What April 2021’s Rating Revaluation will mean for the North of England’s commercial property sector
Manchester’s office and industrial markets are set to see the largest increases, but it’s better news for retail as business rates are expected to fall
Business rates help fund local services across the country. Nowadays, the levy attracts a large amount of attention in the media, often sparking discussion which links it to the decline of Britain’s high streets and town centres.
Rating revaluations aim to redistribute the tax burden amongst those who pay business rates, with the Valuation Office Agency (VOA) updating Rateable Values to better reflect changes in rental value.
The next Rating Revaluation was scheduled for April 2021 but required legislation which stalled in the run up to the general election. The default is April 2022 and will form the basis of rates liability for the following three years. These assessments will be based on April 2019 rental values. So, what does this mean for the North of England?
Rises on the horizon in major cities
As usual, predictions abound. The latest report from JLL’s dedicated rating team shows an expectation that in the North of England, the office and industrial sectors will see an increase in their share of rates.
This should come as no surprise, as both markets continue to perform well across the region.
The North West’s industrial and logistics sector is thriving, with schemes such as Logistics North in Bolton and Birchwood Park – part of the Cheshire Science Corridor – cementing the region’s status as a major player.
Elsewhere, Manchester’s city centre office market is ever resilient, with take-up in Q3 2019 reaching 300,000 sq ft so far. Leeds is similarly buoyant, with 143,000 sq f. transacted in Q3 putting the year to date activity level with the 10-year annual average.
Both cities are attractive commercial destinations, resulting in rental growth across both sectors since the last valuation date, and in turn, this will translate into increased rates payable.
The industrial and logistics sector has outperformed the rest of the UK property market in terms of rental growth; a shortage of land supply due to fierce competition from residential developers has played a part in this, as well as the rise of internet shopping.
What’s more, Brexit has had little impact on this sector, so all these factors have led to increased demand and rental levels in the key industrial locations – such as the M62, M6 & M1 corridors in the north.
The increase in rates for these two sectors should help to alleviate some of the pressure on the retail market, which traditionally is the most taxed sector. The key question for the retail and leisure markets however, is whether business rates decreases will accurately reflect the dramatic changes in these sectors over the last few years?
The small print
We predict that the rating multiplier will fall slightly to 48p – not a huge departure from the current multiplier of 49.9p.
Overall, we’re expecting a significant increase in Manchester’s office market, which is the largest of all the northern cities. York follows closely behind with 26 percent, and Sheffield and Leeds come just after with expected rises of 12 percent.
However, there is a proviso with the dates for the next Revaluation. The run up to the General Election brought most parliamentary business to a halt, including essential business rates legislation confirming that the next Revaluation would be 1 April 2021.
Currently the default position is that the next Revaluation will be 1 April 2022. However, should any party obtain a majority in the upcoming general election, the legislation could be reintroduced, and the 2021 Revaluation could still take place.
Despite uncertainty around exact timings, it is still vital that ratepayers, whether they be tenants or landlords alike are prepared for an upcoming Revaluation. It’s possible to seek a review of the current business rates including reductions due to disturbance from large-scale infrastructure projects – for example, if your office space is located next to a construction site for a major local project and the works are found to be disruptive to your team – among other things.
Increases are highly likely, particularly in the office and industrial sectors, but having a rating specialist on board can help to mitigate impact.
We have been looking at what this might mean for the Northern region within the main commercial property sectors. Download our 2021 Northern Rating Revaluation report today and discover how it will affect you:
Our recently released JLL Research paper on the 2021 Rating Revaluation has further detail on this. Examining the impact of the 2021 revaluation across the UK in retail, office, hotel and industrial & logistics real estate, focusing on prime & Grade A stock - please visit https://www.jll.co.uk/en/trends-and-insights/research/rating-revaluation-2021