Commercial surveying news from the Beattie Partnership

Time to move on business rates

As the economy continues to recover and once-empty office buildings and shops fill with new tenants as the market returns, businesses need to be quick if they are to secure one important method of reducing occupancy costs, writes Paul Giness, of The Beattie Partnership.

During the economic downturn, landlords were desperate to fill space. Now that the economy is picking up again, we’re seeing some of those landlords harden their rents on their tenants, knowing that demand is increasing for corporate and retail space.

According to Colliers International, retail rents fell between 14 and 22% across the nation as a result of the recession. As we pull clear of the downturn, those figures are expected to rise sharply, putting pressure on businesses of all sizes.

It seems that you can’t have an increase in prosperity without an increase in costs. But the question is, will one cancel out the other? Businesses will need to keep a close eye on their rents, rates and service charges going forward and judge for themselves if savings need to be made.

One way that many businesses are reducing costs is by challenging the business rates that they’ve been paying over the past five years. As current rating valuations are based on calculations made in 2008, many companies have been paying rates based on rental values from before the recession took hold. As the rental value of many business properties dropped during the downturn, businesses that have suffered the most have often been first in the queue to challenge the rates that they’ve been paying up to now.

Time is running out to do so, however. On the first of April, rule changes to rating appeals will abolish the ability of companies to back-date their claims to 2010. This could wipe out hundreds of thousands of pounds in potential repayments.

The next few weeks are the last chance many businesses will have to claw back years of overpaid business rates. If companies are serious about managing their occupancy costs, this is an opportunity that they can’t afford to miss and look to appeal by 31st March.

The time is now

A major report from Colliers International recently highlighted the UK towns where the rental values of retail space has declined the most over the last five years together with the highest vacancy rates.  An upshot of this is that it highlights areas that are most likely to see appeals against the rateable value, used to calculate their business rates.

The top 10 towns noted in the report as having the largest drop in retail rental values, as well as the biggest increase in empty business spaces, are:

  1. Telford
  2. Boston
  3. Swansea
  4. Merry Hill
  5. Neath
  6. Poole
  7. Aylesbury
  8. Barnstaple
  9. Marlow
  10. Swindon

Business rates are based on the hypothetical rental value of a property. The last time rental values were reviewed at a national level was in 2008, before the economic downturn.  This means that the disparity in some of these latest rents and the actual rental value of properties from the last few years has been wildly different, especially for the towns mentioned in the report.

Sizeable differences between previous and current rental values are one of the elements that may appear to make business rating appeals more likely to succeed however this isn't necessarily that straightforward as the latest rental evidence will probably be of most significance for the next revaluation in 2017.  However in towns where rents have recently been low, like the ones in the report, businesses are still being encouraged to apply for a review of their Business Rates, as scope can still exist for savings.

Businesses in these towns could be repaid thousands of pounds in overpayments, if their rating appeals are successful and backdated. But there is a problem; after 31st March, rating appeals will not be backdated before April 2015.  That means that these businesses will miss out on those repayments unless they get their appeals in within the next few days.

Article originally published on CoStar News, 25th March 2015.