The business rates revaluation that comes in next month could create a barrier for affordable offices in some parts of London and hit smaller companies, new research suggests.
Real estate consultancy Colliers looked at how various popular office locations will be impacted by the rates revaluation, which is based on rateable values from April 2021.
It found that a number of ‘fringe’ areas popular with start-ups and small firms, some of which may find the City and West End too expensive, will see higher percentage rises than in central London.
The research said offices in Hammersmith & Fulham for example will see on average a 11.7% rise in their rateable value (and hence rate bills). In Southwark a 11.4% increase is calculated, and in Hackney office rates are increasing 21.7%.
That is much greater than the 2.1% rise in the City, the 8.2% rise in Westminster and even a drop of 3.4% in Islington.
Business rates are linked to the underlying rental value of a property, but they are currently based on values from April 2015. While some retailers will be winners from the revaluation because many shop property rateable values have declined, the London office sector has seen gains in a number of cases.
Colliers said that since 2015 rents and hence rateable values in fringe locations have increased at a greater pace than in historic ‘core’ office locations.
Alex White, the firm’s director of rating in the London team said: “The revaluation will therefore have a disproportionate impact on the fringe areas where occupational costs- rents and rates in particular- are rising.”
White also said: “Added to increased energy costs, one can see how some of the smaller business occupiers might struggle. These new business rates rises could very well create a barrier for affordable workspaces in these fringe locations.”
A HM Treasury spokesman said: “We are delivering a key ask of business rates payers by delivering more frequent revaluations, which will ensure the business rates system is fairer and more responsive, on top of our £13.6 billion business rates support package.”
