Monday 21 November 2022 7:05 am

Harrods sees £15m drop in business rates assessment as retail undergoes dramatic revaluation

By: Michiel Willems

More than half a million retail properties across England and Wales have now been revalued with new rateable values, which will be used to calculate business rates liabilities from 1 April 20023 to 31 March 2026, having been published showing a fall of 10 per ccent overall for the sector.

The Valuation Office Agency, an executive agency of His Majesty’s Revenue & Customs, say 508,300 shops will see their rateable values fall by 10 per cent overall from £16.3bn to £14.6bn from April next year. 

Despite rateable values falling across all regions for the embattled retail sector, experts say the reductions don’t go far enough.

The revaluation of all 2.1 million non-domestic properties has been based upon an estimate of open market rents as of 1st April 2021.

The last revaluation came into effect in England and Wales on 1^st April 2017 and was based upon an estimate of rents being paid on 1^st April 2015. The 2023 revaluation will reflect the changes in rents being paid during the intervening 6-year period.

Analysis by the real estate adviser Altus Group, Britain’s largest ratings advisory, shows that the largest shops, those over 1850m2 in size, are the biggest retail winners seeing their rateable values tumble by 34.7 per cent. 

Harrods

Iconic London department stores Harrods will see its rateable value plummet 45 per cent from £32.73 million to £18 million next April whilst Selfridges will benefit from similar reductions with its rateable value being slashed from £30.5 million to £16.82 million. 

Large shops, those between 750m2 to 1850m2 in size, will see an overall fall of 19.3 per cent.

Hypermarkets and superstores, generally those operated by the Big 4 supermarkets, will see their rateable values fall by 14.9 per cent.

The biggest fall in rateable values for the retail sector was 14.6 per cent in Yorkshire & Humber and 13.9 per cent in the North East.

But convenience stores will see their rateable values increase overall by 12.7 per cent, large food stores the smaller format supermarkets will see their valuations increase by 8. 4% with hairdressing and beauty salons facing a 6.3% increase Altus Group added.

More than 400,000 small shops, the vast majority of all retail sector properties, will see their rateable values fall by 8.4 per cent with rateable values across the entire retail sector falling by 10 per cent overall as a result of the revaluation which comes into effect next April. 

Declining rents

But analysis of rental changes by MSCI UK between the first quarters of 2015 and 2021, which tracks the performance of property investments with a total capital value of over £149bn, shows the retail sector saw rents decline by 19.8 per cent in England with even steeper declines of 26.4 per cent in Wales.

Robert Hayton, UK President at Altus Group, explained to City PM this morning that whilst the retail sector was “undoubtedly a big winner from both the Autumn Statement and the 2023 revaluation.”

“These modest reductions on most retail properties are very hard to square with the collapse in demand for new leases in the period around the valuation date during the final stages and immediate aftermath of Covid restrictions,” he added.

At the Autumn Statement 2022, the Government announced that businesses seeing a declining rateable value at the 2023 revaluation will benefit from the full decrease straightaway by permanently removing caps on tax reductions known as downward transition. 

Business rates are calculated by multiplying the rateable value of the business premises by the multiplier which the government say will be frozen keeping the small business multiplier and standard multiplier at 49.9p and 51.2p respectively before applying any eligible reliefs.