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Soaring costs associated with council rates, electricity and insurance are driving increases in commercial building operating costs which far exceed the rate of general inflation, the latest report has found.

In their latest analysis, property services company Turner and Townsend said operational expenses for commercial buildings had risen by 58 percent over the last decade.

This is more than double the increase in the CPI over that same period (28 percent) and more than three and a half times the increase in commercial building construction costs.

Driving the increases were rising costs in areas such as electricity, rates and insurance, the report said.

Across all regions, council rates have consistently risen by an annualised average of 5.7 percent – well above average annual increases in the inflation rate.

Increases were particularly strong in Melbourne and Adelaide during 2013 and 2014, where rises of around 16 percent were recorded.

A further factor has been rising energy costs, which surged 18 percent in 2012 alone despite having eased back over the past year.

Driven by growing risks associated with climate change, fire and flood, meanwhile, insurance premiums have risen by 60 percent over the decade.

Gary Emmett, Senior Economist for Turner & Townsend, said there was a growing focus on reducing operating costs amongst commercial landlords and tenants, especially whole-of-life costs as opposed to up-front outlays.

He said cost pressures could rise further going forward.

“Businesses need to be mindful of the additional costs of building ownership as costs typically spiral upwards,” Emmett said.

“The trend towards higher cost increases across major commercial building expenses is evident over the past decade. Businesses are unlikely to impact on council rate increases apart from lobbying, which is more often than not unsuccessful.

“With electricity so volatile, there is a greater requirement for more sustainable designs. Building owner operators or building tenants should identify sustainable energy saving technologies to reduce power usage, and insist any new buildings install these technologies.”

The analysis covered Sydney, Melbourne, Brisbane, Perth and Adelaide.

 
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