Birmingham City Centre Business Rates – The calm before the storm?
As a born and bred Brummie, it’s great to live and work in the city at a time when it is attracting so much investment. However, with market values rising, could the city’s office occupiers be in for a shock, as business rates are brought more in line with current property prices?
The next business rates revaluation will be here before you know it in April 2021 and preparation is the key. We’ve been looking at what this might mean for the city and what you can do to soften any impending hikes.
Business Rates Set to Rise
Given headline rents in the Birmingham city centre office market are now reaching £33 per sq ft, you could be forgiven for expecting rate liabilities to increase in line with them.
However, good news! A recently released JLL research paper on the 2021 business rates revaluation, suggest the increases may not be as significant as anticipated. Also, some occupiers will have legitimate reasons for reducing valuations in the interim.
Devils in the Detail
The 2021 revaluation figures will be based on rental valuations of properties at April 1, 2019 – meaning any increases after then should be disregarded.
Also, valuations for rating are at net-effective levels, so rent free periods and other incentives must be reflected, reducing the overall headline figure rates they will be assessed against.
We also predict the multiplier (before supplements) will fall to 48p plus supplements which is broadly similar to the current multiplier of 49.1p.
Put all this together and yes, we’re expecting increases in the region of circa 10% for prime city centre offices, however, in real terms after inflation is accounted for, this equates to a 6% rise approximately and so not nearly to the levels you might expect.
With JLL’s latest Flex report, Disruption or Distraction Flex space predicting that flexible space will increase in Birmingham to 1.2m sq ft by 2023, will the flex market impact on business rates?
Well for stock classed as Grade B and below it could have a significant effect. Occupiers who previously could only afford secondary offices or locations can now go prime on flexible terms. We believe this will lead to a greater divergence in values between Grade A and Grade B stock in the 2021 rating list.
Plan for 2021
So, as we said at the beginning preparation is the key. As an occupier or a landlord, you can seek a reduction due to disturbance from major infrastructure projects.
Also, much of the city’s office stock has yet to be appealed under the current revaluation and this too can have an impact on the rates payable after the 2021 revaluation.
While an increase is highly likely, with a ratings specialist on board, there are options to reduce the impact.
This article was written by Jordan Fendick – Associate, JLL Rating team