Offices
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section of the Rating Manual deals with the broad principles to be followed in the valuation of hereditaments which wholly or mainly comprise offices. This includes standard offices, offices within a specialist class, offices used for local government, and headquarters/institutional type offices. Different considerations may, however, apply to offices forming a part of a larger hereditament and computer centres. The valuation of purpose built computer centres is detailed in Rating Manual: section 6 part 3 - section 281.
Other Rating Manual sections that might also be of interest include:
Police Stations in Rating Manual: section 6 part 3 - section 605
Banks and Building Societies in Rating Manual: section 6 part 3 - section 90
2.1 Standard Offices (including computer centres)
For standard offices, Special Category Code (SCat Code) 203 should be adopted. The relevant suffix letter will be G, as offices are a ‘general’ or Regional Valuation Unit (RVU) class. Responsibility for ensuring effective co-ordination of SCat 203 assessments rests within the RVUs.
The Special Category Code (SCat), Primary Description Code (P Desc Code) and primary description available for offices is as follows:
- SCat Code: 203 – Offices
- P Desc Code: ‘CO’ – Using the default primary description of ‘Offices and Premises’
For standard offices, the default primary description should not be overwritten.
2.2 Offices in local government occupation (but not town halls etc.)
For offices in local government occupation (but not town halls etc.), Special Category Code (SCat Code) 203 should be adopted. The relevant suffix letter will be G, as offices in local government occupation are a ‘general’ or Regional Valuation Unit (RVU) Class. Responsibility for ensuring effective co-ordination of SCat 203 assessments rests within the RVUs.
The Special Category Code (SCat), Primary Description Code (P Desc Code) and primary description available for offices in local government occupation is as follows:
- SCat Code: 203 – Offices
- P Desc Code: ML – Overwriting the default primary description to ‘Offices and Premises’
2.3 Offices Within/Part of Specialist Property
For offices Within/Part of Specialist Property, the relevant suffix letter will be G, as offices Within/Part of Specialist Property are a ‘general’ or Regional Valuation Unit (RVU) Class. Responsibility for ensuring effective co-ordination of such assessments rests within the RVUs.
The Special Category Code (SCat), Primary Description Code (P Desc Code) and primary description available for offices Within/Part of Specialist Property is as follows:
Airport Let Outs – Offices:
- SCat Code: 008 – Airport Let Outs
- P Desc Code: ‘MX’ – Overwriting the default primary description with ‘Offices and Premises’
Offices Within/Part of Specialist Property (other than Airport let outs):
- SCat Code: 506 – Offices Within/Part of Specialist Property
- P Desc Code: ML – Overwriting the default primary description to ‘Offices and Premises’
Furthermore, sublet offices should not be split from a Specialist Property without first obtaining approval from the Responsible Person (or CCT facilitator) in the relevant Specialist Team.
2.4 Offices (Headquarters/Institutional)
For headquarters/Institutional type offices, Special Category Code (SCat Code) 204 should be adopted. The relevant suffix letter will be G, as headquarters/Institutional type offices are a general ‘Unit’ Class. Responsibility for ensuring effective co-ordination of SCat 204 assessments rests with Generalists in the Units.
The Special Category Code (SCat), Primary Description Code (P Desc Code) and primary description available for headquarters/Institutional type offices is as follows:
- SCat Code: 204 – offices (headquarters/Institutional)
- P Desc Code: CO – Using the default primary description of ‘Offices and Premises’
For offices (headquarters/Institutional), the default primary description should not be overwritten.
Valuations for offices are a ‘general’ or Regional Valuation Unit (RVU) class.
Requests for Information should be made on a ‘Form of Return’, in particular the VO 6003 ‘Rent and Lease Details’ form (RALD), as appropriate. The properly completed RALD or VO 6003 is ordinarily a sufficient supply of information to make valuations, but a follow-up form VO 6005 may be required to seek further and better particulars where necessary, for example details of fitting out, car parking and plant and machinery.
The framework for co-ordination is shown in Rating Manual: section 6 part 1. Additionally, and where available, this class is subject to the co-ordination procedures outlined in the appropriate practice notes attached to Rating Manual: section 6 part 1. This is a ‘general’ or Regional Valuation Unit (RVU) Class. Valuation Officers’ should ensure that, within the range of available rental evidence, the approach to valuation provides a correct relationship between the values adopted for offices within their Unit and that similar levels of rent result in similar levels of assessment.
Close liaison should be maintained within Units and with adjoining Units to ensure uniformity of interpretation and application of rental evidence.
Furthermore, the ‘Offices’ Class Co-ordination Team (CCT) has responsibility for supporting the co-ordination of this class as performed by the Revaluation Team and ongoing at Unit level.
The CCT is responsible for examining the technical approach to considering rental evidence, adjusting and analysing rents, and making valuations for offices. The approach is common to all hereditaments where a rental/comparison method of valuation is ultimately adopted. The guidance for rental adjustment is found in the relevant Rental Adjustment Practice Note for which the CCT is responsible. The machinery for making valuations is supported by the Valuation Support Application (VSA) within the VOA’s Rating Support Application (RSA).
Guidance for the use of these applications is provided outside the CCT structure, and the CCT contributes to the formulation and delivery of such guidance as required. As comprehensive guidance for the delivery of valuations and the valuation basis for revaluation and advice as necessary during the life of the rating lists is comprehensively supported elsewhere, it is not envisaged that general revaluation Practice Notes are required for this class.
5.1 Current Statutory Provisions
There is no specific legal framework. There are no particular statutes in force at the time of writing specifically applicable to the treatment of offices.
6.1 Basis of measurement
The method of measurement of offices will vary between different valuation areas for historical reasons. It may also vary between offices of different ages and types within the same area.
It is recommended that offices should be measured to Net Internal Area (NIA) having regard to the definition in the VO Code of Measuring Practice.
In addition, hereditaments classed up to September 2020 as B1 ‘Business’ under the Town and Country Planning (Use Classes) Order 1987 should have been measured to GIA as they are likely to be compared with industrial/warehouse hereditaments. Class B1 - ‘Business’ (before 1 September 2020) encompassed a wide range of uses including offices, light industrial and assembly, research and development.
From 1 September 2020, the Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 take effect in England and amend the 1987 Order. Whilst there is a ‘phasing in’ period between 1 September 2020 and 31 July 2021, essentially Classes A and D of the existing 1987 Use Classes Order are revoked and they, together with Class B1, are replaced with a new Schedule 2, Class E, as follows:
Schedule 2, Class E: ‘Commercial, Business and Service’. This new class will include the former classes A1, A2, A3 and B1, along with uses such as indoor sport, recreation or fitness, provision of medical or health service, crèche, day nursery or day centre, etc.
It is important to recognise that the Use Classes Order is subject to change over time, along with the General Permitted Development Orders. Valuation officers’ must ensure they are aware of the wording and workings of the various Orders (and amendments), in order to fully appreciate the detailed nature of any changes that may impact on the survey (and valuation) at the relevant date.
It remains to be seen how these changes will impact on comparability and valuation, but it will be immediately apparent that having the former retail classes and B1 within the same new class will mean that ‘business’ occupations will need to be measured in alignment with those properties judged most comparable. For example, GF ‘business’ use on the high street at NIA (with measurements taken to enable a zoning valuation method to be used if appropriate) and ‘business’ use (including offices, light industrial and assembly, research and development) more comparable with industrial/warehouse hereditaments measured to GIA.
The following sets out some general guidelines to the application of the Code of Measuring Practice and illustrates some of the difficulties which may arise if surveys are not consistent.
1. Have measurements been taken to walls or skirtings? The Code recommends that all measurements are taken to the internal wall finish, ignoring skirting boards, and this practice should be followed in all cases, unless continuous heating apparatus intervenes (see (e) below).
2. Are toilets, kitchens, PBX rooms, plant rooms, etc. included in floor areas or “reflected” in the unit rate adopted? The Code recommends exclusion from measurement of toilets, toilet lobbies, and plant rooms, other than those of a process nature. Kitchens and PBX rooms are not excluded under the Code. For this purpose it should be taken that it is normal plant rooms for heating and air conditioning plant and lift motor rooms, etc., which are to be excluded. Where there are plant areas which serve the particular needs of the occupier as opposed to the general provision of services to the building those areas will normally be included. This situation might arise, for example, in the case of plant areas serving computer suites.
3. Have structural columns been deducted? Internal structural walls, columns, piers, chimney breasts and vertical ducts are excluded under the Code.
4. How have corridors, entrance lobbies and reception areas been treated in single occupation/multiple let buildings? The Code recommends exclusion from measurement of corridors used in common with other occupiers or those of a permanent essential nature, like fire corridors. Parts of entrance halls used in common or for the purpose of essential access are also excluded. Special care will however be required in the case of fire corridors separated from the offices by non-structural partitions. For the purpose of this exclusion it will normally be only fire corridors which are set aside exclusively for fire escape purposes that will be left out of account. Corridors within a suite of offices in single occupation will usually serve a dual purpose. Their main function will be that of providing access to the separate offices within the suite, the provision of a means of escape in the event of fire being subsidiary and not justifying their exclusion from the floor area, even though occupiers of other suites in the block may have rights to use them as a means of escape.
5. Is floor space occupied by heating or air conditioning ducts included in the floor area? The Code recommends exclusion from measurement of any areas rendered substantially unusable by the presence of continuous ducting (various examples are given with diagrams).
6. Where lifts open directly into the office area is it practice to assume a notional lift lobby? The Code specifies those areas which are to be excluded from the NIA. As notional lift lobbies are not mentioned such areas are properly to be included in NIA.
It is emphasised that the Code of Measuring Practice refers only to the inclusion or exclusion of areas for survey purposes. It may be considered necessary to divide areas up into smaller parts for valuation (for example adopting different values for offices, stores, kitchens etc.).
Provided that a common approach is adopted in the analysis of rental evidence, and in the valuation, of all offices in the same category, no difficulties should be experienced. If it is necessary to compare offices within one category with those in another careful attention should be paid to any differences between the categories in the calculation of floor areas.
6.2 Survey details to be recorded
Whilst carrying out the survey special attention should be given to the following features:
- External General description, construction, age, type (for example purpose built, hi-tech, converted), location, access, transport facilities etc.
- Car Parking, allocated/communal, open/covered, number of spaces
Internal
| 1. | Entrance | sole/shared, standard/prestige |
| 2. | Walls | structural/non-structural, finish |
| 3. | Floors | solid/timber, raised/channelled |
| 4. | Ceilings | finish, suspended, floor to ceiling height |
| 5. | Windows | construction (for example steel, pvc, etc.) glazing (for example single, double, tinted etc.) |
| 6. | Heating | type of fuel, type of system (for example radiators, ducts, underfloor), extent |
| 7. | Air | type (for example VAV, fan coil etc.) provides (for example Conditioning cleaning, cooling, humidification etc.) extent |
| 8 | Fire | sprinklers, smoke detectors Precautions |
| 9 | Lighting | natural/artificial, quality |
| 10 | Toilets | extent, quality |
| 11 | Lifts | type (for example manual/automatic), goods/passenger, capacity, floors served. |
| 12 | Security | type (for example closed circuit TV, entry phone) |
6.3 Plant and Machinery
Common items of rateable plant and machinery such as heating and ventilating equipment, sprinkler systems, passenger lifts, etc., should be captured when making a survey. In many instances, plant and machinery is reflected in rents and thereby regarded as enhancing the value of the hereditament they serve. As long as the rent is known to properly reflect them, it is anticipated these items would not be separately valued, as to strip them out of a rent just to put them back is unnecessary. However, as the quality of these items of P&M vary considerably, and sometimes they are not reflected in the rents, it is nevertheless important to ensure that full details of such plant are recorded in order that they may be properly reflected in the valuation of the hereditament.
6.4 Heating and Air Conditioning
The extent and effectiveness of heating and air-conditioning systems will vary significantly according to the type of system installed. This is particularly true of air-conditioning systems which vary in terms of the range of facilities offered, their performance, and the degree of environmental control offered. Consideration should therefore be given to the extent to which demand, and hence rental values, would be influenced by variations in heating and air-conditioning systems. A basic air conditioning system will usually incorporate facilities for heating, cooling and ventilating. More complex systems will also control humidity, monitor the through-flow of air, filter, purify and deodorise the re-circulated air, and offer localised control in different parts of the premises and even in different parts of an open plan floor.
The use IT systems, data servers and other similar technology in offices can create considerable problems for traditional systems because of localised heat generation; this has created a demand for more sophisticated systems. Some computer suites have especially complex systems to control the environment to very fine tolerances of temperature, humidity and cleanliness. The cost of such systems will be many times that of standard heating and ventilating plant and this is a factor which may influence negotiations between the hypothetical landlord and tenant.
6.5 Computer Suites
Reference has been made above to the increased sophistication of air conditioning systems in computer suites.
Other special features often found in computer suites will include various types of raised access floors and flexible trunking systems carrying essential services. These features may also be found in modern office accommodation where there is a need for special flexibility. The installation of such systems together with suspended ceilings, with ducting installed above, creates a need for greater inter-floor heights. These are factors which will influence relative demand for and hence rents of older office buildings when compared with modern ones.
7.1 Surveys should be captured on the Rating Support Application (RSA) and plans and Inspection check lists/sheets stored in the property folder of the Electronic Document Records Management (EDRM) system.
8.1 Rental evidence
Sufficient rental evidence will usually be available for the valuation of offices on the rental basis, which will in many cases require adjustment (for relevant rental adjustment practice note, see Rating Manual: section 4 - Valuation Methods). Rental evidence from a different mode or category of use in office accommodation may be considered if there is a reason to suppose that the occupier would pay a rent of a similar level. The best indication of that, failing the existence of a rent paid for the subject premises, is a rent paid for another hereditament in the same mode or category of occupation which happens to be at office levels. (See John Eric Reeves (VO) [2005] LT RA 74 – Truro College occupation of a centrally located purpose built office building for educational purposes, case detailed at 8.3 below).
Offices may be broadly divided into the following categories:
1) Purpose built blocks, either singly occupied, or let out in suites
- This category should be valued by reference to the actual rent, other rents within the same block, rents from comparable blocks and settlements determining the tone of the Rating List agreed with professional representatives.
2) Banks, Insurance Offices and other offices situated in shopping streets
- These offices will usually fall within Class A2 of the Town and Country Planning (Use Classes) Order 1987 and may be comparable with shops. (See also Rating Manual: section 6 part 3 - section 920)
3) Offices over shops
- In valuing separately assessed offices above shops evidence should be drawn from rents of separately let upper parts. The evidence derived from devaluation of rents for shops and upper parts let together as a single unit should only be considered in the absence of any direct evidence.
4) Miscellaneous (for example converted houses)
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It will usually be possible to derive a basis for hereditaments of this type directly from the available rental evidence
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If, however, evidence is scarce it may need to be supplemented by consideration of rents of similar premises occupied for commercial or quasi-commercial purposes
5) Offices outside traditional locations
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Developments in computers and high technology industries have resulted in the creation of Business and Science “Parks” where offices, research facilities, and production areas may exist side by side, possibly with little or no differentiation in style, quality or rental value.
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This class of premises will fall within class B1 of the Town and Country Planning (Use Classes) Order 1987, the “Business” class. They will generally form a separate category for valuation purposes and their congregation into “Parks” or estates should ensure that sufficient rental evidence is available to assist in their valuation.
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The need to provide for flexibility between office, research and production uses may mean that traditional relativities between the values of those various parts are considerably modified. (See also Rating Manual: section 6 part 3 - section 380 parts 6 and 7)
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Where hereditaments in this category are purpose built or specially adapted to suit the needs of the particular occupiers care should be taken that any special features are properly reflected in their assessments.
8.2 Rental Adjustment and Analysis
Advice in respect of the adjustment and analysis of rental evidence is given in (Rating Manual: section 4 - Valuation Methods).
8.3 Evidence of Value
The value of evidence in any particular case will depend on the similarity between the subject hereditament and the comparisons used. For example, headquarter office buildings, or other substantial buildings in single occupation, will be in a different market from small suites in multi-let buildings and may have different levels of value. See:
- Caltex Trading and Transport Co Ltd v Cane (VO) [1962] LT 2 RVR 175
- B L Cars v Andrews (VO) [1980] LT 254 EG 1103
Where offices over bank premises are let out special factors may influence the rents paid. In Afford, Earnshaw and Co v Harrison (VO) and Lyon, Griffiths & Co v Harrison (VO) [1958] LT 5 1RIT 542 it was held that the depression of rental values, because of the bank’s policy of only letting to professional firms, should be disregarded. If the evidence indicates that the rents of such offices are below those which might reasonably be expected between the hypothetical landlord and tenant, under the rating hypothesis, the actual rents may be adjusted to eliminate the effect of the depression.
In some circumstances the value of a hereditament as offices may be influenced by rents paid for premises in other uses. For example an occupier who has a particular need to be located in a central location with access from the High Street (for example Insurance Companies, Local Government Departments, and others requiring convenient locations for the collection of money) may be influenced by rents paid for other High Street premises.
In Commercial Union v Burne (VO) [1978] LT RA 173, the Tribunal, whilst finding that the appeal premises were offices and would let in an office market, upheld the VO’s approach of valuing them by comparison with banks, making allowance for poorer access, quality and layout. The appeal premises were the only offices in the locality with direct access from the High Street and were situated on basement to third floors with access via a 4 metre wide entrance between shops. The Tribunal found, as a fact, that there would be competition from other occupiers requiring a High Street location and that prospective tenants would look to High Street values as a guide in making their rental bids.
The use of established office tones for users in a different mode or category of occupation (for example educational) can be justified if there is rental evidence from other educational users. Before office tone can be used, there has to be some evidence that the actual use is as valuable, to the user, as would be office use to other potential office bidders. In John Eric Reeves (VO) [2005] LT RA 74, the Tribunal found that the appeal premises, an office block in Truro town centre occupied by Truro College, should be valued with reference to the rent paid for the appeal property and evidence of rental value for other educational users in the locality.
If in another case such evidence was lacking then, however central or office-like the building, to adopt office tone would transgress the “mode or category of use” limb of rebus unless there is a reason to suppose that the occupier would pay a rent at a similar level. The best indication of this, failing the existence of a rent paid for the subject premises, is a rent paid for another hereditament in the same mode or category of occupation which happens to be at office levels. Failing that, office rental levels may be supported, provided that the user’s likely alternative would be to take an office building and adapt it, rather than construct a substitute from scratch. The latter approach suggests that rather than taking the subject hereditament, the occupier would be equally content to rent the other hereditament and pay the rent passing on that other hereditament, and that this therefore fixes the occupiers rental bid for the subject hereditament. This would not contravene the second limb of rebus.
8.4 Unit of Assessment
The general principles concerning what constitutes a single rateable hereditament are set out in Rating Manual: section 3 part 1. It is essential that this section of the Rating Manual is considered in full, as the identification of the hereditament is a crucial step in making any assessment for rating purposes.
8.5 Vacant Offices
The treatment of vacant or empty properties is covered in the rating manual at Rating Manual: section 3 part 1, in particular the section on ‘valuing vacant property’.
8.6 Car Parking Spaces
It will be necessary to consider whether the car parking spaces, in any particular case, should be included with the offices or be the subject of a separate assessment. The treatment of car parking spaces should be fairly straightforward where the entire block is in single occupation. However, difficulties may arise where offices are occupied in suites and the following guidelines are given to assist in these cases:
1) If the landlord has paramount control of the car park and he charges, or could charge, a fee for parking, a separate assessment should be raised, in the occupation of the landlord.
- See: City of London Real Property Co Ltd v Stewart (VO) [1960] LT 53 RIT 329
2) Where the landlord exercises no control and spaces are available for use by the tenants as a right on a “first come first served” basis and the use by the tenants exhausts the value of the car parking, a separate assessment should not be raised. In these circumstances the benefit of the car parking should be brought into account when determining the assessment of each suite of offices. It should be borne in mind when adjusting rents passing in respect of the office space that the value of the car parking could be said to be ‘reflected’ in those rents.
- See: Re: the Appeals of Scott (VO) [1982] LT 22 RVR 34
3) If defined spaces are allocated to individual tenants for their exclusive use they will be in the rateable occupation of the respective tenants and occasional unauthorised use by other parties would not justify departure from this general rule. Unless the parking areas are contiguous with offices occupied by the same tenant the offices and parking areas will form separate hereditaments.
- See: Coxhead (VO) v Brentwood UDC [1972] LT RA 12 and Emery v Cooke (VO) [1971] LT RA 141
In congested areas the availability of adequate, on-site, parking may be an important factor in rental negotiations. Where it is necessary to make use of rental evidence from offices which have adequate parking space to assist in the valuation of those which do not care should be taken to ensure that adequate and appropriate adjustments are made to the rents in question.
8.7 Common parts
The value of common parts, such as toilets, corridors, lift shafts etc. should be regarded as reflected in the rental value of the various offices in the block.
8.8. Serviced Offices
Guidance in respect of serviced offices is contained in Appendix 1 to this rating manual section.
Valuations of Office premises should be performed on the Rating Support Application (RSA), which offers full Valuation Support Application (VSA) support and contains bespoke scales for various types of offices. These are expected to form the basis of any Valuation Scheme.