Business rates set to bite
The next Business Rates Revaluation comes into effect on 1st April 2021 and will result in large changes in rates payable across London
2 minutes to read
The Revaluation is based on rental values as at 1st April 2019 with the aim to redistribute the amount of rates payable by reflecting changes in rental values.
In order to forecast the effects on London offices, we have created a heat map of our Central London office submarkets, showing the Rates Payable for the current year, 2019/20, against the projected rates payable following the Revaluation in 2021/22.
What has caused these changes?
The average increase in Rates Payable across central London will primarily be driven by the success of London as a global financial capital. Despite the uncertainty surrounding Brexit, rental values have continued to increase in most submarkets.
Whilst in the West End values on the prime offices in areas such as St James’s or Berkeley Square have continued to increase, the core market has seen falls driven by an increase in supply. On the other hand, the City Core market has seen a moderate increase with areas such as Shoreditch/Clerkenwell outstripping traditional locations with the rise of the TMT sector around Silicon Roundabout.
"While some occupiers may take comfort in the fact that rents have remained relatively stable since the Brexit referendum, the issue of the looming rates revaluation in 2021 appears to be going relatively unnoticed. Our calculations suggest a 17% increase in rates payable across the board, with some markets such as Shoreditch/Clerkenwell likely to see a 50% uplift, driving up total occupancy costs in parallel."
_Bjorn Bowles, Partner, Business Rates,
How are Business Rates calculated?
Business rates are calculated by multiplying the ‘rateable value’ of a property by the uniform business rate (UBR). The ‘rateable value’ is the Valuation Office’s estimate of a property’s market rent at a set valuation date. We are currently in the 2017 Rating List with rateable values being based on a valuation date of 1st April 2015. The next Revaluation takes place in 2021/22.
What does this mean for businesses?
1) London office rents set to rise - With office rents in Central London set to rise by as much as 10-13% over the next five years, despite the political rumblings in Westminster in the wake of Brexit, occupiers need to be prepared for higher rates bills.
2) Higher occupancy costs – When combined with service charges and rents, business rates can have a significant impact on the attractiveness of a location for potential occupiers.
3) Appealing your Rateable Value and applying for Reliefs are more important than ever – For occupiers phasing occupation of a space, or vacating a property, understanding empty rates relief will be crucial. Similarly, challenging your Rateable Value as a result of the impact of nearby construction activity on a business will also be very important.
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