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The capital's thriving tech sector could run into property and viability problems once the 2023 business rates revaluation comes into effect on 1 April.
So said Colliers, suggesting the revaluation could mean tech occupiers being priced out of their preferred London hot spots, while the business rates relief regime could put fragile young tech businesses at risk.
Colliers said the revaluation will have “a material impact on the provision of affordable workspace in the capital,” particularly in the formerly fringe locations favoured by tech businesses.
Rents and hence rateable values in fringe locations such as Hackney, Southwark and Hammersmith & Fulham have increased 50%-60% in 10 years, compared to 21% in the City. Fringe locations have now become equally or in some cases more expensive locations than those in the central London core. This is pricing some office occupiers out, particularly those in the creative and tech industries.
Rates bills are up, too. Business rates on offices in Hammersmith & Fulham, for example, will see an average 11.7% rise in their rateable value, and hence rate bills.
In Southwark there is an 11.4% rise and in Hackney office rates are increasing 21.7%, much greater than the 2.1% rise in the City, the 8.2% rise in Westminster and even a drop of 3.4% in Islington.
“The London Plan gives greater significance to the importance of affordable workspaces and the need to provide for these in the planning process and many local authorities are including policy within their local plans, together with thresholds and requirements for developers," Colliers Director of London Rating Alex White said.
"But it will all be meaningless if businesses aren’t able to afford to take on these new buildings, even with their rents reduced by the plan. This is due to the sizeable cost associated with business rates.”
Colliers said the changes to business rates could impact the viability of new affordable office schemes because the current business rates relief system does little to support affordable workspace. After the 2023 revaluation this will, in many central London areas, only benefit those occupying less than 205 SF of self-contained space with no benefit for open-plan or shared areas.
“We believe there are wide benefits of supporting affordable workspace schemes in the city fringes both from an economic and social viewpoint. It is crucial that London remains at the forefront of the UK’s tech, creative and life science sectors,” Colliers Head of Business Rates John Webber added.
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