A tax typically faced by property occupiers, and broadly based upon annual rent, the business rates regime has faced increased opposition from tenants in recent years. Opposition has been most vocal in secondary locations, where business rates have been rising at a time of lower economic activity and sharp rental decline.
The planned revaluation in 2017 could provide significant support to the secondary property market, particularly retail, while reducing the relative appeal of prime assets. On average, annual business rates for secondary retail could fall by as much as 20% from 2017 onwards, with some locations seeing far greater reductions.
Irrespective of any reform of the rates regime, the planned revaluation is likely to boost occupier and investor demand for secondary assets and locations, at the expense of prime. Given the expected magnitude of the tax cut on some secondary properties, this may help to sustain the recent rise in investor demand for secondary assets and locations, boosting the relative return from this part of the real estate market.
Source : Deutsche Asset & Wealth Management