THE recession has cost lives -- the lives of some of the UK's largest

property companies.

''Value for money'' is the current buzz phrase for tenants and

shoppers alike. Because of this, the mid and late 1990s are likely to

witness a glut of discount stores emerging, where keeping running costs

low is a major objective.

There is no doubt that as the recession drags on, it is having a

marked effect on the management of commercial property. One company

rising to this challenge is Erdman Lewis which manages one of the

largest property portfolios in Scotland, including shopping centres,

offices, and industrial properties.

Rationalisation during a recession is vital for the property manager.

The astute property manager will be proactive, addressing tenants'

problems before they arise. Tenant contact and communication is more

important than ever. It enables the property manager to anticipate

problems, plan for lease expiry and so on. All of this, including

assiduous care for the property, protects the client's investment. It

may be that the client needs to be alerted to changes in surrounding

property values or uses. Avoiding rental voids, which may require moving

a tenant, and succession planning are all essential jobs for the

property manager in servicing a client successfully.

Increasingly the management of individual properties is being regarded

as the management of individual businesses and therefore budgeting and

cost control have become paramount. Some tenants have asked for a

reduction in service costs, but the pragmatic agent will aim at a nil

increase or one corresponding to the current rate of inflation. This, of

course, has to be achieved while still maintaining acceptable standards.

In a recession tenants are often unable to pay their rent on time,

which causes the landlord difficulties, as he relies on the income to

pay the interest on his borrowings. Because of the knock-on effect on

the capital investment, landlords are reluctant to reduce rents; they

will, however, in some cases accept payment on a monthly, rather than a

quarterly basis. Ratners is currently negotiating this method with its

landlords for a limited period.

This inability to pay on time has resulted in many vacant properties,

causing more of a headache to the already pressurised landlord, who not

only loses his income, but additionally has to fund the property, adding

to his cashflow problems. If he is also involved in surveying, he will

be finding the market increasingly competitive, with fierce fee

undercutting taking place.

Service charges have been brought into sharp focus by the recession,

especially in the case of shopping centres, where retailers are faced

with falling revenue and increasing overheads. In these centres they

usually represent a relatively small percentage of the tenant's fixed

charges. Service charges have been brought into sharp focus by the

recession, especially in the case of shopping centres, where retailers

are faced with falling revenue and increasing overheads. In these

centres they usually represent a relatively small percentage of the

tenant's fixed charges.

Service charges have recently come under an exceptional level of

scrutiny, creating a growing industry for service charge investigators

-- many of them ''poacher turned gamekeeper''. Additionally, rents are

fixed on a five-year cycle and traders now find themselves paying high

sums agreed in boom times.

A recession affects costs which in this case translate into service

charges, the amount incurred by the landlord (in addition to rent) for

the provision of services and facilities for his tenants. These vary; in

a shopping centre they include the employment of management staff,

repairs, heating, lighting, cleaning and security; in an office the

services are usually more restricted.

The service charge depends on a number of factors, such as the

physical layout of the building, its age and the level of services

provided; for an office block it works out at approximately #2.50 per

sq.ft, whereas the costs for a shopping centre will typically amount to

#4-#5 per sq.ft of the space occupied. This cost is ultimately passed on

to the shopper, through the profit margins on goods.

Another feature, not directly related to the recession, but

nevertheless a consideration, is the significant increase in insurance

premiums, as a result of UK insurers withdrawing cover for terrorism. A

scheme is being set up by the Government to reinsure the risk but it is

anticipated that premium rates will still increase by as much 100%.