Commercial property occupiers paid more than £20bn in business rates in 2014, according to a report released today by the Property Industry Alliance.
Business rates have become a growing burden on the retail sector, the report suggests, having increased by 3.9% per year on average over the past decade.
This compares with a 0.2% increase in rental values and 3.1% increase in the rate of retail price inflation over the same period.
Business rates in the office sector have seen an average increase of 3%, compared with a 1.8% rents increase.
Melanie Leech, chief executive of the British Property Federation, said: “The disproportionate increase of the value of business rates compared to other business costs suggests that the suitability of current system needs reviewing.
“That landlords have adjusted their rental income to reflect this is welcome as it maintains productivity, but really what we need to see is complete reform of the current system, to ensure that it is in sync with wider economic trends.”
The report states that the total value of UK commercial property rose to £787bn in 2014, up by 15% on the previous year. The industry contributed about £63bn to the economy, representing 3.9% of gross value added.
The retail sector, worth £340bn, employs nearly 1m people and contributes almost £15bn in direct taxes to the Exchequer.
Offices were valued at £234bn, industrial property at £148bn and other commercial property including hotels and leisure at £65bn.
The report also found that overseas investors owned a quarter of invested UK commercial property, worth £113bn.
In comparison, UK institutions now own £85bn of commercial investment property, representing just under a fifth of total investment – an 8% decline since 2004.
