Industrial and Logistics Business Rates

Accurately reflect the rapid pace of change

The industrial and logistics sector has seen significant changes over recent years, with unprecedented growth in demand resulting in higher occupation costs. The move towards online retailing, changing consumer habits, the effects of Brexit on international trade and the lack of supply have all impacted business rates liabilities. Addressing supply chain disruptions and sustainability could necessitate infrastructure upgrades, further affecting property assessments.

The rise in business rates liabilities adds to a further squeeze on margins for many businesses in the sector, so ratepayers need to stay informed to manage these increased liabilities effectively. We provide expert support for budgeting and forecasting, can identify and secure potential savings, and minimise risk whilst ensuring compliance.

Impact of Revaluation 2023 on Industrial and Logistics

Above-average increases in Rateable Values (RV) in industrial mirrored the escalating demand and persistent rental growth in the industrial and logistics sector. England witnessed an average rise of 35.6% in large distribution, while Scotland and Wales have seen less growth at 18.1% and 8.2%, respectively. However, these averages hide more substantial increases in specific locations, such as the M1 corridor and Greater London. The rise in Rateable Value wasn’t unforeseen, as the pandemic, the shift towards online shopping, and Brexit’s deferred impacts have led to a record surge in demand for logistics space. Given the limited supply, rental rates have increased significantly, particularly in central distribution hubs, which has resulted in corresponding increases in Rateable Values.

Changing property valuations

This sector has demonstrated resilience throughout the pandemic with continued rental growth due to higher occupier demand resulting from the move to online retailing, the delayed impact of Brexit and a limited supply of industrial accommodation.

This growth has been particularly strong in the distribution sector and has filtered through to more traditional industrial occupiers. Increases in rental values, especially those agreed close to 1 April 2021 (the valuation date for the 2023 Revaluation in England and Wales), directly impact ratepayer liabilities, leading to higher costs for industrial and logistics occupiers.

However, not all properties should see such significant Rateable Value increases. As rental growth in parts of the sector continued after April 2021, there is a risk that the Valuation Office Agency may have placed too much weight on potentially inflated evidence and, therefore, overvalued assessments.

In England and Wales, Rateable Values can be challenged through the Check, Challenge, Appeal process.

Regulatory compliance

England and Wales

Non-Domestic Rating Act 2023

The Non-Domestic Rating Act 2023 will introduce potentially onerous mandatory obligations on ratepayers to regularly update the tenure and physical details of all properties within their portfolios with the Valuations Office Agency (VOA).

Increasing the administrative burden on businesses, it will require prompt updates to the VOA and annual returns even where there are no changes, with penalty risks for non-compliance. The complexity of business rates management will increase with measures anticipated to be fully in place for the 2026 Revaluation.

Material Change of Circumstance (MCC)

Legislative changes to Material Change of Circumstance provisions took immediate effect in October 2023. They tighten the scope of MCCs in England so that new legislation, licensing regimes and guidance from public bodies will not be grounds for a change in Rateable Value between revaluations.

Completion Notices

For buildings that have been temporarily removed from the rating list during redevelopment, billing authorities will be able to issue Completion Notices in the same way as for a new building. The regulatory changes should be in effect from January 2024.

Scotland

Since January 2023, Scotland’s new legislation has transferred Valuation Appeals to the Scottish Courts Tribunal service. This entails strict deadlines and rigorous requirements for ratepayers and advisors. All appeals against valuations from April 2023 should have been submitted as a comprehensive case with supporting data by 31 August 2023. Learn more about how to appeal business rates in Scotland.

Impact of Revaluation 2023 on Industrial and Logistics

How we can help

Bringing vast experience and industry-specific knowledge, our specialists offer expert insights on minimising business rate liabilities. We understand the complexity of the industrial and logistics sector – from the latest distribution warehouses and large traditional manufacturing sites through to specialist trade counter operations. We use our leading in-house market analysis, compiled as part of our Prime Logistics and Multi-Let Industrial research publications, to help us achieve the best results for our clients.

Review and Appeal

We know when to appeal and when to leave well alone. Our experience of a diverse range of properties and locations across the UK gives us a tangible edge in our negotiations. This insight and our forensic attention to detail translate into successful appeal strategies.

Budgeting and Forecasting

We can provide certainty with the accuracy of rate bills and account for future new builds and other changes in your accrual reports, which are crucial when budgeting for new sites and capital investments.

Plant and Machinery

Plant and machinery can form a significant part of the rating assessment. We can provide a forensic review of the assets valued and whether they are correctly included. This is a highly specialised area of business rates with complex regulations determining the rateability of plant and machinery. Our experts deal with some of the most complex industrial facilities in the UK and have led in developing case law within this area.

Disturbances and Deletions

As well as advising on the impact of physical changes, including demolitions and temporary disturbances, we also work closely with the Valuation Office Agency to manage and, where possible, ‘prior-agree’ alterations to assessments to reflect these changes.

Vacant Properties

Most properties within this sector are classed as ‘qualifying industrial hereditaments’. They can qualify for six months of 100% empty rate relief when vacant rather than the standard three months. However, industrial properties can sometimes be vacant for longer periods. We work with clients to explore every opportunity to mitigate their liability. Properties can also become redundant or reach a point beyond economic repair. In these cases, we can investigate opportunities to reduce or delete assessments where appropriate.

Exemptions and Reliefs

We ensure reliefs are properly applied. We are at the forefront of devising innovative solutions to problems posed by changes to legislation.

Historic Rates Audit

Our historic rates audit ensures that past errors and overpayments are resolved and refunded.

Rates Payment Management Service (RPMS)

We offer the market leading rate payment management service to ensure you only ever pay the correct rates liability.

New logistics warehouse in Corby

Phased occupation

Development of this site commenced just before the COVID-19 pandemic. As a result of the high demand for emergency storage, our client agreed to open part of the site early while development continued on the rest of the site, delivering a phased process of occupation. The property was initially assessed from the initial occupation date at full value, resulting in a significant liability to the client. We agreed on a reduced payment plan with the local authority and were able to agree a deletion of the initial assessment and a revised staged assessment reflecting the phased handovers. This resulted in a saving of £1.6m.

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Distribution warehouse in Kent

Comparable evidence

This site had assessments for the 2010 and 2017 Rating List, which the Valuation Office Agency (VOA) argued reflected rental levels in the locality. We argued that the rent agreed on the property needed to be considered and that, as a regional distribution hub, comparable evidence should be drawn from a wider area. The VOA were not prepared to concede, and the case was pursed with the Valuation Tribunal who fully supported our arguments.

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Brewery site in Northamptonshire

Valuation method

Acting on behalf of a brewery client, we reviewed the 2017 List rating valuation for the site, which had been undertaken on a Contractor’s Basis valuation method. The site’s valuation reflected the rateable parts of the accommodation with land, with allowances granted to elements of the brewery for underutilisation. In reviewing the valuation, we identified that the Valuation Office Agency (VOA) had double-counted some accommodation on the site and could serve a Check appeal to remove this, to which the VOA agreed. Savings to the client were approximately £200,000.

National food and clothing retailer

Working for a national food and clothing retailer, we reviewed the rates on a recently acquired, second-hand distribution warehouse in Hatfield set for refurbishment. During the year-long renovation, full rates would typically apply. Due to the nature of the works, we made a strong Check then Challenge appeal to remove the rating assessment during the refurbishment period, backed by detailed works, costs, timings and relevant legal and rating references. The Valuation Office agreed to our request.

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Drinks manufacturer

On behalf of a drinks manufacturer, we appealed the rating assessment for their dual-purpose site in Milton Keynes, which was part factory and part distribution warehouse. We undertook a detailed inspection, and following this argued that the site’s bespoke nature reduced its rental value. The Valuation Office Agency (VOA) agreed to these changes on the original 2010 List assessment and on the 2017 List, which meant that the client could benefit from the changes immediately and that there was no need for a formal appeal.