Commercial properties in Aberdeen face a hike in business rates, along with Grade A offices and properties in prime Scottish locations due to the forthcoming rating revaluation, according to new research by property advisor Ryden.
The firm has analysed how sectors and regions will be affected by the revaluation, which is the process that determines business rates.
Bills are calculated using rents at a particular period in time. Current rates are based on rents in 2008 and the five-yearly rating revaluation process, which sets bills, was postponed from 2015 until 2017.
Ryden rating expert Tim Bunker says: “The recession and its effect on rents impacts on each sector and region differently. Many businesses would have seen their rates bill decrease this year if the revaluation had gone ahead in 2015 – but now they might end up with less of a reduction, except in the case of Aberdeen.
“Our research tells us that those facing substantial rises in rates are prime Grade A offices across the country, along with most commercial property in the Aberdeen area. Of course, it’s bad timing for the city, because future bills will be based on 2015 rents which reflect rental increases over the last two years. The area will bear the brunt of rates rises in Scotland.”
The retail sector, already suffering from sustained low spending, will be hoping for big decreases but the cancellation of the revaluation and subsequent improvement in the market will restrict reductions, especially for shops in prime areas like George Street, Edinburgh and Buchanan Street, Glasgow.
It’s also been a difficult time for the pubs sector with the smoking ban, increased numbers of people drinking at home and the reduced drink driving limit. Pubs’ rates bills are based on turnover and those solely reliant on wet sales have seen the biggest dent in income.
Many offices in Edinburgh have been converted to residential use since the recession. With few office transactions, the Assessors have less rental evidence upon which to base new values. That could work in the favour of office owners, however, the recent deal at Quartermile at £31 psf - the highest rent in a decade - could skew values and affect bills.
Industrial rents have a historic low base, so a drop in property values will have less impact on this sector’s bills. Prime industrial, such as warehouses in Newbridge, could see a jump of 16% and at Eurocentral bills could go up by 10%.
Decision on values
A decision is awaited from the Scottish Assessors on values in all regions and sectors. They have “more analysis to do than ever before due to peaks and troughs in transactions”, according to Bunker, but a statutory timetable will dictate timescales for the process.
“There is also the question of what the Uniform Business Rate (the multiplier used to calculate bills) will be. When revaluations occurred every five years, there was a gradual increase in values across the country, therefore the entire country’s rates liability was equitably distributed.
“But there is a problem this time around because recessionary effects on certain property types and locations have yet to be fully reversed, so the total rateable value in Scotland isn’t likely to increase to any great extent, therefore the UBR, at 49p, will remain approximately the same.”
Bunker says: “The Governments are creating an impression that their review of the rating system will lead to savings, however the changes planned are to the administration of the system and this will not reduce bills.
“My advice is that rate payers should seek expert advice as there is more opportunity than ever before to get reductions in bills.”
For more information on the 2017 Revaluation and how we can help you minimise your rates liability, read our Business Rates flyer.