Workplace Operating Costs Budget 2023/24

At a time when rising costs across many areas of the operating budget stand to affect businesses of all kinds, we are working with our customers to provide clear information to help them thrive. We were delighted that you could join us on the 31 January 2023 and hear from our panel of presenters on how we are working to support our customers.

Tim Hollands

SERVICE

Workplace service charge increased

—

External factors: RPI 13.4% and inflation at 10.7%

— Benefitted from £1m ‘saving’ through the 22/23 service delivery review

— Management Fee remained flat

— Cyber/NIST Tech costs increased Volatile energy markets resulted in significant increase of £6.3m (72.7%)

Marketing budget continues to remain flat following restructuring

— Hard Services / Exceptional Expenditure increased by £3m (17.75%). Limited due to taking a risk-based approach and using Forward Funding

— Pay rates increased by 10% to allow for cost-of-living crisis

— Contract extensions across the Workplace portfolio will see all FM contracts co-terminating on 31 March 2024

21.6% change in budget

by £11.61m

Our current energy risk position - Power

Our energy risk policy is to hedge little and often starting two years in advance in 6 month trading windows to become fully hedged before the delivery period (Financial year). The aim is to spread risk as much as possible by having a greater probability of avoiding extreme price peaks.

Our Customers have benefited from forward hedging but there is now a shift as we are forward hedging exposed positions at unprecedented prices.

Our strategy is to continue to spread risk as much as possible in these volatile market conditions and hedge below the market.

Our energy risk performance - Power

This graph shows our hedging performance showing the portfolio price (dark blue) and the market price (red) and the grey block showing the volume trades.

The government wholesale cap for power is set at £211 per MWh which is only set from 01/10/2022 to 31/03/2023. Landsec’s portfolio price of £99.45/ MWh is well below this cap this FY year.

23-24FY Hedging - Portfolio price closer to market price

Workplace service charge variances

Future of Facilities – FM Tender

SOLUTION DEVELOPMENT

Ideation / discovery workshops

— Draft outline optimal operating structure

Future of Facilities

TENDER PREPARATION

RFI / RFP

Finalise scope & critical success factors

Implement RFI (Dec 22)

Review RFI feedback & agree preferred bidder list (Jan 23)

COMMENCE TENDER PROCESS

— Finalise tender document

— Complete asset verification

— Finalise FM Partners

BIDDER SELECTION PROCESS

— FM Partner engagement

— Site visits

— Q&A sessions

— FM initial bids submitted

— Output analysed by Procurement

— Final bids submitted & reviewed

—

Stakeholder interview

Final tender playback & sign off

COMMUNICATION & ENGAGEMENT PLAN

CONTRACT DECISION & FM PARTNER SELECTION

— Final playback session

— Agree preferred FM Partners and model

— Confirm final selection

MOBILISATION

— Legal mobilisation

— Handover requirements

— Exit process for unsuccessful partners

— Agree 100-day review process

Discovery Design Implementation

Workplace

Operating Costs

Budget 2023-2024

Cyber Security

OUR RISK REDUCTION PROGRAMME

Andy Broad

HEAD OF CYBER SECURITY AND IT PLATFORMS

What have we done to protect ourselves and our customers?

Reassessed and restated our cyber risk – one of our primary group risks

Potential significant disruption to our organisation and to our site operations

Threats are from

— Outsiders

— Our supply chain

— Insiders

Responded through a programme of technology and security improvements

— Improved our security policies, services and systems

— Accelerated the upgrade/replacement of many older building management systems

— Created a new site IT operating model involving our delivery partners

— Changed the culture towards cyber security Made significant non-recoverable investments alongside other recoverable costs

Why have we done this and what does it mean for our customers?

To address the ever-growing cyber risks and provide a level of security and safety appropriate for Landsec and our partners

— Increased scrutiny from our stakeholders (partners, investors, auditors, board)

— In response to internal and external assessments and audits for where we were and should be

— Our obligation to protect our customers’ business interests and our guests’ data

What does it mean for us?

A sector-leading cyber security posture

— Many upgraded site systems with potential to drive more data-driven and efficient operations

In 2021, we announced our £135m net zero transition investment plan detailing actions we needed to take to meet our science-based target

Over the next 7 years, we will reduce our emissions by 11,000 tCO2e through:

— Improving the energy efficiency of our buildings: BMS optimisation, advanced AI technology and lighting upgrades

— Removing gas: replacing boilers with Air Source Heat Pumps

— Engaging customers: reducing energy consumption in our occupied spaces

— Increasing onsite renewable electricity generation: extending or installing solar PV across our retail assets

How will this impact service charge?

— Service charge will partially cover the installation of air source heat pumps. The cost for this will be equivalent to the cost for a like-for-like replacement of the existing heating and cooling system

— We will communicate the impact ASHP implementation will have on service charge costs in your building

— Energy prices are increasing and therefore increase service charge costs; the implementation of energy-saving initiatives will ultimately lower the relative increase of annual service charge costs

— Optimisation measures would improve the resilience and longevity of equipment, minimising the likelihood of large unforeseen increases in future expenditure

Central London office impact Retail impact

Landsec portfolio evolution vs science-based target

Workplace

Operating Costs

Budget 2023-2024

Creating unique ESG journeys

IMMERSING CUSTOMERS IN LOCAL OPPORTUNITIES

Chan Chung

SENIOR WORKPLACE MANAGER

Let’s embrace our local workplace community

Customer ESG commitment: Set Point 22 Degrees -/+1

— Dashwood Urban Farm: Bringing the outside in

— St Paul’s Choir School: Free venue

— More biodiverse green space and awareness at Victoria

— Community

— Plus much, much more

Workplace

Operating Costs

Budget 2023-2024

Importance of Wellbeing

FINDING WAYS TO RELAX, BE CREATIVE AND CONNECT WITH OTHERS

Ieva Botes

SENIOR WORKPLACE MANAGER

Have you ever considered just how much time we spend indoors?

Research shows that the average Brit spends around 90% of their day indoors. That’s 22 hours each day that our lives are lived within buildings, at home, school or in the office. Our bodies were not really designed to spend this much time inside so how does the quality of air, water and lighting inside all these spaces affect our health?

Why WELL Building Standard?

WELL Building Standard enables building owners to rate and systematically enhance their complete portfolio of spaces with the objective of improving human wellbeing at scale. It measures and monitors a range of features - not only light and noise, but also thermal comfort, movement, mind and community.

As a WELL Portfolio member, Landsec can leverage the evidence-based strategies contained within WELL to support and enhance the wellbeing of its colleagues, visitors and customers at scale.

We hope you are WELL

With wellbeing in the workplace more important than ever, we are broadening our commitment to WELL Portfolio Score.

In Cundall’s WELL Certified workplace, Cundall reported that employee absenteeism dropped by more than 50% in one year - May 2018

In CBRE Toronto and Vancouver WELL Certified workplaces, it was reported that the employee turnover rate dropped 33% - CBRE Sept 2018

Landsec reported a productivity increase of 30% in its WELL Certified workplace at HQ - Oct 2018

Healthier, happier people perform better

Workplace

Operating Costs

Budget 2023-2024

Leveraging the power of data

USING STATISTICS FOR INTELLIGENCE AND EFFICIENCY

Jamie Cotgreave

SENIOR WORKPLACE MANAGER

Data to provide insights is a critical component of the Landsec | Aspire strategy

— Leveraging the power of data to provide insights and shape our thinking

— Capturing and crunching large and diverse volumes of data to drive improvements for our customers

— Able to highlight and manage Service Partner performance more effectively

— Transparent data that showcases the good work every member of the Landsec | Aspire team does in their respective areas to improve the customer experience

Need specific data?

With Landsec constantly striving for innovative ways to improve our customer service, data is the key. If you would like more information on a more specific set of analytics, please don’t hesitate to ask.

Femi Olunuga Landsec | Aspire Data Analyst aspireanalytics@landsec.com

Typical data results

Femi Olunuga

Landsec | Aspire Data Analyst

With Landsec creating more dynamic ways of capturing data, we have been able to crunch large and diverse volumes of data that relate to our properties, assets, customers and the Aspire team.

Life cycle replacement

MAINTAINING OPTIMAL WORKPLACE PRODUCTIVITY

Workplace

Operating Costs

Budget 2023-2024

HEAD OF BUILDING SURVEYING & TECHNICAL SERVICES

Matt Lambert

Managing exceptional expenditure and major works

We have for a number of years utilised a Life Cycle Replacement system (LCR) that helps us plan major items of building fabric and building services repairs/renewals for works with a material contract value.

Let’s talk about LCR

Best value & economies of scale

— Contractors & management

— Sustainable options

Workplace

Operating Costs

Budget 2023-2024

Exploring renewable power

PUTTING CUSTOMERS AT THE FOREFRONT OF OUR THINKING

Jack Taylor

CORPORATE FINANCE DIRECTOR

Through the acquisition of U+I PLC in December 2021, Landsec acquired ownership of 2 potential Wind Farms located in Wales, the first of which is currently on site being developed, with completion scheduled for September 2023, and the second with a planning decision expected in February 2023

— Final decisions are yet to be taken on longer term ownership, but potential structures are being explored where Landsec could enter into long-term contracts to procure the energy at a long-term fixed price

— This should generate a discount to forecast market pricing, but also the security of long-term fixed costs for customers

— Further structures have been explored with 3rd Party Renewable developers to also take long-term fixed contracts (Corporate Power Purchase Agreements), however the windfall tax announced in October ended detailed negotiations. Landsec is currently planning to re-enter the market in summer 2023, after the next round of Government auctions for Renewable assets

— Landsec is aiming to retain its leadership in both energy and sustainability by exploring and implementing strategies that allow customers best value for money, Green renewable power and fixed-price certainty. We hope that over the next 12 months we will be able to share updates on how we are putting customers to the forefront of our thinking in these areas

What management information on Service Charges can be provided to customers and how are these costs allocated?

Landsec Customer

How costs are allocated will be provided on each customers Service Charge Booklet. This is a detailed document outlining all areas of Service Charge allocation. Your Workplace Manager will be sending each customer their Service Charge booklet in the coming weeks. Should you have any questions, direct these to your Workplace Manager who is best placed to take you through the figures and provide a detailed explanation.

David Wickens Landsec | Head of Workplace Operations

When do you plan to do the boilers replacement?

Landsec Customer

As part of our £135m net zero transition investment plan we will be removing gas boilers and replacing them with Air Source Heat Pumps. This is an ongoing project, and your

Workplace Manager can provide detail on when the changes to replace are scheduled at your building.

David Wickens Landsec | Head of Workplace Operations

How us as tenants can be more involved in your sustainability initiatives?

Perhaps are there volunteering programs available?

Landsec Customer

In the first instance, our sustainability team would be more than happy to have a meeting to discuss our plans and opportunities for our customers to be more involved in sustainability initiatives. As part of this meeting, we would also be keen to better understand what our customer’s ambitions are and explore ways to partner for change. To get a meeting booked in, please either contact sustainability@landsec.com or reach out to their workplace manager.

Launching in April 2023, Landsec’s social mobility fund will focus support where it is needed most by supporting people facing barriers moving into work, whilst tackling local issues. We will do this through:

Real estate bursaries: 3-year bursary of up to £30,000 for young people applying for a course in property

—

6-month paid internships: For young people considering a career in real estate

— Education and Employability programmes: Aimed at engaging people from underrepresented socio-economic backgrounds, supporting them towards employment

— Community grants: Addressing local needs close to our properties, these small grants of up to £5000 are available to charities and community organisations

In terms of getting involved – the intention is that in London each operational area (City of Westminster, City of London, and the London Borough of Southwark) will have at least one education programme and one employability programme engaging local people. We have asked all partners to outline how they can engage volunteers, and this extends to Landsec tenants and brand partners. We will be to provide further details as soon as the new programmes launch.

David Wickens Landsec | Head of Workplace Operations

Office Space by Landsec

Landsec Link

A digital information hub for Landsec customers.

— Property-specific booklets and Customer Handbook documents

— Permits, passes and visitor management

— Essential information, at your fingertips landseclink.com

24/7 HelpDesk AspireAssist

Landsec | Aspire offers a 24/7 support service, direct from our innovative Customer Service Centre.

Landsec | Aspire

Knowledge Base

— New Support Tickets

— Check Ticket Status

— LiveChat

— 24/7 HelpLine on 0800 121 8100

— Assist Email assist.landseclink.com

Essential information on policies and processes for occupying Landsec properties. assist.landseclink.com

Sign up for future editions

Aspire’s One Magazine

aspire@landsec.com

One Magazine