Superstores to benefit from £687m cut in business rates over three years

Supermarkets of over 27,000 sq ft are to see their business rates bill cut by £687m over the next three years, according to new analysis.

The tax cut, which derives from a government revaluation of properties for business rates purposes, will predominantly benefit the traditional big four and Waitrose, according to real estate advisers Altus Group.

The new rateable value of superstores over 27,000 sq ft, which is set to form the basis of their business rates bills from 1 April this year, has dropped 15%, from £2.86bn to £2.43bn in total.

In the case of some larger superstores the rateable value has dropped by as much as 50%, according to Altus Group’s analysis.

Meanwhile, the rateable value of smaller food stores has risen - by 8.4% for those between 8,000 sq ft and 27,000 sq ft and by 12.7% for convenience stores. As a result, their business rates bill is set to rise by £141m over three years. It makes the net tax saving for grocery retailers nearly £550m over three years.  

The revaluation is based on open market rent values on 1 April 2021. The last revaluation came into effect in 2017 and was based on 2015 open market rents, meaning the new rates reflect falling property values over six years.

Rent values of superstores have fallen thanks to lower levels of demand, with major grocers finding they have more space than they need in the intervening years, according to Altus Group.

Stores set to benefit from the biggest tax cuts include a Tesco Extra in Worsley, Greater Manchester, which has seen its rateable value fall 52%, from £3.3m to £1.6m. It is the largest percentage cut in rateable value, followed by an Asda superstore in Watford, which is to benefit from a 51% reduction.

It makes them among the biggest beneficiaries of the revaluation, with rateable values across the entire retail sector dropping 10%, according to Altus Group.

In contrast to bricks & mortar retail, the warehousing and logistics sector faces a dramatic hike in business rates from April, arising from a 27.1% increase in rateable values.

Source: Altus Group