finance to name but a few.
In a recent survey conducted by PwC, 75% of Non Executive Directors, Heads of Internal Auditing, Heads of Risk Management and Senior Executives asked said their Boards or audit committees had not considered the implication of the Bribery Act.
Consideration should be given to the policies of the current Government where they are encouraging the private sector to participate in Government contracts which can often include overseas contracts. This in itself will require those companies seeking such appointments to have adequate measures in place to avoid potential prosecution.
Landlord’s rushing to meet July 29th deadline
In compliance with the CRC Energy Efficiency Scheme, which was introduced in 2008, companies which consume large amounts of energy are required to report their carbon consumption figures every year. This Carbon Footprint Report, which must be submitted by July 29th, will define which sources they have to report every year over the next four years, and will say how much energy was used, and carbon emitted, from 1 April 2010 to 31 March 2011.
According to a survey conducted by the accountancy firm PwC earlier this year, only 21% of large public and private organisations had previously reported carbon emissions which meant 79% had never looked at, or collected data, on this subject. To get it right you must work with a company who has a deep understanding of the subject. Here we look at one company.
Carbon Guerrilla is a web based platform for clients to track and manage their energy consumption and generation and associated carbon and Greenhouse Gas emissions. The CG dashboard provides quick and easy user access to multi-portfolio data management and reporting:-
Identifying and calculating all sources of emissions directly and indirectly attributable to the operation – from 500+ emission categories, from electricity to aviation to waste
Allocating these emissions to individual sites, cost centres or assets to build a comprehensive and robust inventory, benchmark against others, set budgets and monitor targets
Analysing where hot spots of energy use occur and run 'What If' Scenarios to work out reduction strategies
Complying with legislation such as the Carbon Reduction Commitment Energy Efficiency Scheme (CREES), UK Emission Trading Scheme, EU Emissions Trading Scheme, ISO 14064 (Reporting of Green House Gas emissions at an organisational level, PAS 2050 (standard method for assessing GHG emissions of goods and services; and, later in 2011, American, Australian and Japanese carbon schemes,
Managing reputational and financial liabilities by producing accurate reports for Footprints or Annual reports and, maintain an auditable evidence trail for regulators and stakeholders.
According to a survey conducted by the accountancy firm PwC earlier this year, only 21% of large public and private organisations had previously reported carbon emissions which meant 79% had never looked at, or collected data, on this subject. To get it right you must work with a company who has a deep understanding of the subject. Here we look at one company.
Carbon Guerrilla is a web based platform for clients to track and manage their energy consumption and generation and associated carbon and Greenhouse Gas emissions. The CG dashboard provides quick and easy user access to multi-portfolio data management and reporting:-
Identifying and calculating all sources of emissions directly and indirectly attributable to the operation – from 500+ emission categories, from electricity to aviation to waste
Allocating these emissions to individual sites, cost centres or assets to build a comprehensive and robust inventory, benchmark against others, set budgets and monitor targets
Analysing where hot spots of energy use occur and run 'What If' Scenarios to work out reduction strategies
Complying with legislation such as the Carbon Reduction Commitment Energy Efficiency Scheme (CREES), UK Emission Trading Scheme, EU Emissions Trading Scheme, ISO 14064 (Reporting of Green House Gas emissions at an organisational level, PAS 2050 (standard method for assessing GHG emissions of goods and services; and, later in 2011, American, Australian and Japanese carbon schemes,
Managing reputational and financial liabilities by producing accurate reports for Footprints or Annual reports and, maintain an auditable evidence trail for regulators and stakeholders.
Many of the reports that the system can produce help to identify areas of occupation where overly high energy usage has taken place. Armed with this information the property manager now has evidence to engage both their client and occupiers and collaboration is something we continue to promote on a monthly basis. To find out more information visit their website www.carbonguerrilla.com for tutorials links to YouTube videos and pricing. Alternatively call the Carbon Guerrilla team on 0207 956 8698, especially if you are struggling with your CRC reporting.
If you’re too hot or too cold then take a look at this.......
Weather patterns are changing and seasons are becoming more extreme. This year the UK has seen a very cold winter, the driest spring in 100 years and there is talk of a possible hot summer. These unusual climatic changes may result in the office worker finding it difficult to be thermally comfortable. An odd term but the Health & Safety Executive (HSE) has found it important enough to devote a whole microsite on ‘Thermal Comfort’.
So what is thermal comfort? Well according to the HSE it’s a person’s state of mind that determines if they’re too hot or too cold. The microsite goes on to say that thermal comfort is not simply down to the temperature in the room but will also include other aspects such as environmental conditions; the heating, personal factors; the clothes an individual is wearing and how hard the individual is working.
At the heart of this microsite are the six factors that affect a person’s thermal comfort; air temperature, radiant temperature, air velocity, humidity, clothing insulation and metabolic heat. The importance of understanding how these inter-relate with one another is important in determining how someone’s thermal comfort is affected. The HSE has produced a very useful checklist to help assess thermal comfort and a link can be found on our website. Throughout the year, but particularly in the summer hot working conditions can lead to a contentious relationship with the landlord or property manager and the root cause isn’t always down to the management of the heating or air-conditioning system in a building.
As it is seen from this article there are a number of factors which contribute to a person’s thermal comfort and certainly it would be helpful for occupiers to review these before contacting the property manager about a problem. In many situations it may be quicker for the occupier to eliminate any other factors before determining if it’s the heating/cooling system or control mechanism that is causing the problem.
BT is aiming for 1.6 – What is your business aiming for?
Both the British Property Federation (BPF) and the British Council for Offices (BCO) have recently commented that developers, employers and property managers need to be more cognisant of the needs of the end-user in their thinking towards the creation and use of real estate.
In a recent interview with the Estates Gazette, the BCO’s incoming president, Gary Wingrove commented “It’s time now for occupiers to drive the agenda for space and for Landlords and developers to help us to do that, rather than to say that we have to take what’s there because they’ve decided that that’s what we want’’. As part of implementing this, Wingrove is suggesting an Occupier-focused accreditation scheme for property agents so as to ensure that areas such as design and sustainability are understood and form part of the advice that an occupier should expect from his property agent.
In a recent interview with the Estates Gazette, the BCO’s incoming president, Gary Wingrove commented “It’s time now for occupiers to drive the agenda for space and for Landlords and developers to help us to do that, rather than to say that we have to take what’s there because they’ve decided that that’s what we want’’. As part of implementing this, Wingrove is suggesting an Occupier-focused accreditation scheme for property agents so as to ensure that areas such as design and sustainability are understood and form part of the advice that an occupier should expect from his property agent.
Wingrove himself works for one of the UK’s largest corporate occupiers, BT, and is acutely aware of changing working practices and the need for rationalisation across large portfolios. He is also a major advocate for flexible working and sees how improved technology is determining property space requirements. Indeed, BT now claims that over 60% of staff has no allocated desks and that their targeted workspace ratio is 1.6 people per desk.
This shift was picked up at the recent BCO Conference where Head of Innovation at Ove Arup and Partners, Dr Chris Luebkeman said that graduates were far more likely to be fluid workers who are familiar with high levels of engagement with evolving technologies. He branded the new generation ‘’clickizens’’ who present both a challenge and an opportunity to those involved with designing workplaces of the future. The ‘clickizen’ would expect to be able to work at any time and any place and it is to them that designers need to turn in order to understand what is meant by ‘normal’, and design accordingly.
Aside from the physical aspects of occupation, the BPF is supporting the Best Practice Index (BPI) which looks to measure best practice in property management, and as Liz Peace of the BPF says’’. This is an excellent example of property owners and managers working in collaboration with occupiers to improve customer service in the property industry’’.
The occupier’s voice is at last being heard in the right places within the industry.
Question & Answer
The property manager takes care of the security in the common areas; does that mean we do not need to take any extra security measures for our demise?
It’s not unusual for a tenant to believe that the property manager is responsible for securing a multi-let building from potential break-ins or breaches in security. Where the property lacks any on-site presence from a building manager, a security guard or receptionist then the property manager will rely on other elements to secure the building such as an access code, access cards, CCTV or video entry systems. Despite having an array of equipment at their disposal if an intruder is determined to get into the building then they will find away.
Using a number of factors such as size of property, its location, where it’s situated, and how it’s being presented to the market the property manager will define and manage the security arrangements. So if the property is located in the City of London then the security arrangements will differ to those of a retail shopping destination or an industrial estate. But what is important is that these measures are conveyed to the occupiers so they can dovetail their own arrangements which may include sharing the costs of a mobile security guard or linking in to the building’s CCTV system by locating cameras dedicated for your demise.
It’s not unusual for a tenant to believe that the property manager is responsible for securing a multi-let building from potential break-ins or breaches in security. Where the property lacks any on-site presence from a building manager, a security guard or receptionist then the property manager will rely on other elements to secure the building such as an access code, access cards, CCTV or video entry systems. Despite having an array of equipment at their disposal if an intruder is determined to get into the building then they will find away.
Using a number of factors such as size of property, its location, where it’s situated, and how it’s being presented to the market the property manager will define and manage the security arrangements. So if the property is located in the City of London then the security arrangements will differ to those of a retail shopping destination or an industrial estate. But what is important is that these measures are conveyed to the occupiers so they can dovetail their own arrangements which may include sharing the costs of a mobile security guard or linking in to the building’s CCTV system by locating cameras dedicated for your demise.
Although the property manager oversees and manages the security strategy for the common parts they are NOT responsible for the security arrangements of the individual leased units. This falls firmly in the lap of each individual tenant. The security of a tenant’s demise must still remain with the occupier and as such a prudent tenant would review the security arrangements in the building and supplement these with their own bespoke requirements. However, security should not just relate to the physical nature of the property but may also include looking at protecting the power source and telecommunication cables coming into the building.
Ultimately the tenant is responsible for securing their own demised premises and can achieve a more secure environment by understanding the building’s security strategy operated by the property manager. As with all cases, working together and avoiding duplication will deliver better results.
If you would like to discuss your specific circumstances please call us on 0800 865 44 50.
