Rates hammer blow for logistics sector

By Liza Helps, Property Editor, Logistics Matters

PROPERTY ADVISOR Montagu Evans has carried out research forecasting significant changes to UK business rates liabilities from 1 April 2026 when the next revaluation takes place and the new Rating List comes in.

It has calculated that due to increases in rents over the past five years  hitting an average of 40% as well as the Government’s intervention to ‘level the playing field’ between online retailer selling exclusively from giant warehouses and the high street shops, that properties with a rateable valuation of over £500,000 should pay an higher multiplier to offset a lower ones being applied to small high street properties, and the hospitality and leisure sector.

The report noted: “At a national level assessment on industrial and logistics properties are anticipated to increase on average by 28.6%, more than twice the figure for all properties, likely leading to significant increases in liability. Given that rents in the sector have increased by almost 40% over the past five years, this will prove challenging for many occupiers if forecasted RV increases flow through into liability. The proportion of the current rating list made up of industrial and logistics assessments currently stands at 21.7% and will increase significantly with the new rating list.

Rateable value is the value that the Valuation Office Agency has placed on a property it is an estimate of what it would cost to rent a property for a year, on a set valuation date. The property is assumed to be, vacant, in reasonable repair, available to let on the open market.

The Rating List, maintained by the Valuation Office Agency is a public document that details the rateable value of all non-domestic properties in a specific area. It’s used by local councils to calculate business rates. Business rates are calculated by multiplying  the rateable value by the Government set  business rates multiplier.

For 2024/25 the standard multiplier is 54.6 pence so if a property had a rateable value of £100,000 it would have business rates liability of £54,600.

The 2026 Revaluation will update the rateable values of business properties based on market rental values as of April 1, 2024. In the period between the previous revaluation in 2023 which was based on market rental values as of April 2021, rents increased significantly.

In April this year in a joint response to the UK Government’s Transforming Business Rates consultation, investor developers including SEGRO, Prologis, Tritax Big Box, Logicor and Indurent called for a more balanced approach to reform.

The group argued that the proposal to apply a higher business rates multiplier to all properties with a Rateable Value above £500,000 would have unintended consequences, disproportionately affecting high-street retailers, manufacturers and SMEs that rely on efficient logistics infrastructure who would absorb the financial burden.

According to the investors, only 11 per cent of space in their portfolios is occupied by e-commerce businesses, while 66 per cent is used by transport, logistics, manufacturing and retail occupiers.

The Non-Domestic Rates (Multipliers And Private Schools) Act secured Royal Assent in April this year allowing the introduction of new lower multipliers for qualifying retail, hospitality and leisure properties and higher multipliers for high value properties. The government will announce theses multiplier rates in this year’s Autumn Budget, for 2026-27.

Montagu Evans Head of Rating Josh Myerson said: “The impact for businesses of the next Revaluation in already uncertain economic times could be serious: forecast too high and valuable resource will be diverted from growth/investment decisions; pitch too low and an unavoidable cost will sit in the corporate P&L.

“The position will only be fully clear as we move toward the end of 2025, when both rateable values and the new multiplier regime is announced, giving ratepayers less than six months to meaningfully prepare.”