Rates increases to hit W1 occupiers hard – CBRE
The increase in business rates that came into force on Friday (1 April) may be a decisive factor in occupiers relocating from London’s W1 area, warns CB Richard Ellis. The increase equates to an extra £6 per sq ft per year for occupiers in Mayfair and an extra £4 per sq ft per year for those in Soho and Covent Garden, the firm says – having a significant effect on bottom-line property costs.
CBRE says the higher rating costs are partly the result of the new rating multiplier, which will be 43.3p with effect from 1 April – an increase of 4.6% in line with the Retail Price Index for September 2010. This comes on top of the higher costs stemming from the 2010 rating revaluation exercise, which also came into effect on the same date, and which was based on rental values as of April 2008 – close to the peak of the cycle.
“Many West End office occupiers experienced a massive 125% increase in the rateable value of their property between 2003 and 2008. This increase will be implemented in phases over the next five years. As well as seeing a 20% increase in rating costs this year, many W1 occupiers are likely to experience a 20% plus rise in 2012/13 and in 2013/14,” the firm warns. The next revaluation is due in 2015.
Stewart Smith, executive director in CBRE’s Central London Tenant Advisory Group, says many occupiers in W1 will struggle to absorb these additional costs and warns that they could prove to be the tipping point that pushes some media companies and professional services firms into moving into cheaper areas of the capital.
Tony Dann, head of the Rating and Taxation team at CBRE, says all London office occupiers, but particularly those in W1, should be looking at ways to control or lower their rating costs. “In the current climate, companies in all sectors are managing costs carefully, so we expect to see occupiers in W1 exploring every possible avenue to reduce their rating liability.”
