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A simple comparison of the General Election manifestos

24 Jun 2024

With less than three weeks to go until the General Election, Bira has produced a simple table comparing manifestos for Labour, Conservatives, Liberal Democrats, Green Party and Reform UK, and... Read more…

Independents Day message - supporting independent shops boosts local jobs and economies.

24 Jun 2024

With the annual Independents’ Day weekend coming up on July 6th and 7th, independent retailers have been reinforcing the message that supporting independent shops boosts... Read more…

Euro 2024 predicted to deliver multi-million-pound boost for independent retailers

24 Jun 2024

Research from the British Retail Consortium (BRC) has suggested 6% of shoppers will buy a new TV or electronic device during the Euros, 4% will purchase official merchandise and nearly 10% will... Read more…

Bira leads £1 billion damages claim against Amazon by UK retailers in landmark collective action

12 Jun 2024

A £1 billion damages claim has been filed against Amazon on behalf of retailers selling on Amazon’s UK marketplace for illegally misusing their data and manipulating the Amazon Buy... Read more…

Bira responds to KPMG Retail Sales Monitor report

10 Jun 2024

The British Independent Retailers Association (Bira) has responded to the BRC-KPMG Retail Sales Monitor for May 2024.
Read more…

Small independent Harrogate shop does it again at the national level with new awards glory

10 Jun 2024

Independent Harrogate computer shop Phase 4 Computers has been named as a finalist in the Tech Awards 2024.
Read more…

Knutsford fashion show highlights town's 'amazing independent shops'

10 Jun 2024

Independent boutiques in Knutsford have teamed up once again to showcase their new designs at the third Flash Fashion.
Read more…

Increasing numbers of UK consumers limiting their spending to goods on promotion

10 Jun 2024

Research of over 1,000 UK shoppers by Pricer shows 27% now only buy grocery items which are on offer – a +6 percentage increase compared to 2023. 
Read more…

Taunton book shop to host three talks from climate specialists ahead of election

10 Jun 2024

Independent Taunton book shop Brendon Books is to host talks from climate specialists ahead of the general election.
Read more…

Bira releases new podcast exploring accessibility on the High Street

3 Jun 2024

The British Independent Retailers Association has released the second episode of its 'High Street Matters' podcast series, this time tackling the important issue of accessibility for independent... Read more…

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How Are Small Shops Valued

Posted on in Cycles News

In this blog shared with us, Paul Dalling, National Valuation Lead at the Valuation Office Agency explains what is involved in valuing small shops.

Small Shops

Small shops are defined as any shop less than 1,850m² (or 20,000 ft²). There are around 500,000 small shops in England and Wales – accounting for £11.5bn worth of rateable value in 2017.

Typically, they are occupied by retailers of fashion, homeware, food and beverage.

Factors to Consider

When approaching the task of valuing a small shop, the actual rent paid on the property is a good starting point, but this doesn’t always tell us the full story. For example:

  • The rent may be between people who are related to each other
  • The rent may have been agreed a long time ago, or very recently, so may be too distant from the valuation date (which is 1 April 2021 for Revaluation 2023)
  • The tenant may have made improvements to the property such as adding air-conditioning or a lift, which may not be reflected in the rent paid
  • The rent may also include living accommodation, which we would not include in our valuation of the shop

To help build our picture of the property, we measure small shops to ‘net internal area’ (NIA). The NIA is the useable area inside a building. It excludes things like stairwells; pillars; lift shafts; and staff toilets. Dividing the rent by this area gives a price per square metre, which is useful as it helps us to compare one shop with another.

Zoning

Small shops are very location sensitive, but we would expect those of a similar size and in a similar location to be valued at the same rate per square metre. However, shops are unlikely to be exactly the same size, so we use a method called ‘zoning’ to take these different factors into account.

We divide the shop into 6.1 metre (20 foot) ‘zones’, starting with ‘zone A’ at the window. This is the most valuable part of the shop; it’s where customers are attracted and tempted in. We use ‘zoning’ to arrive at an ‘area in terms of zone A’ for each comparable shop.

‘Zone B’ is in the middle of the shop and is half as valuable as zone A. The deeper into the shop you go, the less valuable the floor space. ‘Zone C’ is half as valuable again as zone B. If the shop goes back any more than zone C (or 18.3m), the rest of the shop floor is called ‘the remainder’, which is half the value of zone C.

The reason we divide shops into zones is that a customer looking in through the window of a shop will see the goods on display at the front with greater ease than goods to the rear of the shop. A customer entering the shop is also more likely to stay near the front of the shop than venture to the rear. Using ‘zoning’ is currently the best way to interpret the approach a retailer takes when considering what rent to pay.

Adjusting and Analysing Rents

Once we have gathered all the evidence, we make adjustments to the rent. We consider the actual rent paid and adjust this to take into account the ‘factors to consider’ discussed above. We then divide this ‘adjusted rent’ by the area of valuable Zone A. This is an analysis of the rent, based on the relevant ‘area in terms of zone A’.

Making an Accurate Valuation

After analysing all the rents available, we can determine a ‘tone of value’ for a group of similarly sized shops in a similar location. This is more than just an average; it gives greater weight to rents agreed closest to the valuation date. We can then apply that ‘tone’ at the valuation stage.

Having valued a particular shop, we may need to make additions or allowances for things not reflected in the ‘tone’ of rents. For example, the tenant may have added air conditioning, or the shop may be on a corner with a sales window on two different streets, which could add value.

Conversely, the approach to the shop may be hampered by a flight of stairs or the shape of the shop might mask part of the sales area. We may decide that such a disadvantage requires an allowance.

The overall goal is to determine a rateable value that reflects an estimate of rent that would be reasonable for a particular small shop in a particular location at the relevant valuation date.

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