During the pandemic, e-commerce has experienced impressive growth, and one industry that has directly benefitted from this trend is logistic warehouses. However, a recent news report has indicated that these warehouses will soon face a substantial increase in rates. With digital retail companies eager to secure more space, rents in the industrial and logistics sector have soared and are expected to continue rising in the following year. Consequently, business rates in London could potentially increase by up to 50%, impacting major retailers such as Next, John Lewis, M&S, and Amazon.

According to a forecast by Colliers, the rental growth in the sector will result in average increases of 18.7% in business rates payable from April 2023. The report predicts that rates in London will rise by an average of 50.2% during the next revaluation. The South West of England and the South East will also see substantial increases of 32.5% and 30.6% respectively.

To provide a clearer perspective, the report highlights specific properties and their projected impact. For instance, the rates for a unit in London with a current rateable value of approximately £500,000 will rise from £266,000 per year to £399,630 per year after the revaluation. Amazon’s largest distribution center in Tilbury, Essex, which currently pays an annual rates bill of around £3.625 million, is expected to see an increase to £4.745 million, representing a 30% rise.

John Webber, head of business rates at Colliers, expressed concern over how these rate increases will affect companies with a significant number of properties in the sector. He emphasized that the cumulative effect of these increases, particularly for businesses with prime sites in London, the South East, and the South West, will be substantial. These rising overhead costs, starting from 2023, are anticipated to have a significant impact on the operations of these companies.

While e-commerce continues to flourish, the impending rates hike poses challenges for businesses operating in the logistic warehouse sector. It remains to be seen how retailers, including major players like Amazon, will navigate these cost increases and effectively manage their overheads in the coming years.

Useful links:

1. Reuters: E-commerce boom sees UK warehouse business rates set to surge 50% – forecast
2. Property Week: Business rates on UK warehouses set to rise 50% after Covid-19