Despite a fall in shopping centre values through landlords being heavily exposed to struggling retailers utilising Company Voluntary Arrangements (CVAs) to battle the structural changes taking place across Britain’s embattled high streets, average rateable values for business rates at shopping centres can be as high as £3,500 per m2 according to Altus Group’s annual business rates review.
CVAs have become popular with retailers to not only close unprofitable stores hit by increasing cost pressures but to also seek rent reductions culminating in Britain’s second largest real estate investment trust, Landsec, writing down the value of its U.K. shopping centres by 11.7% last year as rental income declined.
The average business rates bill in England and Wales is based upon an average rateable value of £269 per m2 with that cost being 28 times higher on London’s Oxford Street according to Altus Group, outlining the high cost of maintaining a physical presence on Britain’s embattled high streets.
The average annual rental value per square metre for a shop on the open market on 1st April 2015 forms the basis of business rate tax liabilities until 31st March 2021. Unsurprisingly, 9 out of the 10 most expensive retail post codes by rateable value, are located in London.
The highest average Rateable Value of £7,549 per m2 is the W1C postcode area which incorporates Oxford Street, with the second highest of £5,675 per m2 for the W1S postcode, which includes New Bond Street.
The highest rateable value, per m2 outside London, and the 8th highest overall in England and Wales, is the M17 postcode in the Trafford area of Greater Manchester. At a rate of £3,514 per m2, the area is home to The Trafford Centre indoor shopping and leisure complex.
Outside of the Central London area, higher costs per metre square are dominated by postcodes which house other major shopping centres. The DA9 postcode includes Bluewater, RM16 has Lakeside, BS34 has Cribbs Causeway and MK9 is the home of Centre:MK.
New rateable values for the next revaluation will come into effect on 1st April 2021 and will determine business rates liabilities until 31st March 2024. They will be based upon an estimate by the Valuation Office Agency of the property’s open market rental value on 1st April 2019, the antecedent valuation date.
Robert Hayton, Head of UK business rates at Altus Group says that Landlords are having to share a “disproportionate burden of the high street pain” adding “commensurate tax reductions by virtue of what is happening in the retail rents market generally will only come into effect in 2 years time at the next revaluation and even then such reductions are likely to be gradually phased in without a change in approach by Government.”
The full Business Rates Review can be downloaded here.