Occupiers of commercial property who pay rents and rates will be well aware that the predominant way of valuing almost all of it (shops, offices, factories and restaurants) is on an area basis. But is this all we need to think about?
I know that many reading this will operate shops and will be aware of the “zoning” method of valuation undertaken by surveyors (for those who aren’t shopkeepers or surveyors, we consider the first six metres depth of a shop to be twice as valuable as the next six metres which in turn is twice as valuable as the next six metres and so on). And in restaurants kitchens are valued at a lower rate than the actual trading area etc. But recently I have been engaged to negotiate the rates on a warehouse using the Governments Check, Challenge, Appeal system. Now this relies on floor areas in the basic assessment of warehouses and my client’s unit is in fairness rated at a fairly low level within that. It should be because it is very basic (it has the horrors of a corrugated asbestos roof and only nominal insulation) which obviously have a negative effect on value.
But also… it has a clear working height of approximately 4 metres. Around 15 feet 1 inches isn’t terribly high for storage and so I will be seeking an adjustment to reflect this. The question is how much should the rate be adjusted to compensate for the low height and conversely, were the height to be say 8 metres (over 30 feet), would that have a diminished value because of the extra costs of heating and maintenance? I found forklift trucks that lifted to 6.3 metres, so assuming they were lifting a pallet with stock on of a metre high, anything over 7.3 metres would seem to be wasted space. Excessive heights are of course a problem that I and other churchwardens have to deal with in heating the caverns of our churches and other religious buildings.
So is this relevant to you? I suggest that all commercial property occupiers look at the areas of the properties they are operating in, the volumes of the properties they are operating in and the shape of the properties they are operating in. Floor area gives a very strong clue as to the value of a property, but I don’t think it is anything like the whole answer, even comparing two properties of like floor area, age and energy performance.
And this leads onto how we configure commercial property within – and outside – our town centres. The economy is going through huge changes, some of which may be short term (I hope that the crazy energy price increases we have seen recently will in due course be reversed) as it is another wake up call for us to consider absolutely objectively the space we have and if we can make it better use of it for ourselves and for others.
