Just as confidence in retail investment seems to have restored, a significant piece of guidance quietly came into force at the turn of the year. Will it accelerate the progress the sector needs – or inadvertently put the brakes on, asks Nick Hilton, Partner at Workman writes for Property Week.
The second edition of the RICS Service Charges in Commercial Property standard took effect on 31 December 2025. It’s hard to argue with the intent: greater transparency, clearer accountability, better communication between landlords and occupiers.
But good intentions and good outcomes aren’t always the same thing. For a sector only now rebuilding investment confidence – after the collapse of anchor retailers from BHS to Debenhams, a wave of CVAs, e-commerce growth, and Covid – the timing deserves careful consideration.
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The UK’s shopping centres are, in many cases, old. Birmingham’s Bullring opened in May 1964 – Europe’s first covered shopping centre. A steady stream of openings followed through the 1970s, 80s and 90s before new development essentially stopped. Even the Bullring, redeveloped and reopened in 2003, is now more than two decades old in its current form.
The result is a large inventory of ageing enclosed schemes with building systems at or beyond their design life, and occupier expectations that have moved on entirely. Running them to a standard attractive to today’s retailers requires sustained capital commitment – not just routine maintenance, but meaningful improvement.
The energy challenge alone is acute. Commercial properties must meet EPC Band B by 2030. Many older schemes are nowhere near that standard, requiring new insulation, building services, lighting, glazing and HVAC – a fundamental overhaul for some. That investment must be funded, and historically a significant proportion has come through the service charge.
Getting on: Birmingham’s Bullring was built in 1964 and redeveloped in 2003 Credit: Shutterstock/ Pandora Pictures
How the model has worked – until now
Forward funding of major works through the service charge has been common practice. A landlord identifies a significant programme – a roof replacement, a new HVAC system, a lighting upgrade – and recovers the cost over multiple service-charge years.
Spreading recovery makes costs manageable for occupiers and underpins the investment case. When an investor acquires a shopping centre, part of what they’re underwriting is the ability to manage the asset proactively.
Unintended consequences
The second edition places much stronger emphasis on occupier consent. Forward-funding arrangements spanning multiple service charge years now require explicit occupier agreement, with separate cost categories for future works clearly identified.
In principle, it’s reasonable. Occupiers should understand what they’re paying for. But the practical problem is this: average retail lease terms are getting shorter. Occupiers on three or five-year leases have little appetite to buy into a ten-year improvement programme. Getting meaningful consent from a large and diverse occupier base for significant multi-year expenditure is going to be difficult – and when consent isn’t forthcoming, the consequence is delay to the very works that make these assets viable.
There’s a real risk that shorter leases, complex consent requirements, and increased dispute mechanisms combine to create an effective veto against major refurbishments. If investors cannot confidently execute upgrade programmes, capital goes elsewhere. For an asset class that has only recently started attracting serious money again, that matters.
What to do now
Due diligence on the service charge position is more important than ever: the building’s condition, material upcoming expenditures, and how likely the occupier base is to engage constructively with a forward-funded programme. Where quick efficiencies are achievable – through better procurement, building technology or operational improvements – identify and execute them early. Building occupier confidence through demonstrated competence is the most effective foundation for getting consent on larger programmes later.
The RICS update is a genuine step forward. But it would be a poor result if guidance designed to improve landlord-occupier relationships made it harder to invest in the assets those relationships depend on.
Shopping centres are far from a lost cause – investor interest is returning, and occupier demand in fashion, food and beverage, and leisure is robust. The sector needs the flexibility to act. Those who treat the new code as a framework for better collaboration, rather than a constraint, will be best placed in this improving market.
This article first appeared in Property Week.
