Industrial sector to feel the brunt of 2021 rates revaluation

The logistics and industrial sector is set to be affected by higher rates bills in 2021, while the beleaguered retail industry could benefit from a dramatic reduction. Rateable values among logistics and industrial firms are expected to rise by 17.2% across England and Wales for 2021/22, according to the latest research from Avison Young. Consequently, the rates liability of the sector is predicted to increase by 12.1% (£876m) on the previous year. The new business rates revaluation will begin on 1 April 2021. After that, revaluations will take place every three years, rather than every five. Retail rates to fall Meanwhile, retail occupiers are expected to see a £3.7bn reduction in rates bills over the same three-year rating period, although this will vary by sub-sector and location. However, the report emphasised that the £3.7bn cost saving can only be realised if the government scraps the downward transition model – a system that phases in rates liability decreases from a new revaluation. A reintroduction of the same scheme in 2021 would remove £1.5bn to £2bn from the potential saving that the retail sector could achieve over the three years, the report found. Estimated growth in total rateable value pools will result in a fall in the uniform business rate in England from 49.9p to 47.7p at the start of the new rating list, and a drop from 53.5p to 52.3p in Wales. The total rateable value pool in England is forecast to rise by 6.1% to £72.7bn in 2021, while the equivalent in Wales will grow by 3.5% to £2.65bn. What it means for offices The office sector is expected to pay an additional £406m in rates liability in the first year. Growth was found to be comparatively consistent across the regions, with an estimated 10% increase in the rateable value pool in England and Wales, although more notable uplifts are expected in the East and South West regions. London dominated the rates pool for offices, with inner London accounting for 53% of the total rateable value for offices in England and Wales. The capital is expected to increase its proportion of the total rateable value pool to 32% by 2021, compared with 25% in 2005. Avison Young estimated that London’s rates liability will increase by £453m to almost £11bn in the first year of the new rating list, while there will be no overall change in regional rates liabilities. The call to abolish downward transition David Jones, principal at Avison Young in London, highlighted three main areas that the government should focus on, in light of the report’s findings. “Firstly, scrapping downward transition is fundamental to ensure that rates liabilities are as consistent as possible with rents being paid,” he said. “Furthermore, the inherent problems with implementing check, challenge and appeal have been unfair on rate payers. The current system is not allowing excessive rates to be challenged efficiently and within an appropriate time frame. “We recommend that the government reviews the CCA system urgently. The delays in implementation for larger businesses need addressing, and we call on the government to extend the ability to check a valuation by a further year to April 2022.” He said that only two out of 400 shopping centres have been settled, despite being two-and-a-half years into the four-year period of the 2017 revaluation. Jones added: “Finally, we believe that all forthcoming revaluations require an antecedent valuation date of one year rather than two years prior to the start of the new list, so that values align more closely with market conditions.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette