Winners and losers in revaluation

Hospitals suffer big rates rises while shops gain

southern-generalHospitals and utility companies will see a huge increase in their rates bills next year as a result of changes in the Scottish Budget which has provided a lift to retailers.

Analysis of the data shows that some institutions will see their rates jump dramatically as their valuations have grown by up to 300%.

The Southern General in Glasgow (pictured) will see its rates bill rocket by 50% to more than £22m, while Network Rail’s bill will jump 45% to £47m.

The figures are revealed by commercial property agent Colliers International whose head of rating, John Webber, said: “Of course, there is little public sympathy for large utilities firms, but the fact is that these rises will be passed on to the public as customers.

“And the NHS is also being saddled with significantly higher bills which will have to be paid for from the public purse. These rises are therefore arguably a stealth tax which funds the drop in rates for regional businesses.”

The analysis reveals better news for retailers in smaller towns such as Glenrothes and Hamilton where rateable values have fallen by more than 60% to reflect the reduction in commercial property values. 

The findings follow a report from Cushman & Wakefield revealing that some of Scotland’s most famous landmarks are facing big rises in their business rates bills from April 2017.

The new rateable values, from which business rates are calculated, show steep rises for some of the country’s most prominent properties.

Glasgow Airport’s valuation soars from £10m to £12.5m. Also seeing a big rise is the Faslane Naval base with a 22% increase and Shetland Oil Terminal up 18%.

Edinburgh airport (photo by Terry Murden)
Edinburgh airport (photo by Terry Murden)

However there are winners too – Edinburgh Airport’s rateable value moves down from £11m to £10m and the Scottish Parliament’s rateable value has decreased from £77m to £6.96m a decrease of about 10%, meaning its annual rates fall from £3.9m to £3.4m.

The rates, which are either calculated on a comparative market rental basis or the capital cost to build, multiplied by the new reduced poundage rate of 46.6p before any relief, supplement or discount, were last reviewed in 2010.

This was based on a tone date of April 2008 when the commercial property market was at its peak before the UK entered into recession.

Many companies in Aberdeen are likely to be hit by upwards valuations as the assessment took place a few months before the oil crisis started to impact on the local economy. Valuations of key city centre office buildings have increased in excess of 20%.

The hike in their business rates comes at a time when they can least afford it according to Tony Rosenthal, Head of Cushman & Wakefield’s National Rating Team in Scotland.

He said: “For some Aberdeen businesses this could be the thing that finally tips them over the edge – the system is designed to redistribute the overall business rate burden so that firms in places which have prospered since the revaluation pay more and those in areas where property values have fallen pay less.

“While this works well most of the time it doesn’t take into account unexpected fluctuations in the market such as a falling oil price and there is a real argument for the revaluations to be carried out more frequently. “

Among other winners in the retail sector is The Forge Shopping Centre in Parkhead, Glasgow. Traditional zoned shops will see their rateable values drop by up to 70%, which will lead to a significant reduction in the rates for tenants.

Others to benefit include The Mercat in Kirkcaldy and The Wellgate Centre in Dundee with reductions in value of circa 50% and 30% respectively.

Mr Rosenthal said: “A lot of deals have been on hold while retailers wait to see how much the rates will go down and this revaluation will kick-start the market again much like what has happened in Belfast.

“Prior to their revaluation in 2014-15 the city centre had lots of vacant, run down shops – now it is thriving and feels like a completely different place.

“he fact that there will be no Transitional Relief system in Scotland for the 2017 revaluation means that retail businesses in struggling locations in Scotland will now be at a competitive advantage with the expected large decreases now being realised from day one of the 2017 revaluation.”

Stuart Moncur, head of national retail & occupier services for Cushman & Wakefield – UK, said: “This is welcome news for the retail market in Scotland.

“For far too long the historic rateable values have been penalising occupiers unfairly and ultimately not truly reflecting how the retail market has changed over recent years.

“Yes, like most things, there will be winners and losers, but on the whole this is welcome news for many landlords and occupiers in Scotland. This will most certainly generate much needed confidence in the retail market north the border for the coming years.”

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