W1 office occupiers braced for a sharp increase in business rates

UK business rates increase will significantly impact property costs for W1 tenants

Article posted: 04 Apr 2011

The UK business rates increase to be implemented on 1 April will have a significant impact on bottom line property costs for occupiers in the W1 London postcode, global property advisor CB Richard Ellis has warned.

With rates payments set to increase by 20% from 1 April 2011, CBRE’s Rating and Taxation team estimates that occupiers of office space in W1 will have borne the brunt of an approximately 40% hike in rates payments since April 2010.

For occupiers of office space in Mayfair the 1 April increase equates to an extra £6 per sq ft per year while tenants of offices in Soho and office space in Covent Garden can expect rates to increase by £4 per sq ft.

The increase in rating costs is due in part to the introduction of the new rating multiplier by the UK Government. From 1 April 2011 the multiplier will be 43.3p, which represents an increase of 4.6% in line with the September 2010 Retail Price Index. This multiplier increase comes on top of the rise in property costs flowing from the 2010 Rating Revaluation which came into force on 1st April 2010.

With the next revaluation due to take place in 2015, occupiers in the bulk of existing office space in London will be burdened with rates based on 2008 values throughout the downturn.

Stewart Smith, Executive Director in CBRE’s Central London Tenant Advisory Group, warns that the rates increase may be a decisive factor in occupiers relocating from W1: “Many occupiers in London’s W1 will struggle to absorb these costs. This hike in rates, with the prospect of further increases over the next few years, may be the tipping point for media companies and professional services firms that are already considering cheaper alternatives to W1.”

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Posted by Jo