A RESEARCH PAPER INTO THE FACTORS IMPACTING BUSINESS RATES VALUES.

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Registered Company No. 4821785. VAT No. 820601475. T: +44 (0) 20 3111 4393 | E: sales@localdatacompany.com | W: www.localdatacompany.com

LDC

The leader in retail

location data & insight

Produced by

Alex Singleton (University of Liverpool)

in partnership with The Local Data Company

September 2013

No part of this report may be reproduced or distributed.

FACTORS IMPACTING BUSINESS

RATES VALUES.

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INTRODUCTION

In partnership with the ESRC and The University of Liverpool, The Local Data Company and Dr. Alex Singleton have carried out some preliminary research looking at the changes in occupation, vacancy rates and rents in relation to nine pilot areas. These areas are Cleethorpes, Grimsby, Market Harborough, Rochdale, Salisbury, Scunthorpe, London SW6, London W12, London W6 and London W14.

The aim of this research is to demonstrate changes to the original values attributed to the last business rates revaluation in 2008 across a number of geographically diverse locations. Following feedback on this paper the intention is to build and apply a model that can identify the relative changes from 2008-2013 across all retail locations in England. We welcome your feedback on this paper.

RENT CHANGE SINCE 2008

The last VOA revaluation took place in 2010, however, was implemented using 2008 values. As such the property rental rates are based on those which were applicable around the economic peak and prior to the current recession. The VOA estimates that rents have fallen by 13% in England since this point, and between the regions, there are also considerable variations (see Table1) .

North West -17

Yorks & Humber -15

East Midlands -9

Table 1. Estimated change in Retail Rental Values between the Regions since 2008.

Table 2. 2008 VOA Rental Values by Retail Category (Pounds per square metre). http://www.voa.gov.uk/corporate/News/2012/newsRelease_November_2012.html Region Change (%) North East -17 West Midlands -13 South West -15 East -15 England -13 London -8 South East -14

Food & Drink 107.5 80.2 252.7 233.5 198.6 295.9 151.1 138.4 197.6 88.8

Health & Beauty 117.3 143.1 264.3 393.2 213.7 309.2 124.6 142.3 178.6 99.7

VOA Rental Values London

SW6 London W12 London W14 London W6 Market Harborough Rochdale Salisbury Scunthorpe Grimsby

Cleethorpes

Clothes & Fashion 96.7 246.2 253.5 636.8 298.8 588.1 135.5 163.2 233.7 129.4

Home & Garden 108.8 48.5 264.4 200.8 243.7 228.7 109.0 105.9 144.9 74.8

Taxis & Transport 26.6 43.6 154.1 112.4 146.9 125.6 78.6 98.2 106.3 56.6

Pubs, Bars & Clubs 50.7 68.4 141.4 66.6 82.4 119.9 46.8

Restaurants 85.2 66.1 273.3 280.5 184.1 210.0 92.7 119.3 116.7 67.0

Shops & Amenities 108.0 222.7 266.2 326.4 222.0 339.4 126.4 170.2 315.5 116.1

Events & Attractions 86.3 135.3 283.9 181.1 311.8 182.3 116.9 108.8

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Rental value per square metre were calculated for each retail premises using the VOA rental data. Total square meterage for the properties were used in these calculations, and as such, does not account for apportionment of total rental values between the different zones within the property. The results are presented by the LDC retail category in Table 2 for the sample towns. There is a variation both within these categories, and also between towns. These values were then adjusted by the VOA estimated

Table 3. Estimated 2013 Rental Values by Retail Category (Pounds per square metre).

Table 4. 2008-2013 Rental Value Changes by Retail Category (Pounds per square metre).

Food & Drink 91.4 68.3 232.5 214.8 182.7 272.2 137.5 114.9 167.9 75.4

Health & Beauty 99.7 121.6 243.2 361.7 196.6 284.5 113.4 118.1 151.8 84.8

VOA Rental Values London

Cleethorpes

Clothes & Fashion 82.8 209.3 233.2 585.9 274.9 541.1 123.3 135.5 198.6 110.0

Home & Garden 92.5 41.2 243.2 184.8 224.2 210.4 99.2 87.9 123.1 63.6

Taxis & Transport 22.6 37.1 141.8 103.4 135.2 115.6 71.5 81.5 90.4 48.1

Pubs, Bars & Clubs 43.1 58.2 130.1 61.3 68.4 101.9 39.8

Restaurants 72.4 56.2 251.4 258.0 169.3 193.2 84.3 99.0 99.2 56.9

Shops & Amenities 91.8 189.3 244.9 300.3 204.2 312.2 115.1 141.3 268.2 98.6

Events & Attractions 73.4 115.0 261.2 166.6 286.9 151.3 99.4 92.5

Food & Drink -16.1 -11.9 -20.2 -18.7 -15.9 -23.7 -13.6 -23.5 -29.6 -13.3

Health & Beauty -17.6 -21.5 -21.1 -31.5 -17.1 -24.7 -11.2 -24.2 -26.8 -15.0

VOA Rental Values

Clothes & Fashion -14.5 -36.9 -20.3 -50.9 -23.9 -47.1 -12.2 -27.7 -35.1 -19.4

Home & Garden -16.3 -7.3 -21.2 -16.1 -19.5 -18.3 -9.8 -18.0 -21.7 -11.2

Taxis & Transport -4.0 -6.5 -12.3 -9.0 -11.8 -10.0 -7.1 -16.7 -16.0 -8.5

Pubs, Bars & Clubs -7.6 -10.3 -11.3 -5.3 -14.0 -18.0 -7.0

Shops & Amenities -12.8 -9.9 -21.9 -22.4 -14.7 -16.8 -8.3 -20.3 -17.5 -10.0

Restaurants -16.2 -33.4 -21.3 -26.1 -17.8 -27.1 -11.4 -28.9 -47.3 -17.4

Events & Attractions -13.0 -20.3 -22.7 -14.5 -24.9 -31.0 -17.5 -16.3

regional rate of rental change (see Table 1) and are shown in Table 3, with their difference from the 2008 values in Table 4.

An alternative measure was derived from data supplied by the commercial estate agent Colliers that recorded changes in rent asked between the sample towns (excluding Cleethorpes) in 2008 and then 2013 (see Table 5). Updated adjustments using the localrates can be seen in Table 6 and their corresponding difference from the 2008 values in Table 7. Unlike

London

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London SW6 6.3

London W12 8.3

London W6 11.1

Table 5. Colliers Rental Rate Changes.

Town Change (%) Grimsby -18.5 London W14 -9.1 Scunthorpe -41.2 Market Harborough -10.0 Rochdale -40.0 Salisbury -26.9

Table 6. Locally adjusted Estimate 2013 Rental Values by Retail Category (Pounds per square metre).

Table 7. Locally adjusted Estimate 2008-2013 Rental Values by Retail Category (Pounds per square metre).

Food & Drink

252.9 19.4 180.5 -18.1 328.7 32.8 136.0 -15.1 83.0 -55.4 144.4 -53.2 52.2 -36.6 65.4 -14.8 268.7 15.9 Health & Beauty

Health & Beauty

425.8 32.6 194.3 -19.4 343.5 34.3 112.1 -12.5 85.4 -56.9 130.5 -48.0 58.6 -41.1 116.6 -26.5 281.0 16.7

Colliers rental data adjustment to VOA

Colliers rental data adjustment to VOA London W12 London W12 London W14 London W14 London W6 London W6 Market Harborough Market Harborough Rochdale Rochdale Salisbury Salisbury Scunthorpe Scunthorpe London SW6 London SW6 Grimsby Grimsby

Clothes & Fashion

689.7 52.9 271.6 -27.2 653.4 65.3 121.9 -13.5 97.9 -65.3 170.8 -62.9 76.1 -53.3 200.7 -45.5 269.4 16.0 Home & Garden

Home & Garden

217.5 16.7 221.5 -22.2 254.1 25.4 98.1 -10.9 63.5 -42.4 105.9 -39.0 44.0 -30.8 39.5 -9.0 281.0 16.7 Taxis & Transport

Taxis & Transport

121.7 9.3 133.5 -13.4 139.5 13.9 70.7 -7.9 58.9 -39.3 77.7 -28.6 33.3 -23.3 35.6 -8.1 163.8 9.7 Pubs, Bars & Clubs

Pubs, Bars & Clubs

153.2 11.7 74.0 7.4 49.4 -32.9 87.6 -32.2 27.5 -19.3 55.8 -12.7 Restaurants Restaurants 303.8 23.3 167.3 -16.7 233.3 23.3 83.4 -9.3 71.6 -47.7 85.3 -31.4 39.4 -27.6 53.9 -12.2 290.5 17.2 Shops & Amenities

Shops & Amenities

353.5 27.1 201.8 -20.2 377.0 37.7 113.8 -12.6 102.1 -68.1 230.6 -84.9 68.2 -47.8 181.5 -41.2 282.9 16.8 Events & Attractions

Events & Attractions

196.2 15.0 346.5 34.6 109.4 -72.9 85.5 -31.5 64.0 -44.8 110.3 -25.0 301.8 17.9

certain parts of London exhibited positive rent change. Furthermore, other towns recorded rents falling at a rate much greater than their regions estimated average.

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LOCAL SCALE RETAIL VITALITY

However, national, regional and town level adjustments will likely mask significant variation within towns. In a study of ten London town centres, it has been shown that a 1% increase in the rate of void, betting and charity shops influenced a reduction in rent of £46m per year . However, this relationship may only be applicable within London, where shop density and competition for space would likely be higher. Also, the values used in this calculation were based on Zone A space within the property, and although these may also be applicable to other zones (which are often a proportion of Zone A space), they would not necessarily be applicable to all other spaces within a property such as kitchens, bathrooms or offices.

Vacancy rates provide a useful measure of retail vitality, and across the sample of towns it can be seen that these have changed considerably between 2008 and 2013 (see Figure 1).

20 30

Per

cen

t

Grimsby Rochdale Salisbury Market Harborough

10

0

2010 2012

2008 2010

2008 2009 2009 2011 2011 2012 2013 2013 2013

Figure 1. Vacancy Rate Changes Between Selected Towns 2008-2013.

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http://www.oxfordeconomics.com/publication/open/240048 2

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Those retail properties identified within the buffer zones were then used to calculate the percentage of vacant units. These are mapped for an area with Grimsby and London W12 in Figure 3 and Figure 4 respectively.

A second measure calculates the same percentage scores, however, for the ten closest shops to each retail unit rather than those within a 100 meter buffer. In an area with high retail density this would

provide a more localized measure. An example is mapped for Cleethorpes in Figure 5.

Figure 2. Buffer Zones.

Figure 3. The Percentage of Vacant Retail Units within 100m Vicinity of each Shop within Grimsby.

Background Map Data - CloudMade.com and Openstreetmap.org.

Figure 4. The Percentage of Vacant Retail Units within 100m Vicinity of each Shop within London W12.

Using vacant shops as a measure of retail vitality, it can be shown that town averages can mask considerable local variation. To investigate this issue further, two additional metrics were calculated. The

first takes a 100 meter buffer around each shop and calculates the proportion of vacant retail units within this area. This is shown in Figure 2 for the store Bank Fashion located in Grimsby (green point). The pink points on this map are those retail premises within the 100m buffer zone, and the blue points the remaining premises.

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The VOA values adjusted using the Colliers data were then grouped into bands created from the 100m buffer vitality measure. The results are shown in Table 8 for each of the sample towns . Each of the percentage bands represents the rate of vacant property surrounding the retail unit, with the figures in the table an estimate of the current average ratable value in pounds per meter square. Blanks are the absence of property allocated within the bands. This analysis again highlights the between city differences, but also a trend towards lower values in those areas with greater vacancy rates. Further analysis would be required to explain these patterns, however one hypothesis might be that in more peripheral locations, where rents would also be typically lower, these areas may also have suffered from greater vacancy rates.

Figure 5. The Percentage of Vacant Retail Units within Cleethorpes (10 Nearest Retail Units to each Shop).

Grimsby 151.6 40.7 17.4 30.2

London SW6 158.2

London W12 302.6

Table 8. Regionally Adjusted Rental Values by the 100m Buffer Retail Vitality Measure.

Town 0-25 26-50 51-75 76-100 Cleethorpes 89.9 56.4 81.4 London W14 London W6 195.7 278.0 Scunthorpe 87.6 43.0 Market Harborough 115.7 Rochdale 128.3 55.3 107.7 Salisbury 197.9 121.0 % % % %

For the pilot areas LDC supplied a match between VOA data and their bespoke retail database, enabling categorization by retail use and identification of vacant property.

The VOA values (based on 2008 actual value) were divided by the overall square meterage – in later work zonal divisions within units will be accounted for. 1. A. 2. B.

RESEARCH METHODOLOGY

These values were adjusted to 2013: with the VOA regional estimates of change – e.g. value X % change (based on the region in which the retail unit was found).

Where Colliers rental data were available (by town), these were applied to the VOA data and again used to calculate a rate of change.

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For more information contact:

sales@localdatacompany.com

or call (0) 20 3111 4393.

ACKNOWLEDGMENTS

Alex Singleton (University of Liverpool) and Matthew Hopkinson (LDC) would like to thank the ESRC for their ongoing support to this project. They would also like to thank Colliers International for supplying rental values for the areas analysed.

All data and time contributed by LDC and Colliers International has been on a pro bono basis.