For many beleaguered business rates payers the 1 April 2019 is no joke. The typically light-hearted day has been set as the Antecedent Valuation Date (AVD); that is the date at which all valuations of non-domestic properties will be based for the next rating list when it comes into effect on 1 April 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 1 April 2022, the Government has decided to bring forward the next revaluation to 1 April 2021; four years since the last revaluation, and six since the AVD.
A tale of two sectors
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, whose plight has risen to prominence in recent years, the growth of industrial and logistics is tipped to send rateable values for properties in this sector soaring.
Our analysis of the rental markets across England and Wales between 2015 and 2019 suggests that the industrial and logistics sector is likely to see the biggest increase in rateable values at the revaluation, rising by an average of 25%.
Industrial and logistics - top three growth locations:
- Neath Port Talbot (50%)
- Harrow (44%)
- Milton Keynes (44%)
Industrial and logistics - bottom three growth locations:
- Doncaster (11%)
- West Devon (14%)
- Dover (14%)
Providing some welcome relief to the high street, the retail sector is expected to fall by an average of 3%.
Retail - top three growth locations:
- Runnymede i.e. Staines/Chertsey (5%)
- Liverpool (2%)
- Brentwood (2%)
Retail - bottom three growth locations:
- Vale of Glamorgan (-17%)
- Rugby (-10%)
- Blackburn with Darwen (-8%)
The office sector, which has seen steady growth over the past four years, is predicted to increase by 16%.
Offices - top three growth locations:
- Watford (44%)
- Bristol (41%)
- Sutton (37%)
Offices - bottom three growth locations:
- Redcar & Cleveland (-7%)
- Carlisle (-4%)
- Swansea (-2%)
Regionally, LSH’s research predicts that Greater London and the East of England will be hardest hit, rising by an average of up to 12.4%. Conversely, Wales is expected to see a fall in rateable values by an average of 1.8%.
Paul Nash, Director of Business Rates at LSH, commented:
“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. Flipped over, 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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