Storage Insider: Understanding Business Rates for Self Storage Operators

Understanding the nuances of business rates can help when it comes to significant financial advantages for self storage operators. In this next instalment of the 'Storage Insider' series we look into the intricacies of business rates in the self storage industry.

Drawing on insights from a conversation between Anna Roberts, CEO of Exploration.com, and Andrew Davies, senior associate with Fisher German. Their discussion looks at the significant impact of business rates on the self storage industry, recent legislative changes, and valuable advice for operators to navigate these challenges effectively.

Business rates are a significant financial consideration for self storage operators. Understanding the nuances of business rates is not just beneficial- it's essential when it comes to financial management and operational efficiency. They apply to any non-domestic property, including traditional storage facilities and container storage yards. The rates are based on the rental value of the property, meaning even owners are subject to these rates, which can constitute a substantial outgoing.

Andrew points out a significant gap in the current valuation process that could affect many operators:

"I'm finding the moment certainly with container storage, the not all assessments are in the rating list at the moment. I think there's a capture exercise going on."

The substantial financial burden that business rates can have on self storage operators makes it vital for businesses to understand and accurately manage this aspect of their operations. As Andrew puts it:

"On the business rates assessment is the rental value of your property. Even if you own it, they will attribute a rental value to it and the rates payable is approximately half of that. So it's a huge outgoing for most businesses."

There is a need for clarity and precision in managing business rates, Anna and Andrew's discussion points out the intricacies of business rates, calling for self storage operators to engage actively with the valuation process, ensuring their assessments are fair and reflective of their actual business operations.

A crucial aspect of managing a self storage facility: the importance of accurate assessments in determining business rates.

"It's a huge outgoing for most businesses," Andrew points out the significant financial impact that business rates can have on operators. Precise assessments are not just beneficial but essential when it comes to the financial health of self storage businesses.

Accurate assessments ensure that self storage operators are not only overpaying but also underpaying their business rates:

Overpayment can lead to unnecessary burdens, diverting funds that could otherwise be used for business development, customer experience enhancement, or operational improvements. Underpayment, (though it sounds like it have it's advantages) in the short term, it can lead to legal complications and significant back payments once discrepancies are discovered.

Valuation of property for business rates is a complex process, influenced by various factors including location, size, and usage.

For self storage facilities, which may consist of a mixture of indoor spaces, outdoor containers, and sometimes even bespoke storage solutions, ensuring each is correctly assessed is critical.

"I think there's a capture exercise going on," Andrew mentions, referring to the ongoing efforts by the Valuation Office Agency (VOA) to accurately list all storage assessments. This ongoing process reflects the nature of the industry and the need for operators to be watchful about their property's assessment.

In light of these considerations, self storage operators are encouraged to actively engage with the assessment process. This involves regularly reviewing the details held by the VOA, understanding the components that contribute to the valuation, and where necessary, appealing inaccuracies.

"Make sure that you're across what your non-domestic rates assessment is about," advises Andrew, highlighting the need for operators to take ownership of this aspect of their business.

Andrew Davies brough the attention to what is a significant legislative change:

"There was an upper chain the Lands Tribunal decision which drastically changed the value attributable to the containers themselves."

The key focus from this discussion was the Lands Tribunal's recent decision, which significantly lowered the valuation for steel containers - a staple in the self storage industry as we know.

This decision has reduced the valuation from between £10 and £30 per square meter to approximately £5 per square meter, marking a noticeable shift in the financial landscape for self storage operators who are utilising these containers.

The impact of this decision goes far beyond mere numbers; it represents a fundamental change in how business rates are calculated for a large portion of the self storage industry. For decades, the valuation of steel containers had remained relatively unchanged, with operators familiar to a certain financial outlay towards their business rates.

"So if you can imagine if you've got 200 or even thirty containers, it's a big change." This reduction in per-square-meter valuation means that the overall rateable value of these facilities sees a significant decrease, reducing the business rates payable by these operators.

These change also brings to light the necessity for operators to ensure that their assessments are current and accurate. The discrepancy in valuation could mean that many operators are currently overpaying on their business rates, unaware of the savings they could be making.

It underscores the importance of revisiting and (if necessary), appealing the rateable values assigned to their properties in light of these changes.

This decision could encourage a revaluation of the use of steel containers within the industry. With the lowered cost associated with business rates, operators could find it financially viable to expand their use of containers, potentially leading to growth and diversification within the sector.

Anna and Andrew talk about collaboration and growth in the industry, how collaboration fuels the industry's expansion and innovation, fostering success in the self storage industry.

The self storage industry, with it's blend of real estate, customer service, and logistics, benefits immensely from a culture of openness and cooperation. As operators navigate the complexities of business rates, legislative changes, and market dynamics, the collective knowledge of the community serves as a powerful resource.

This collaborative ethos not only helps individual businesses to thrive but also contributes to raising standards across the sector.

Explorage.com itself plays a vital role in fostering this culture of collaboration. Providing an online marketplace for self storage in the UK, Explorage.com bridges the gap between operators and customers, while also serving as a platform for industry insights, trends, and best practices.

"That's everything we're about, making life easier for people," Anna notes, reflecting the company's commitment to adding value to both operators and users.

Andrew's experience in business rates offers a depth of knowledge that can help self storage operators optimise their operations and navigate the financial landscape more effectively.

Growth of the self storage industry is not just a function of market demand but also a result of this collaborative approach. As operators share insights, tackle challenges together, and leverage platforms like Explorage.com for visibility and engagement, the industry as a whole becomes more innovative, and customer-centric.

Are you looking for reliable chartered surveyors and property consultants? Consider reaching out to Andrew:

Email: andrew.davies@fishergerman.co.uk

Tel: 07800 912549

Explorage.com provides Remote Management services specifically for smaller and independent self storage operators who may want to hand over the day to day sales and operations of the site so they can focus on other things, such as another business, family or strategic growth.

We offer a range of services all provided by our friendly and experienced in-house team.

If you're interested in learning more about this service, contact our Network Manager Jaqui Jeffries at: jaquijeffries@explorage.com. 

You can watch Anna's full interview with Andrew Davies below: