The crash caused huge volatility in markets and one of the worst-affected sectors was commercial property: values plummeted in many locations and sectors in its immediate aftermath and, while some areas of Scotland have stabilised or even moved on since then, others have remained in the doldrums.
Nearly a decade later, the seismic impact of the “credit crunch” will be felt once again on 1 April 2017, the effective date of the business rates revaluation in Scotland. After being postponed by the Scottish Government in 2015, it is possibly the most anticipated revaluation of the last two decades – and the consequences could be significant for organisations of all shapes and sizes.
Recently, a great deal of media attention concentrated on the profound effects that movements in property values were having on draft 2017 rateable values set in England. Huge rises were predicted in many areas of London and the south-east, where some prime retail destinations in the City were reportedly going to see their rates more than double, or even treble – on one particular street, they were estimated to increase by 415 per cent.
Of course, not everywhere has seen the upturn in rents experienced in parts of London – growth has been uneven across the economy, and, whilst many businesses within the M25 may see large increases to their annual bills, organisations in regional towns and cities may find the opposite is true.
In Scotland, rateable values have generally tended to rise from one revaluation period to the next. However, it’s likely that the upcoming re-assessment will produce a mixed bag, as assessors across the country attempt to reflect the instability and rental fluctuations since the last revaluation.
While Glasgow grade A offices, prime retail sites and prime industrial areas have steadied – and in some cases experienced rental growth – out-of-town offices and high street retail units in smaller regional towns across Scotland are likely to go the other way. Ironically, landlords in the latter locations have, in recent years, often accepted discounted rents in order to see properties occupied and remove themselves from rates liabilities. Many of these rents will now provide the evidence that will be used by the assessor to justify revised rateable values.
All businesses, no matter what sector they operate in, need to pay attention: the new rateable value assessments introduced in April will form the basis for all companies’ rates bills for the next five years, and organisations will only have until September 2017 to appeal the revised assessments. It is, therefore, absolutely crucial that ratepayers take professional advice on their rates liabilities during this time of reassessment.
If they decide to pursue an appeal against the new rateable value of their property, it’s critical that the aforementioned strict deadlines in place are not missed. An appeal by a professional adviser will protect a ratepayer’s position and, at a minimum, provide comfort that the assessment has been independently checked and is correct. The best case scenario could be a reduction in the rateable value and often significant savings being made in rates costs.
While the temptation might be to think that April 2017 is a long time away, in truth, preparation needs to begin now. The work to arrive at new rateable value assessments is almost complete and figures are expected to be announced around the turn of the year, with formal notices being issued to all business ratepayers in March or April.
It remains to be seen how exactly these will take shape; nevertheless, what’s certain is that there could be significant differences in the offing for the rates paid by many businesses – and the price of inaction could be high.
• Iain McGhee is valuation and rating partner at property consultant Knight Frank