The 2023 business rates revaluation could have a “material impact” on the provision of affordable workspace in London’s ‘fringe’ locations and price some occupiers out of the market, according to Colliers.
As rents – and therefore rateable values – in fringe locations such as Hackney, Southwark and Hammersmith (pictured) and Fulham have increased at a greater pace than in the capital’s historic ‘core’ office locations such as the City and the West End, those fringe locations have now become equally or in some cases more expensive locations than those in the Central London core.
According to Colliers’ data, rents in the City core have increased 21% over the last 10 years compared with 50-60% growth in fringe areas, and whereas 10 years ago there was a 30% gap between average core and fringe rents the company said by the first half of 2022 this gap was non-existent.
Since 2010, business rates in fringe markets have more than doubled and the 1 April 2023 revaluation will push rates even higher, with Colliers data suggesting offices in Hammersmith and Fulham will see on average a 11.7% rise in their rateable value (and hence rate bills), in Southwark there will be a 11.4% rise and in Hackney office rates are increasing 21.7%. These increases are much greater than the 2.1% rise in the City, the 8.2% rise in Westminster and the drop of 3.4% in Islington.
Alex White, director of rating in Colliers 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. 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.
“The London Plan gives greater significance to the importance of affordable workspaces and the need to provide for these in the planning process and many local authorities are including policy within their local plans, together with thresholds and requirements for developers. But it will all be meaningless if businesses aren’t able to afford to take on these new buildings, even with their rents reduced by the plan. This is due to the sizeable cost associated with business rates. And it looks like this situation is going to get worse rather than better. Business rates could certainly impact the viability of such affordable schemes moving forward.”
