A RESEARCH PAPER INTO THE FACTORS IMPACTING BUSINESS RATES VALUES.

Transcription

1 A RESEARCH PAPER INTO THE FACTORS IMPACTING BUSINESS RATES VALUES. LDC The leader in retail location data & insight Produced by Alex Singleton (University of Liverpool) in partnership with The Local Data Company September 2013 Copyright The Local Data Company. No part of this report may be reproduced or distributed. Copyright All Rights Reserved. The Local Data Company Ltd, 20 Broadway Chambers, Hammersmith Broadway, 7AF. Registered Company No VAT No Page 1

2 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,, Rochdale, Salisbury, Scunthorpe, S,, and. Region Change (%) North East -17 North West -17 Yorks & Humber -15 East Midlands -9 West Midlands -13 East South East -14 South West -15 England -13 Table 1. Estimated change in Retail Rental Values between the Regions since 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 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 1 variations (see Table1). VOA Rental Values Cleethorpes Grimsby S Rochdale Salisbury Scunthorpe Clothes & Fashion Events & Attractions Food & Drink Health & Beauty Home & Garden Pubs, Bars & Clubs Restaurants Shops & Amenities Taxis & Transport Table VOA Rental Values by Retail Category (Pounds per square metre). 1 Page 2

3 VOA Rental Values Cleethorpes Grimsby S Rochdale Salisbury Scunthorpe Clothes & Fashion Events & Attractions Food & Drink Health & Beauty Home & Garden Pubs, Bars & Clubs Restaurants Shops & Amenities Taxis & Transport Table 3. Estimated 2013 Rental Values by Retail Category (Pounds per square metre). VOA Rental Values Cleethorpes Grimsby S Rochdale Salisbury Scunthorpe Clothes & Fashion Events & Attractions Food & Drink Health & Beauty Home & Garden Pubs, Bars & Clubs Shops & Amenities Restaurants Taxis & Transport Table Rental Value Changes by Retail Category (Pounds per square metre). 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 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 Page 3

4 Produced RETAIL by RENT Local Data ADJUSTMENT Company End of Year Shop Vacancy Report 2012 the regional adjustments, within the sample towns, certain parts of exhibited positive rent change. Furthermore, other towns recorded rents falling at a rate much greater than their regions estimated average. Town Change (%) Grimsby S Rochdale Salisbury Scunthorpe Table 5. Colliers Rental Rate Changes. Colliers rental data adjustment to VOA Grimsby S Rochdale Salisbury Scunthorpe Clothes & Fashion Events & Attractions Food & Drink Health & Beauty Home & Garden Pubs, Bars & Clubs Restaurants Shops & Amenities Taxis & Transport Table 6. Locally adjusted Estimate 2013 Rental Values by Retail Category (Pounds per square metre). Colliers rental data adjustment to VOA Grimsby S Rochdale Salisbury Scunthorpe Clothes & Fashion Events & Attractions Food & Drink Health & Beauty Home & Garden Pubs, Bars & Clubs Restaurants Shops & Amenities Taxis & Transport Table 7. Locally adjusted Estimate Rental Values by Retail Category (Pounds per square metre). Page 4

5 LOCAL SCALE RETAIL VITALITY However, national, regional and town level adjustments will likely mask significant variation within towns. In a study of ten town centres, it has been shown that a 1% increase in the rate of void, betting and charity shops influenced a 2 2 reduction in rent of 46m per year. However, this relationship may only be applicable within, 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). Grimsby Rochdale Salisbury Percent Figure 1. Vacancy Rate Changes Between Selected Towns Page 5

6 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. 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 2. Buffer Zones. 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 in Figure 3 and Figure 4 respectively. Figure 4. The Percentage of Vacant Retail Units within 100m Vicinity of each Shop within. provide a more localized measure. An example is mapped for Cleethorpes in Figure 5. 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 Page 6

7 Town % % % % Cleethorpes Grimsby S Rochdale Salisbury Scunthorpe Figure 5. The Percentage of Vacant Retail Units within Cleethorpes (10 Nearest Retail Units to each Shop). 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. Table 8. Regionally Adjusted Rental Values by the 100m Buffer Retail Vitality Measure. RESEARCH METHODOLOGY 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. A. B. 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. Page 7

8 Produced RETAIL by RENT Local Data ADJUSTMENT Company End of Year Shop Vacancy Report 2012 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. For more information contact: sales@localdatacompany.com or call (0) Page 8