Industrial occupiers warned of increases at next rates revaluation

April 10, 2019

Commercial property consultancy Lambert Smith Hampton (LSH) has warned North East occupiers of industrial and logistics premises to expect a significant hike in business rates liabilities at the next revaluation.

April 1, 2019 was set as the Antecedent Valuation Date (AVD) – the date at which all valuations of non-domestic properties will be based for the next rating list when it comes into effect on April 1, 2021.

In layman’s terms, the AVD is the date which the Valuation Office Agency (VOA) adopts to calculate a hypothetical rental value for every commercial property in the country.

This, in turn, is used to calculate rates payable through the application of a multiplier, or ‘rate poundage’. Originally scheduled for April 1, 2022, the Government has decided to bring forward the next revaluation to April 1, 2021, four years since the last one, and six since the AVD.

In theory, the non-domestic rating system should follow the market, specifically movement in activity and rents since the last time rental values were assessed.

While this is likely to provide some welcome relief to bricks and mortar retailers, the growth of industrial and logistics is tipped to send rateable values for properties in this sector soaring.

LSH’s analysis of the rental markets across England and Wales between 2015 and 2019 suggests that, while the UK’s industrial and logistics sector is likely to feel the biggest impact at the revaluation, the North East is not expected to be hit as hard, with rateable values set to rise by an average of 18 per cent compared with a UK average of 25 per cent.

Industrial and logistics – top three maximum growth locations:

Darlington (26 per cent)

Durham (22 per cent)

Middlesbrough (22 per cent)

Industrial and logistics – top three minimum growth locations:

Outer Gateshead (15 per cent)

North Tyneside (15 per cent)

South Tyneside (14 per cent)

The retail sector is expected to fall by an average of 5 per cent across the North East, compared with a UK average of -3 per cent.

Retail – top three maximum growth locations:

Hartlepool (-3 per cent)

Gateshead (-4 per cent)

Newcastle (-4 per cent)

Retail – top three minimum growth locations:

Darlington (-5 per cent)

Middlesbrough (-5 per cent)

Redcar and Cleveland (-6 per cent)

The office sector, which has seen steady growth over the past four years, is predicted to increase by 5 per cent across the North East, compared with a UK average of 16 per cent.

Office – top three maximum growth locations:

Newcastle fringe (16 per cent)

North Tyneside (15 per cent)

Newcastle city core (12 per cent)

Office – top three minimum growth locations:

Hartlepool (-5 per cent)

Darlington (-6 per cent)

Redcar and Cleveland (-7 per cent)

Melanie Oates, director of business rates at LSH Newcastle, said: “Inevitably, this will create some winners and losers. On the plus side, it helps smooth out massive swings in liabilities for occupiers and enables the VOA to iron out anomalies on a more frequent basis.

“Conversely, it remains to be seen whether a transitional scheme will be introduced in 2021, which is designed to limit substantial increases and decreases in liability at rating revaluations.

“Despite our forecasted moves, it is too early to accurately quantify how individual ratepayers will be affected.

“That said, businesses currently occupying properties in locations where rental values have increased significantly since 2015 should prepare now for rate liability rises.

“In particular, those in the process of currently negotiating new leases, lease renewals or re-gears, should take any projected increases into account before making a decision.”

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