City fringe offices hammered in business rates revaluation
Farringdon (+75%), Shoreditch (+54%) and Clerkenwell (+47%) worst-hit London office locations
Jerry Schurder: “Business rates have reached unacceptable and unsustainable levels”
Offices in ‘City Fringe’ locations such as Shoreditch, Farringdon and Clerkenwell have been hardest-hit by the business rates revaluation, with average increases of over 50% and some properties seeing a doubling or even trebling of their liabilities, according to analysis from Gerald Eve.
While all of London’s major office markets are seeing increases, it is the non-traditional locations – popular with technology, media and start-up companies – that have seen the biggest rises in valuations with commensurate surges in business rates liabilities. The latest valuations reflect the changing commercial face of London, and the growing popularity of previously less desirable areas as business locations.
Gerald Eve has published a full breakdown of the rises being faced by London’s office locations:
The new rateable values – published by the Valuation Office Agency on Friday 30th September – will be used to calculate business rates liabilities from April 2017 onwards. The revaluation is the first to take place for seven years, leading to the dramatic increases as the new values more accurately reflect London’s office rents.
Jerry Schurder, head of business rates at Gerald Eve, said: “These massive spikes in liabilities highlight how business rates have reached unacceptable and unsustainable levels. Occupiers have just six month to work out how they will meet these increases, with an obvious potential impact on jobs and wider investment.
“The surges seen in City Fringe locations are a reflection of their newfound popularity among technology and media companies, and it is the movement of such firms to these areas that has driven the rise in values. Rents in Shoreditch were far lower at the time of the last revaluation, but as business have moved to the area rents have been pushed higher and rateable values have risen accordingly.
“The volatility in the rating system, and the sudden surge these areas are now facing, is not only an issue for existing occupiers, but also puts these locations at risk for future arrivals. The resurgence of the City Fringe has been driven by tech firms attracted to the area by relatively low occupation costs; huge rises in business rates liabilities severely impact on the affordability of the market and potentially puts the location’s continued success in peril.”
The impact of the revaluation is magnified by the Government’s controversial transitional relief proposals, a scheme designed to assist ratepayers by phasing in rises over a number of years. Under the current scheme, first year rises are limited to 12.5%, but the Government is proposing that from April 2017 onwards larger properties (rateable value over £100,000) will have their increases ‘limited’ to a massive 45%.
Jerry Schurder added: “The purpose of transitional relief has always been explained by Government as to cushion businesses from meeting significant unexpected costs. This is clearly met by restricting increases to 12.5% but to impose a limit of 45% provides as good as no protection. The proposed new scheme provide precious little respite for occupiers of large properties and is symptomatic of a Government attitude that asks firms to pay up and shut up.”