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Government's rating revaluation misleading

Details released by the government on the effects of the 2010 rating revaluation is misleading, according to the latest research published by BNP Paribas Real Estate.

The government states that there will be modest shifts in liability across England, ranging from -7% decreases to a rise of just 5% across all regions and sectors.

BNP Paribas Real Estate’s research, however, demonstrates that this is a very macroeconomic outlook which may result in unrealistic expectations from the revaluation by ratepayers.

Mike Flecknoe, Senior Rating Director at BNP Paribas Real Estate, explains: “It is very misleading to present a macroeconomic view that there will be ‘nominal’ changes for business ratepayers following the 2010 revaluation. It is easy to show this view if you take an average of all properties across England. However, realistically, there will be both winners and some significant losers when you examine different sectors of properties in different regions in England. Once you delve a bit deeper, the shifts can be quite dramatic and in our sample we highlight falls of just over 2% but increases of up to 25%.”

The research covers various office, retail, industrial and other specialist property types in six regions: Greater London, South/South East, West/South Wales, Midlands, North East, North West and Scotland. It looks at the ratepayer’s likely liability, the amount they will have to pay, rather than just the rateable value which most market commentary has thus far been focused on.

The research highlights Mayfair offices as the biggest loser, seeing a rise of about 25% in their rates bills next year, once you factor in the Crossrail levy and the rise in the rateable value of such prime buildings. However, subsequent rises of 19%, 21% and 10% in the second, third and fourth years after the revaluation will also mean that over a four year period, ratepayers of Mayfair offices could see their rates bill double.

Flecknoe comments: “The difficulty for many ratepayers will be that there may be further rises to come in years two and three to factor in on top of sometimes huge spikes for year one. These rises will continue at a time when the economy is starting to recover, and may unfortunately cause further downward pressure on rents for certain buildings: Mayfair offices being a prime example. Such ratepayers may find themselves having to restructure various costs to factor in these prolonged increases or even look for alternative and cheaper locations.”

The research also shows that retail will be the worst-hit sector across the board, particularly prime retail that has performed well. The research predicts that shopping centres in the South East such as Bluewater and Lakeside will see their liabilities rise 15% next year, while prime retail on Oxford Street will see rises of 22%, a shop in Gateshead will have rises of 15%, high street retailers in Cardiff may see a 13% increase, with retailers in Liverpool rising 9% and the Midlands 7%. However, non-prime retail on Oxford Street will see a rise of just 2% while a shop in Walton-on-Thames will see a fall of -1%.

Industrial and distribution properties stand to be the biggest winners with the sector seeing falls of over 2% in many areas.

The office sector in general will see modest rises in most locations with a 2% increase in Bristol and Birmingham, but a 2% decrease in Farnborough. However, some Manchester offices will see 15% increases and the City of London may see a 12% hike. Specialist properties such as car parks, NHS hospitals and multiplex cinemas will all find a rise in their liabilities, often due to different building costs with a Bolton cinema and a Liverpool pub seeing liabilities rise 12% and 14% respectively while a Birmingham car park and a builders’ merchants in Plymouth will both see increases of 15%.

Flecknoe concludes: “By examining the potential liability of certain properties in different locations, it is clear that there will most definitely be winners and losers from the 2010 rating revaluation and ratepayers should not rely solely on the government paper for an indication of what liability rises or falls they may face.”

Liz Peace, chief executive of the British Property Federation, adds: “with this revaluation taking effect in such challenging economic times, government must be open about the impact for individual businesses, and should support both those who would see big increases in rates bills and those whose property values have performed badly.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 or 07968 12 45 45 or ateacher@bpf.org.uk. 

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BNP Paribas Real Estate report

Spreadsheet with specific examples