COLLIERS INTERNATIONAL 2017 Rating Revaluation Central London Office Occupiers 2015 NEW RIVER RETAIL PROPOSALS P1

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1 COLLIERS INTERNATIONAL 2017 Rating Revaluation Central London Office Occupiers 2015 NEW RIVER RETAIL PROPOSALS P1

2 Understanding the 2017 Rating Revaluation Since 1990 business rates in the UK have been re-valued every five years to bring them in line with open market rental values. However in October 2012 when the government decided to postpone the 2015 Revaluation it created the prospect of this realignment exceeding five years for the first time in a generation. The 2017 Revaluation will now come into effect on 1 April 2017 with Rateable Values (RVs) recalculated from the current 1 April 2008 valuation date to reflect 1 April 2015 values. The landscape of the Central London office sector has seen a significant amount of change over the last seven years. The 2009 economic downturn in Central London was short lived with rental levels recovering quickly and whilst rents have continued to rise to record levels in 2015, the level of rates liability have until now simply increased year on year in line with the retail price index. This is now all set to change and with the anticipated increases in RVs now due to catch up with these record rental levels there will be significant impact on overall occupancy costs in the capital. The 2017 Rating Revaluation will produce the largest changes in Rateable Value for a generation it has therefore never been more important for businesses to properly plan and budget for the changes ahead. P2 BUSINESS RATES 2017 RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS

3 How have Central London office rents changed since 2008? PERCENTAGE RENTAL CHANGE SINCE APRIL % 80% 60% 40% 20% 0-20% Westminster Valuation date for 2010 Rating List City City Fringe Canary Wharf Southbank 2010 Rating List effective date Valuation date of postponed 2015 revaluation Valuation date for 2017 Rating Revaluation City 2015 rental growth remained consistently strong across London with headline rents throughout the wider City submarkets seeing average annual growth of 16.7%. Across London as a whole, prime rents grew by an average of 9.8% on 2014 levels. West End While average headline rental growth in the West End stands at 8.1% year on year, a number of villages are seeing growth in excess of that figure. -40% Apr-08 Apr-09 Apr-10 Apr-11 DATE Apr-12 Apr-13 Apr-14 Apr-15 Colliers London Office market snapshot October RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS BUSINESS RATES P3

4 What impact might this increase in office values have on anticipated 2017 Rateable Values? Kensington 20% Paddington 25% Paddington Hyde Park Chelsea 20% Marylebone Marylebone % Knightsbridge Knightsbridge 5% Bond Street Mayfair / St 15% James s Fitzrovia Fitzrovia 45% Euston % Tottenham Court Road Soho % Victoria Victoria / Westminster % King s Cross % Clerkenwell / Farringdon Bloomsbury % % Farringdon City Midtown Midtown % Covent Garden/ Garden Strand % Shoreditch Old Street 95% Central City 30% London Bridge St James s Southbank 50% 20% Southwark % Waterloo/ Vauxhall 35% Aldgate 40% Figures apply to rents for Grade A office space of 10,000 sq ft and above. Canary Wharf 10% Docklands 5% *figures are the estimated percentage change in rateable value that could come into effect from 1 April Actual rates payable will be subject to uniform business rate and transitional relief arrangements. P4 BUSINESS RATES 2017 RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS

5 2017 Revaluation What changes are ahead? Any Central London office occupier or landlord with an exposure to business rates needs to be aware of the implications of the Revaluation. The draft rating list is due to be released by the Valuation Office Agency (VOA) in September 2016 with the values then set to go live in April Therefore the sooner the anticipated changes are fully considered the earlier a strategy can be implemented to review and mitigate the newly enforced rates liability. It is not just the RVs themselves that are due to change, there are a number of other areas of the business rates system that are affected, proving that it has never been more important to instruct a specialist business rates adviser. Business Rates Reform - Check, Challenge, Appeal After significant pressure to completely reform the way business rates are managed the government announced at the end of 2015 a number of proposed changes to the way business rates assessments can be challenged. The suggested Check, Challenge, Appeal (CCA) process, to which Colliers International have sent a response and recommendations, will require adaptation from the current system, requiring full mobilisation at the earliest possible opportunity. Devolution Revolution The 2015 Autumn statement announced the government s intention to devolve powers from Whitehall to local authorities. This will mean by 2020 all 30.5 billion in business rates revenue will be retained by local government. This devolution will also see the end to a Uniform Business Rate (UBR) in Central London where powers will be afforded to reduce or increase the multiplier. In the March 2016 budget it was announced that this timescale will be brought forward and the Greater London Authorities will retain 100% of the business rates collected by them from April Uniform Business Rates The 2017 Rating Revaluation will see the setting of the highest ever business rates multiplier at the start of a revaluation period. When rates in their current form were established in 1990 the rate in the pound payable on RVs was 34.8p. This had increased to 41.4p by 2010 (the first year of the current revaluation). We estimate the Central London business rate multiplier in 2017/18 will be 49.8p, excluding Crossrail and City of London supplements. Division of adjacent floors The valuation of business rates is continually shaped by case law and legislation. The 2015 Supreme Court judgement in Woolway (Appellant) v Mazars (Respondent) is set to have a significant impact on the way Central London offices are valued. Any companies who occupy more than one floor within the same building will potentially be impacted by this decision and Colliers International are currently advising a number of clients on the true implications to their business rates liability as a result of this decision RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS BUSINESS RATES P5

6 Your business rates timeline Preparations for the 2017 Revaluation are already under way. In the interim, the VOA will be dealing with the 300,000 remaining appeals relating to the 2010 Rating List. JUNE - SEPTEMBER 2016 The VOA will complete their rating valuations for the 2017 List It is imperative that any outstanding 2010 appeals, that may have an impact on the values set for the draft list, are resolved. JULY 2016 Deadline for responses to consultation paper Business Rates: delivering more frequent revaluations. 30 SEPTEMBER 2016 The 2017 draft rateable values (draft list) will be published These values will need to be checked for clear factual errors as they will provide the basis for the budgeting and decisions on appeal. Re-inspections of properties, to take into account the requirements of the CCA process, should be taken so your advisers can quickly determine inaccuracies once the list is released. AUTUMN/WINTER 2016 UBR multiplier for 2017/18 and transitional adjustment arrangements will be announced We have already set out in previous documentation what our estimates of the multiplier will be, as well as the implications for transitional relief. Given the seven year gap between revaluations, we expect there to be large variations, both up and down. In our opinion, this will result in a far larger percentage used in the transitional scheme than for the 2010 List. APRIL 2017 The new rating list will be published and the CCA process can commence from this point All businesses will be in the same position at this stage, it is therefore critical that your advisers are fully prepared and in a position to prioritise your liabilities. P6 BUSINESS RATES 2017 RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS

7 The Colliers International Rating team Colliers International has a dedicated Central London Business Rates team operating from four offices within the Greater London Authority, and headquartered in Westminster, with extensive knowledge across all Central London sub-markets. The Colliers International Rating team specialise in the valuation of offices in all the key Central London markets. We have an enviable Central London Agency and Investment team which ensures we are also able to draw on a wealth of detailed market rental evidence which we use to support our valuations. In addition, Colliers employs an expert research team who are continually tracking and reporting on any movements within the Central London office market. Being able to combine our knowledge with this wider network of expertise will be vital when collecting and reviewing rental evidence in relation to the 2017 revaluation, particularly with the challenges presented by the awaited CCA system. Once the Check, Challenge, Appeal proposal changes come into effect the requirement for extensive market knowledge will be essential to ensure that any incorrect valuations are highlighted and challenged at the earliest possible opportunity. The need for an adviser with a breadth of dedicated experience within the Central London market who can draw on a wider network of resources has therefore never been more important. With the new Check stage being implemented the need for re-inspection of all properties will be essential and therefore the retention of existing advisers who have previous inspection details becomes less significant. Businesses requiring an adviser who can implement a strategy well in advance of the draft list should therefore consider their breadth and capacity to prioritise an inspection programme and proactively manage business rates liabilities. Colliers International has demonstrated that with strong communication, a detailed mobilisation plan, process mapping, carefully considered risk control measures and a commitment to working in partnership with clients and other agents a seamless transition can be achieved. During the course of the 2010 Rating List we have received numerous appointments mid list and these instructions have resulted in significant savings being achieved which had previously not been identified. Our success is down to one thing our dedicated rating team. We have one of the largest rating teams in the country, which affords us the envious ability to draw on professional rating advice throughout the UK from ten of our offices demonstrating a true national coverage with a thorough understanding of the local markets. Our team boasts the largest number of qualified surveyors that hold the prestigious RICS Diploma in Rating and we are well represented on the RICS, RSA and IRRV panels enabling us to influence policy RATING REVALUATION CENTRAL LONDON OFFICE OCCUPIERS BUSINESS RATES P7

8 The UK business rates team covers everything from challenging rateable values to examining your bills. We provide a comprehensive, integrated service. We call it 'The Complete Circle of Rating Advice'. Our service includes: Rateable Value Review and Appeal Material Change of Circumstance (MCC) Appeals Rate Account Management (RAM) Business Rate Forensic Audit Property Usage Review Empty Property Rates Cost Management New Development & Practical Completion Advice Contacts John Webber Head of Rating john.webber@colliers.com Howard Smith Director Rating howard.smith@colliers.com Ben Monk Associate Director Rating ben.monk@colliers.com Damien Clarke Director Rating damien.clarke@colliers.com Alex White Director Rating alex.m.white@colliers.com Jeff Norris Director Rating jeff.norris@colliers.com Since 2010, through Appeals and Audit services combined we have saved our clients over 500m. If you have any further questions please contact us directly or call rating@colliers.com P8 NEW RIVER RETAIL PROPOSALS 2015 May 2016