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Elizabeth Line and business rates double whammy to push up London office costs

Occupancy costs in offices across London and the South East are set to rise due to a combination of the new Elizabeth Line and the government’s business rates revaluation.

Research by residential and commercial property firm JLL predicts that occupancy costs for grade A office space that is in close proximity to stations on the new line will inevitably be pushed up when it officially opens in 2017.

With the next business rates revaluation due to come into effect on 1st April 2017, many occupiers will see their expenditure on occupancy costs rise.

According to the research, a number of areas in central London which sit on the route of the new Elizabeth Line will experience particularly big jumps in the cost of grade A offices.

The likes of Paddington which is estimated to see an average rise from £14.40 sq ft to £30.31 sq ft, Stratford (up to £17.47 sq ft from £8.16 sq ft) and Whitechapel (£16.09 sq ft to £26.20 sq ft), are all predicted to see some significant increases.

While the new figures did not take into account any potential transitional relief money that might be offered to businesses, Phillip Jay, Director of Rating, JLL, still cautioned that the impact of rates rises on occupiers could be great.

He said: “Although we expect rate increases to be cushioned by transitional relief, the process by which these changes are phased in gradually, there will still be major impacts for many occupiers.

“We believe Canary Wharf and Stratford in London and Reading in the South East will be the most attractive locations for occupiers along line.”

James Finnis, Head of South East office agency at JLL, echoed Phillip’s warnings and outlined his belief that increased rates may work in the favour of South East regions who can offer better value for money when it comes to grade A offices.

He added: “While some regions of the South East, particularly those with an Elizabeth Line station, will face substantial business rate increases, these towns will still have a significant occupational cost advantage to occupiers when compared to the costs of locating within core Central London.

“Occupancy costs in Central London are significantly more expensive than the South East towns – the rating revaluation will exacerbate this differential - and we expect price sensitive occupiers to seek to address this by building or increasing their presence in the wider South East region, where major new, highly efficient, stock is being delivered close to major infrastructure hubs at substantially lower overall occupational costs.”

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