Rating Manual section 6 part 3: valuation of all property classes

Section 205: car showrooms

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section applies to premises constructed or adapted for use as car showrooms. To qualify as a car showroom for the purposes of this class, there must be a showroom element present at the subject property. Therefore this manual section does not apply to car lots, car supermarkets, garages or workshops or petrol filling stations with some ancillary space.

2. List Description and Special Category Code

Primary Description Code: CG3 List description: Car Showroom and premises SCAT code: 042 SCAT suffix: G

3. Responsible Teams

3.1 This is a Unit class and each Unit is responsible for the survey and valuation of car showrooms in the class.

3.2 For Reval 2017, it is anticipated that each Unit will have a named individual responsible for the class.

3.3 It is then recommended that each Unit should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Unit. This Lead Valuer will be responsible for assisting in the delivery of the Group’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Units.

4. Co-Ordination

The Car Showroom Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. The CCT is responsible for overseeing the approach to car showroom valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

The use for planning purposes is usually sui generis.

6. Survey Requirements

Car Showrooms should be measured to gross internal area (GIA).

6.1 Internal and external photographs are mandatory and should include photographs of all main areas including show rooms, ancillary offices, parts stores, workshops, mezzanine floors and car wash bays and all rateable plant and machinery.

6.3 Air Conditioning Air-conditioned areas should be identified on the survey, and details of the air conditioning system should also be noted. Air-conditioning to be added as a 5% addition to the appropriate line entry using the air plus adjustment code, the beacon characteristics for air conditioning set to partial if the whole property is not air conditioned.

6.4 Quality Adjustments should not be made for quality other than in exceptional circumstances, for instance where an old workshop is attached to a modern showroom. Generally quality should be reflected in the showroom price.

6.5 Office Area Offices in modern dealerships tend to fall into the following categories:

6.5.1 Sales offices and reception areas that face the showroom or are only partitioned from the showroom should be captured as OFF. This will value at a relativity of 100%. These offices are often occupied by sales staff, the dealer principal, etc. The partitioning used is commonly glazed.

6.5.2 Ancillary offices usually form a defined block of offices used for administration, accounts, service administration, human resources and such like. They are often located between the showroom and the workshop. These should be captured as ANO and achieve a relativity of 60%.

6.5.3 First floor offices All first floor offices should be classed as ANO unless sales areas or reception or where offices are of an exceptional standard when they should classed as OFF. The floor level code should be 01 on the upper floor.

6.5.4 Offices located within the workshop are normally of a more basic quality and these should be captured as OWK which attracts a relativity of 50%. If workshop offices are simply partitioned from the workshop then capture as part of the workshop GIA.

6.6 Allowances to reflect reduced height should ordinarily not be made for accommodation within the main body of the showroom which is below first floor office accommodation, whether the reduced height accommodation is used for showroom or office purposes. Such areas should be included in the normal main showroom or office GIA.

6.7 Land All modern car showrooms have a requirement for land to display cars for sale, customer and service parking and car storage. The land value is a significant item within any car showroom valuation and consistency of valuation method should be adopted across units to achieve consistent valuations.

6.7.1 Although in most cases use by the hypothetical tenant is expected to be the same as actual use of the site, different occupiers can occupy land in different ways. In some cases the land directly in front of the showroom is given over to display but sometimes it can be reserved for customer parking. It is important to have regard to the optimum use of the land if the car showroom was vacant and to let.

6.7.2Land used for display ,customer and service parking should be valued on a price per space. Where car spaces are not marked the measured gross area of the land, less essential access to the workshop only and any landscaped areas, should be used and divided by a notional car space of 20m2. This will reflect circulation. Areas used for vehicle access into the showroom should not be deducted from the area.

6.7.3Historically, in general terms, the most valuable land was normally at the front of the site however the site layout of modern showrooms may mean that premium sales space can also be located on other parts of the site away from the road frontage. The least valuable land is typically to the rear and usually utilised for car storage or parking areas often for staff. There is usually limited public access to these areas.

6.7.4Any areas of landscaping (flower beds, embankments etc.) or areas used for essential access into the site or to the workshop areas or petrol filling station or to other separately assessed buildings should be excluded.

6.7.5 Land can be data captured as line entries in the main survey or in Other Additions. The preferred approach is for the display land and car parking to be captured as line entries. In both cases car parking will be expressed as the number of spaces.

6.7.6 Where display and parking land is captured as line entries in the main survey, car parking should be expressed as the number of car spaces and captured using Use Codes VS1, VS2 and VS3. VS1 and VS2 are intended for main display and customer parking areas usually situated at the front and the side of the showroom. As these uses are essentially interchangeable both codes will use the same relativity.

6.7.7Spaces to the rear of the showroom are normally used for workshop parking and vehicle storage. These areas are not normally accessed by the public. These spaces should be captured as VS3 and will attract a lower relativity to VS1 and VS2.

6.7.8there display and parking land is captured as an Other Addition, Other Addition Codes VS1- VS9 are available options in the Other Addition tables. Where Other Addition Codes are used, they should ideally be rationalised to VS1-VS3 where possible, to align with the stated line entry method of data capture and valuation.

6.8 Storage Land and Compounds Storage yards if used solely for car storage (no access to the public) can be captured as line entries in the main survey or in Other Additions. In both cases, the land should be expressed in terms of an area per square metre. The use of codes LFH, LFG etc should be adopted.

6.9 Valet Bays located in workshop type buildings should be captured either as WKS or ASO. ASO should only be used where the valet bay is housed in an inferior building to the workshop space.

6.10 Plant and Machinery Details of any items of Plant and machinery present should be noted and identified on the survey in the usual way. Air conditioning see para 6.3. Car washes often have rateable elements such as settings and drainage. Rateable items such as CCTV cameras, fire protection systems, sprinklers, inspection pits and air compressors and receivers and CCTV may also be present. Details of all plant and machinery should be accurately recorded.

6.10.1 For rateability and valuation, reference should be made to the 2017 cost guide.

7. Survey Capture

Rating Surveys should be captured on RSA and plans and surveys stored in EDRM.

8. Valuation Approach

The rental method is the appropriate method to be adopted. There is rental evidence available and once adjusted rents can be analysed on a £/m2 basis. The relevant rental adjustment practice note in the Rating Manual, Section 4: Part 1 provides guidance on rental adjustment.

9. Valuation Support

9.1All valuations for the 2017 Rating List should be made using the Rating Support Application (RSA).

Appendix 1

CAR SHOWROOM .  INSPECTION  CHECKLIST

 

Occupier

 

 

Address

 

 

Location  main road frontage, adjoining other car showrooms etc

 

 

Rental details including basis of rental calculation – for example OMV, % build costs etc

 

Car Showroom Type  See PN  Rating Manual section 6 part 3 - section 205

1 Prime

2 Modern Main Dealer

3 Older Purpose Built or Conversion

 

 

 

Marque(s) sold at dealership  eg BMW, Ford etc New / second hand

 

 

Land - Number of VS1 and VS2 spaces see plan Rating Manual section 6 part 3 - section 205 para 6.2

 

Number of VS3 spaces see plan Rating Manual section 6 part 3 - section 205 para 6.2

 

Number VS1- VS9 (if recorded as other additions see Rating Manual section 6 part 3 - section 205 para 6.7.8)

 

 

Size

TOTAL AREA

 

SHOWROOM AREA

Building External

Built:

 

 

No. of floors

 

Construction

 

 

Other points

 

 

continued.../

Building Internal

 

Refurbished:

 

Fit out including quality:

Lifts  Type manual/automatic, goods, passenger, staff/ customers, capacity, floors served  Extent and Quality

 

 

 

 

 

Services. 

Fire Precautions.

Security

 

 

Air Conditioning (age) Cassette or ducted.

Purpose.  Extent of area covered.

Heating. Fuel. System

 

 

 

 

 

Plant and Machinery including age make and output specification

 

General remarks eg disabilities unusual features

 

 

 

 

Date of survey

 

 

Survey by:

Practice note 1: 2017: Car showrooms

1. Market Appraisal 2008-2015

1.0Between 2003 and 2007 the market for new cars in the UK saw continued year on year growth with 2,404,000 new car registrations in March 2007. In the year to March 2008 sales slipped slightly to 2,398,000 sales. There followed a gradual downturn over the summer of 2008 with a severe fall in September 2008.

1.1This prompted the Society of Motor Manufacturers and Traders (SMMT) to state that the “most difficult economic conditions the industry has faced in 17 years” and called for Government action. There then followed further significant falls in October and November 2008, with November down 36.8% year on year.

1.2In response to the desperate state of the car retail market the Government introduced the car scrappage scheme on 18 May 2009. The scrappage scheme arrested the slowdown and the market started to recover from the weak performance of 2008 by Autumn 2009. However, 2009 total sales were only 1.99 million, 2010 sales were 2.03 million and 2011 were 1.9 million - half a million sales down on the 2007 figures.

1.3At the Antecedent Valuation Date of 1 April 2015 annual sales of new cars had seen 37 months of consecutive growth to show 2,476,435 registered in the year to March 2015.

1.4The SMMT Chief Executive Mike Hawes stated that March 2015 was “The best month this century for new car registrations”.

1.5At the AVD the new car market surpassed pre-recession levels of sales, but the SMMT predict that the market will level off in 2015.

1.6Articles in MotorTrader.com (November 2013) and the Vehicle Dealership Property Market Update (2014) carried out by Barber Wadlow considered whether market improvement was reflected in the rental value of car showrooms.

1.7Both reports refer to improving market conditions. Barber Wadlow reported rental growth on Prime rents inside the m25 suggesting that rents have nearly recovered to their 2007 highpoint. However, it went on to say that outside the m25 prime rents are static and remain below the 2007 levels.

1.8The Motortrader report states that the market is performing better than one year ago (report dated November 2013). It quotes Rapleys as saying that prime values, on facilities representing key brands such as Mercedes, Audi and BMW, being comparable to that achieved at the height of the market. Conversely, secondary brands are unable to compete at the prime values of 2008. GVA Grimley are quoted as saying that secondary properties are still approximately 25% below the market peak. A further report in March 2015 quoted Colliers as saying that “ Values of prime sites in major conurbations are now consistent with the pre-downturn although secondary locations, smaller provincial sites have still some way to go”.

1.9Both reports refer to a two-tier market with secondary properties taking longer to recover their value. There appears to be stronger growth in the South East relative to the rest of the country.

1.10Further reports from Motor Trader.com (Oct 2014) highlight rising confidence from investors in dealerships occupied by premium brands, namely, BMW, Jaguar, Land Rover, Mercedes-Benz, Lexus, Audi and Honda. These marques also had requirements for new or upgraded facilities. As the market improves manufacturers will put pressure on dealers to either upgrade older showrooms or move to new, purpose built showrooms. Dealers are under pressure to locate to larger higher specification properties as manufacturer’s ranges grow. Manufacturer owned dealer group subsidiaries such as VW, Honda, Volvo, Kia, Ford and Peugeot are active in developing their retail network and demand high quality showrooms which conform to a strong corporate identity.

2. Changes From Last Practice Note

2.1 The main change from the previous practice note is that car display/parking spaces captured either as VS1 or VS2 as survey line entries are to be valued at a factor of 1.75 times the showroom main space price per m2. Formerly, VS1 was at a factor of 3 x the showroom price/m2 and VS2 was at a factor of 1.5.The adoption of the same factor for both VS1 and VS2 spaces reflects the interchangeable nature of their use between prime display, secondary display and customer parking areas. The factor for VS3 car spaces, where captured as a line entry, remains unchanged at 0.8 of the showroom price/m2.

2.2Where car spaces are data captured as VS1, VS2 or VS3 in ‘other additions’, the above factors do not necessarily apply and will be subject to a local valuation approach.

3. Ratepayer Discussions

None.

4. Valuation Scheme

4.1There is no agreed valuation scheme. Car showrooms are valued in accordance with Rating Manual section 6 part 3 - section 205. The location and type of showroom are important factors when valuing this type of property.

4.2Prime locations are likely to provide access to large populations through the local main roads and motorway network. Good locations are often on the edges of larger towns and cities and often located adjoining other showroom premises.

4.3Highly visible sites with good access, adequate customer parking in prime locations are the most desirable.

4.4 The following examples give guidance to the types of showrooms, but this is not an exhaustive list and a wide variety of showroom types exist.

Type 1: Prime

These are modern purpose built showrooms built since 2000. They are purpose-built or purpose adapted for the end user and will be to a tightly controlled manufacturer’s design brief. The design standards will often be pan-European or in the case of BMW across Europe and North America. They will usually be in the best locations, e.g. prominent main road sites close to motorway junctions or co-located on motor retail parks. Some may be on fully re-developed existing car showroom sites. They are usually double height glass walled showrooms fitted out to a very high standard with a distinctive corporate style. They aim to provide a very high quality retail experience which reinforces brand values. They will have plentiful parking and display and good access. The expected marques are BMW, Audi, Mercedes, Jaguar, Land Rover, Lexus. Redeveloped showrooms on cramped sites may have multi-storey parking and occasionally first floor showrooms.

Type 2: Modern Main Dealer

These will be purpose built showrooms constructed from the mid-1980’s onwards. These will be less highly specified than type 1 and occupiers are more likely to be the main stream marques, e.g. Ford, VW, Vauxhall, Skoda, Seat, Toyota, Nissan etc. They may be single storey height or double storey glass walled showrooms. They will be in a wide variety of locations, some will occupy the same type of sites as Type 1 but others will be on main A-road locations historically associated with car sales.

Type 3: Older purpose built / conversions

These will be built prior to 1980. They may be purpose built but to designs that now look dated with lower single storey showrooms with some solid walls and glazed display, rather than three glazed walls as type 1 and 2. They will tend to be either stand alone or along A-roads in the traditional “car-alleys.” In major cities some showrooms may be in converted shops with little or no outside space.

4.7 In cases where it is correct to value the showroom at a relatively low rate due to the characteristics of the property for example due to its age or construction, care should be taken in valuing the land used as display and car parking. This is particularly the case where display land and parking is data captured as a line entry. In some cases the factor applied to the showroom value may produce a value that is too low and does not reflect the correct value of the land for example where the price/m2 on the land comes level with or below the price/m2 for ancillary storage land with industrial units in the locality.

Practice note 1: 2010: Car showrooms

1. Co-ordination

This is a Group Class. Co-ordination responsibilities are set out in Rating Manual section 6 part 1.

For Car Showrooms, the Special Category Code is 042 (Car Showroom). As a Group Class, the appropriate suffix letter is G.

The Primary Description Code of CG3 should be used when creating an assessment.

For Reval 2010, it is anticipated that each local office will have a limited number (one is preferred) of individuals responsible for the class.

It is then recommended that each Group should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Group. This Lead Valuer will be responsible for delivering the Group’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Groups.

2. Overview of the Market - 2003 to 2008

Generally speaking between April 2003 and early 2008 the economic outlook remained healthy, although since the summer of 2007 the consequences of bad debt within the globalised debt markets have created a “credit squeeze”, which had the potential to damage consumer spending from 2008 onwards. Consequently, at AVD (2008) there was a degree of uncertainty within the car sales market, with an expectation that the market might weaken.

The Bank of England bank rate had gradually risen to a high of 5.75% and at December 2007 were reduced to 5.5% and subsequently further reduced to 5.25%, amid signs of a cooling economy and stagnating or falling property values across most market segments. In terms of commercial property, at the AVD it was still not clear whether there would be any impact on rental demand or rental levels.

At AVD, the largest car dealership in the UK was Pendragon. In November 2007 Pendragon issued a profit warning, the second in five months. During 2007 it had closed 21 poorly performing sites most likely picked up within recent acquisitions, which had included 19 former Dixons dealerships and Reg Vardy. Prior to this in November 2006 Pendragon announced that it had entered into a significant sale and lease back transaction involving 81 of its sites.

Inchape, the second largest UK dealership, at the same time was reporting increases in underlying and like-for-like sales. This was following their recent takeover of European Motoring Holdings (EMH).

The market for cars has continued to become more sophisticated, building on the changes forced upon the manufacturers by European Law in 2002 (See 2005 PN). The underlying business of selling cars has seen fluctuating volumes over the last few years, but appears to have been generally consistent with new car sales for 2007 being just over 2.4 million units, roughly the same as 2005.

In 2005 the removal of Block Exemption Rules (BER) came belatedly into force, allowing dealers to be unrestricted in terms of their location and territories they sell cars into. This has lead in the 5 years to 2008 to a boom in new dealership construction, much of it at the behest of the manufacturers, who (in an attempt to retain control over the supply of their products) have enforced greater dealership and brand standards upon their networks, often creating bespoke showrooms with a corporate identity.

Many manufacturers have now begun to identify sites from market research of their target customer base and have acted to acquire and develop a site before letting to the dealership directly. Key to this strategy appears to be the manufacturers’ desire to retain control over the freehold or head lease of the property, to ensure continued trading from the chosen location regardless of problems encountered by the dealer or a dealership group. In some instances the manufacturer will agree a chosen location with a large dealership group, who after construction may enter into a sale and leaseback arrangement in the investment market, thus releasing capital to concentrate on their core business activities.

In many cases the basis for the initial rent will be build costs. With these modern, sophisticated showrooms complete with climate control, balconied areas, expensive flooring materials, specialist lighting, comprehensive security systems and expensive external works for forecourt displays and effluent control systems, these costs can be substantial. According to a GVA Grimley LLP report in January 2007, the construction costs of a fully fitted dealership had risen by 100% in the preceding 5 years.

There is evidence that prime rental growth has averaged 6% pa during the period of 6 years to the AVD. This is a consequence of the higher build costs mentioned above, but also the constraints in supply of facilities which meet the current demands of brand standards.

The high costs associated with providing such expensive space demands higher volumes of trade in order to make these businesses viable. The number of dealerships continues to contract, which has provided the greater share of sales volumes required to sustain the new, ‘glitzy’, breed of showrooms.

In a market of increasingly tight margins on new cars, the importance of used cars as a percentage of dealership profit is becoming progressively recognised. This in turn has lead to an increased demand for larger site areas to display used stock. The need to have new, increasingly sophisticated, cars serviced by the main dealer to retain warranty validity means that high quality ‘hi-tec’ workshop facilities are also necessary.

Further defence against high costs can emerge from economies of scale to be found in the consolidation of dealership groups. Back office operations, such as accountancy roles can be streamlined, occupying less valuable space and even being potentially disconnected from the sales locations. Additionally, the larger dealership groups can exert some influence over the ever-controlling tendencies of the manufacturers.

Co-located dealerships (allowing for several brands operated by the same dealership group to share one site) had been thought likely to be an increasingly common occurrence when legislative changes made in October 2002 permitted multi-brand showrooms. This would in some cases provide for cost savings to the dealer but take up has been limited, probably due to this practice not being preferred by the premier brands, regardless of the recent legislative changes. There is however, obvious aggregation in the choice locations (usually large prominent retailing sites, with easy access, near main arterial routes) by the various brands.

Further changes to Block Exemption are due in 2010, but are not to be announced until 2009. The impact was therefore unknown at the AVD.

3 Survey Requirements

The basis of measurement is Gross Internal Area (GIA).

3.1 Accommodation Use, Other Addition and Adjustment Codes

Attached below are links to a summary of main codes and a typical layout plan which contains some coding elements and has been found to be of assistance when applying Survey and Valuation coding.

3.2 Air Conditioning

The approach to air-conditioning remains unchanged for Reval 2010.

Air-conditioned areas need to be identified separately on the survey. Details of Air Conditioning systems should also be noted.

In summary, a step-by-step approach should be adopted as follows:

  1. Rents that include Air Conditioning should be identified, analysed and used in producing valuations.

  2. Where no rental evidence can be found, Comparable Assessments should be used as evidence (this is not applicable for Reval).

  3. Actual costs from the subject property should be converted to an annual equivalent to produce a virtual rent.

  4. Where actual costs at the subject property are not available actual costs on comparable properties should be converted to an annual equivalent to produce a local “backstop” figure.

  5. If none of the above is possible, then a “fall back” percentage of 5% should be adopted, although this may need to be adjusted to reflect the type of Air Conditioning actually installed.

3.3 Quality

Adjustments should not be made for quality other than in exceptional circumstances, for instance where an old workshop is attached to a modern showroom. Generally quality should be reflected in the showroom price.

3.4 Office Areas

It is important to distinguish between the uses of the different office accommodation. Sales offices and reception areas within the showroom, with access from the showroom and whose use is directly related to sales should be captured as OFF. Administration offices (finance, personnel etc) that are not within or facing the showroom should be captured as ANO. Offices ancillary to the workshop functions should be captured as OWK. There may be occasions when the quality and positioning of an office is inconsistent with the use and a judgment will need to be made as to the appropriate value.

In lofty showrooms, which may have two storey purpose built admin type offices within, the upper floor offices should be captured as ‘First Floor’.

Allowances, to reflect reduced height, should ordinarily not be made for accommodation within the main body of the showroom which is below first floor office accommodation, whether the reduced height accommodation is used for showroom or office purposes. Such areas should be included in the normal main showroom or office G.I.A.

3.5 Land

In general terms, the most valuable land is normally at the front of the site. The least valuable land is typically to the rear and usually utilised for car storage or parking areas.

Land value is a significant item within any car showroom valuation. Care and consistency must therefore be adopted with this element.

Any areas of landscaping (flower beds, embankments etc) or areas used for essential access into the site or to the industrial/workshop areas or petrol filling station or to other separately assessed buildings should be excluded. Areas used for vehicle access into the showroom should not be deducted from the area.

Although in most cases it is envisaged that the actual use of the site will reflect that of the Hypothetical Tenant, it is important to have regard to the principle of valuing ‘vacant and to let’.

3.5.1 Display Land and Car Parking

Land can be data captured as line entries in the main survey or in Other Additions. In both cases, car display and car parking will be expressed as the number of car spaces. The appropriate approach is to be determined at Group level. (See Para 4.2 below.)

VS1, VS2 and VS3 codes are available as line entries in the main survey, VS1 being for the best quality land. VS1 – 9 are available options within the Other Additions Tables.

Of the land at the front of the site, the most highly prized is typically in front of the building line, having a good display onto a prominent road. If the property is on a corner position with good visibility from two prominent roads, it is a matter of judgement as to which code and therefore value is most appropriate.

If customer/staff parking takes place on the frontage land in a position where it would be expected to find display spaces, this should be captured as prime (with the description being overwritten – the plan at Para 3.1 illustrates this example). In those cases where the showroom is built right up to the road frontage with display land at its side which itself fronts onto the road, it may be that the whole or part of this land is captured as front land (prime sites). It could be envisaged in some situations, e.g. on an industrial estate or retail park, that there may be no prominent road frontage and in these cases the code used for prime sites should adopted for the most prominent display land for that particular showroom.

Where car spaces are not marked out, the gross area of the land should be measured and this total divided by a notional car size that reflects normal site circulation. One notional car space is to be taken to equal 20m2, reflecting circulation. The gross area required therefore includes circulation space between the rows of cars in the designated display/parking areas. Counting the actual number of vehicles on site is not an acceptable means of calculation and it is reiterated that these areas of un-marked land should always be measured.

3.5.2 Land used for Storage

Storage yards if used solely for storage can be captured as line entries in the main survey or in Other Additions. In both cases, the land should be expressed in terms of an area (m2).

Significantly sized yards, occasionally found at mainstream dealerships, may attract size allowances. It is suggested, however, that similar allowances should not be applied to other land areas, unless they can be shown to be significantly in excess of the expected norm.

3.6 Car Washes

The provision of a Car Wash facility at main dealerships is becoming more common. The type of fixed car wash may vary substantially in terms of quality from rollover brush systems as often seen at petrol filling stations down to drag through vibrating ‘curtain’ type systems.

Previously Car Washes have been captured in the Other Additions Tables and their value drawn from the petrol filling station valuation scheme. However, for Reval 2010 where a Car Wash is within the main buildings the area should be part of the appropriate line entry, usually workshop. Where the Car Wash is outside the main buildings the area under the canopy or the additional building housing the Car Wash can be included as a separate line entry in the main body of the survey or in Other Additions as appropriate. The rateable Plant and Machinery should then be considered in the usual way and recorded in the Other Additions Tables. This is likely to include settings and drainage.

3.7 Plant & Machinery

Details of any items of Plant and Machinery present should be noted and identified on the survey in the usual way. Air Conditioning and Car Washes are mentioned in detail above, but items such as CCTV cameras, fire protection systems, sprinklers, inspection pits and air compressors may also be found on inspection.

For rateability and valuation, reference should be made to the 2010 cost guide.

4. Valuation

4.1 Categorization of Car Showrooms

The Rating Manual entry for Car Showrooms recommends allocation of car showrooms into one of 4 types. This is to assist with comparison at both the valuation and defence stage.

For Reval 2010, it is recommended that Type 2 and 3 be treated as one and that Car Showrooms are allocated to Type1, Type 2/3 or Type 4. Within these Types it is then possible to further categorize to reflect the market conditions, type and distribution of properties within the Group.

The following examples may help to illustrate this, although they should not be taken in anyway as being a full list:

  • Where different market levels are identified for Type 1 properties that are clustered as opposed to those that are ‘standalone’.

  • Where there are a high number of very new, post-2000, sites and different market levels are identified, a sub-division of Type 1 may be required.

  • In major conurbations there may be a number of converted shops, which could form a subcategory of Type 4.

Retaining the main 3 broad Types allows co-ordination between Groups particularly with Type 1 properties where this is considered essential. Subcategorizing within the 3 broad Types then allows consistency within Groups.

4.2 Display Land and Car Parking

The approach to valuation of the display land and car parking should be determined locally in line with market evidence or established practice.

Where the value of spaces is directly related to the showroom price/m2, the ratio between the car space values for VS1, VS2 and VS3 is anticipated to be 3:1.5:0.8 respectively.

4.3 Interpretation of rental evidence

In order for Lead Valuers to provide informed advice to colleagues within the Group and to effectively contribute to co-ordination between Groups a thorough understanding of rental evidence is required.

As always, it is important to scrutinize all rental evidence, however useful it may or may not appear at the outset, and consider the weight that should be attached to it. (See Rental Adjustment section of the Rating Manual – RM4:s5:PN1-part18)

Particularly at the top end of the Car Showroom market, there is evidence of transactions based on cost and pension fund rents. These need to be identified, treated with caution and properly understood – but none the less carefully weighted within the basket of rents.

As explained in “Overview of the Market” above, manufacturers have been increasingly involved in the provision of car showrooms, which they have then let to operators. On the face of it, these leases should provide useful rental evidence. However, often the leases are accompanied by a business arrangement between the manufacturer and the operator. In such instances, the weight of this rental evidence may be diminished. Again, this is particularly likely to affect the top end of the market.

Practice note 1: 2005: Car showrooms

1. Co-ordination

This is a Group Class. Co-ordination responsibilities are set out in Rating Manual section 6 part 1.

For Car Showrooms, the Special Category Code is 042 (Car Showroom). As a Group Class, the appropriate suffix letter is G.

The Primary Description Code of CG3 should be used when creating an assessment.

For Reval 2005, it is anticipated that each local office will have a limited number (one is preferred) of individuals responsible for the class. Each Group should have an allocated co-ordinator, or lead valuer, to act as a point of contact for each of the locations within the Group. This lead valuer co-ordinator will be responsible for liaising with other lead Valuers.

  1. Introduction

Car Showrooms have a dedicated Rating Manual 5:205.

The Rating Manual Section describes the suggested basis for the categorisation of Car Showrooms into 4 Types. This categorisation of properties in this class is intended to assist when making comparisons across and between Groups.

  1. Scope of this Practice Note

Building on efforts made during the maintenance of the 2000 list, Reval 2005 has presented an opportunity to develop an agreed single analysis and valuation scale for adoption by all Groups. The standard scale introduces a new approach for some areas and amends current practices for others. This Practice Note endeavours to direct and inform all staff in the move toward a single approach to the data capture of car showrooms. It also aims to provide valuation guidance on the main elements to be considered.

  1. Overview of the Market – 1998 to 2003

4.1. As at April 1998 – A.V.D. Reval 2000

During the late 90’s, and due in part to increased press publicity, consumers became more aware of the price differentials for goods in the UK compared to mainland Europe and pressure mounted for more price harmonisation.

New car prices did not escape this attention and in 1998, the government undertook a review of new car prices to investigate the fact that car prices in the U.K. were considered substantially more than prices paid for the same models on the continent. It also examined what was seen as a new and increasing trend for individual members of the public to travel to Europe to purchase their vehicles.

The effect of this heightened price awareness proved difficult to quantify in terms of the impact on car volumes through established showrooms. However, there were some signs of concern in the industry, which appeared to be backed up with marketing activity by the larger companies in an effort to stay the growth of public concern over prices.

It is important to focus on the possible factors affecting any squeeze on retail margins. There is little doubt that in the late 1990’s, there was a substantial over supply of new vehicles, although ‘nearly new’ pre-registered and promotion deals appeared to account for much of this.

Following the 1998 review the feared “catastrophic effect” on the industry did not materialise, instead there appears to have been a continuing slow downward pressure on new car prices.

In terms of car sales volumes, the first bi-annual change of registration letter took place on 1 October 1998 with the first March letter change boosting sales as anticipated. Before 2000, there was also speculation amongst manufacturers that a boom of sales of millennium cars would occur.

Despite earlier worries there are positive moves in sales volume 98-2000, irrespective of downward pressure on price/margins at AVD.

4.2. As at 1 April 2003 – A.V.D. Reval 2005

As at 1 April 2003, the general economic background in the UK was strong and the factors which might be considered most influential in terms of the car market were favourable: interest rates were continuing at their lowest level since the 1950’s (Base Rate at 3.75%) and unemployment was at similar historic lows. Although stabilising, in the 2-year period prior to the A.V.D. house prices nationwide had risen substantially (by over 100% in many areas).

The Car market evolved significantly between 1998 and 2003. Prices of many new cars fell in real terms, especially in the bulk sector of the market.

The practice of buying cars cheaper from Europe was by 2003 established, although to some extent the lower resale values on such vehicles is thought to have deterred buyers from following this route. Irrespective of this, volume within this sector was still low compared with that of overall car sales.

The following changes took occurred following European legislation in October 2002: -

  • Restrictions on multi-brand showrooms were lifted, so dealers could sell more than one make under the same roof.

  • Importers and Internet firms were able to buy more than 10% of a dealer’s annual sales volume.

  • Foreign dealers were able to advertise their prices in the UK.

  • Franchised dealers would no longer have to offer both sales and servicing if they prefer to specialise.

  • Independent service outlets would have greater access to technical information and diagnostic equipment, thus increasing competition and reducing costs

  • It was also announced that from October 2005, dealers with a ‘selective’ distribution system (block exemption) would no longer be tied to exclusive sales territories and so would be free to open new outlets where they wished, promoting greater competition. Up until that time it is expected that the historic hold on the market (they dictate who can sell their product and where they will be located) by the manufacturers would remain.

Of all these initiatives, the major change is the freeing up of “block exemption”, delayed until October 2005. How this eventually affects rental value remains to be seen.

In terms of franchised dealers there is a clear downward trend in terms of numbers. In 1980 there were 9,000 such dealers, in 2000 this had fallen to 6,000 and by mid 2003 there were thought to be around 3,500.

All these factors contribute to a move in the market towards less and better located properties, usually close to good road communications and often in mixed retail developments with other car showroom occupiers continues. At the top-end of the market, location is still vitally important, together with an appropriate display of ‘presence’, sometimes in the form of high glass frontages.

4.3. UK New Car Sales (Source: Retail Motor Industry Federation)

Year

1996

1997

1998

1999

2000

2001

2002

2003

Quarter 1

531,049

550,462

622,562

635,942

660,747

675,083

722,718

712,940

Quarter 2

469,569

504,253

514,330

555,387

555,674

593,941

624,975

 

Quarter 3

656,616

722,347

706,587

628,767

581,310

693,671

715,543

 

Quarter 4

368,216

393,663

403,923

377,519

423,916

496,074

500,395

 

TOTAL

2,025,450

2,170,725

2,247,402

2,197,615

2,221,647

2,458,769

2,563,631

 

+4.1%

+7.17%

+3.53%

-2.22%

+1.09%

+10.67%

+4.26%

 

4.4. Multi-Franchise Sites

The evolution of the car market as described above has resulted in an increasing demand for multi-franchised sites. Such sites offer several complementary brands within a single facility.

The physical nature of these sites will be diverse, from a grouping of several standalone car showroom sheds (each with their own full range of facilities in addition to the showroom - workshops, paint shops etc) in a single occupation to a major operation offering the full range of facilities (the workshops being large enough to fulfil the whole site’s needs) with subsidiary showroom operations within the complex.

It is suggested that when approaching such properties for valuation purposes, the caseworker should consider the location of the property within the nature of their particular market. End allowances for fragmentation should be avoided as it is anticipated that any disabilities associated with this feature are reflected in the overall levels of demand and subsequent values adopted for such facilities.

5 Survey Requirements

For Revaluation 2005, the basis of measurement is Gross Internal Area (G.I.A.) reflecting market practice at the AVD.

The current edition of the VSA standards document should be consulted to determine the standard approach when dealing with car showrooms.

5.1 Accommodation Use, Other Addition and Adjustment Codes

The main codes to be employed for RSA data capture for car showrooms are detailed in the appropriate Valuation Scale Scope document. For reference purposes, a summary of the main codes to use can be found in the final section of this guidance note.

5.2 Heating, Air Conditioning, Sprinklers

Air Conditioning is becoming more prevalent, especially with the Class 1 or the best car showrooms. Air-conditioned areas should therefore be separately shown as separate line entries of the survey data/valuation and appropriate additions made to reflect the quality and facilities offered by the air conditioning system.

5.3 Quality

Adjustments should not be made for quality other than in exceptional circumstances, for instance where an old workshop is attached to a modern showroom. Generally quality should be reflected in the showroom price.

5.4 Corridors and Partitions

Where partitions are between two areas of differing value, the partition/wall thickness should be attributed to the lower valued area.

For example, an area taken up by partition and corridor and situated between the Showroom and the Admin Accounts office would be added to the latter area, as it is of lower value.

5.5 Office Areas

In lofty showrooms, which may have two storey purpose built admin type offices within, the upper floor offices should be captured as ‘First Floor’. However, if the floor is a true mezzanine, i.e. a floor of lower height between two floors, it should be captured as such. Stationery cupboards etc should be included in the office area.

Allowances, to reflect reduced height, should ordinarily not be made for accommodation within the main body of the showroom which is below first floor office accommodation, whether the reduced height accommodation is used for showroom or office purposes. Such areas should be included in the normal main showroom or office G.I.A.

5.6 Workshop Areas

Within the workshop, adjacent area of the same quality but different uses is normally dealt with as a single area. However, where value significant, it is also acceptable to distinguish individual areas within the valuation such as Locker Rooms, Stores and Plant Rooms as appropriate.

5.7 Land

In general terms, the most valuable land is normally at the front of the site. The least valuable land is typically to the rear and usually utilised for car storage or parking areas.

Land value is a significant item within any car showroom valuation. Care and consistency must therefore be adopted with this element. The majority of land should be data captured as a number of spaces in Other Additions, with storage land/yards captured as an area (sqm).

Any areas of landscaping (flower beds, embankments etc) or areas used for essential access into the site or to the industrial/workshop areas or petrol filling station or to other separately assessed buildings should be excluded. Areas used for access into the showroom should not be deducted from the area.

It is also important to remember that land use should be captured with regard to the facts on the ground and not necessarily to individual site users preferences. This accords with the principle of valuing ‘vacant and to let’ and should maintain consistency of approach.

Land areas can be broken in to 3 main uses

1: Primary Display

Land used for the primary display of used vehicles available for sale.

2: Other Car Parking

Other areas situated in any part of a site that could be used for display. It is anticipated that such car-parking areas would attract a value on the basis of price per space. As with primary display, the position of the car parking within the site will affect its value.

It is envisaged that the majority of car parking areas will be captured as an Other Addition. However, remote parking areas, most usually at the very rear of the site with no road visibility, may be captured using an appropriate local car-parking matrix.

3: Storage Yards

This is land used for storage of general items including pre-registered cars and are usually fenced and lit, often towards the rear of the property. The gross area in m2 should be captured, without deduction for circulation.

Significantly sized yards, occasionally found at mainstream dealerships, may attract size allowances. It is suggested that similar allowances should not be applied to other land areas, unless they can be shown to be significantly in excess of the expected norm.

The treatment of Land for Display and Car Parking in RSA

Land used for display or car parking purposes is expected to be treated as “car spaces” using “Other Additions” in the RSA Valuation model. Whilst the provision does exist in RSA to capture land as a line entry, this is not recommended. Instead, all land should be captured as “No of Spaces”. This should be established by counting the marked spaces where present.

The “Other Addition” codes VS1, VS2 and VS3 should be used, with VS1 being the best quality land.

The use of VS1 when recording display land

Of the land at the front of the site, the most highly prized is typically in front of the building line, having a good display onto a prominent road. If the property is on a corner position with good visibility from two prominent roads, it is a matter of judgement as to which code is most appropriate.

If customer/staff parking takes place on the frontage land in a position where you would expect to find display spaces, this should be captured as VS1 (with the description being overwritten – the plan at paragraph 5.1 illustrates this example). In those cases where the showroom is built right up to the road frontage with display land at its side which itself fronts onto the road, it may be that the whole or part of this land is captured as front land (VS1). It could be envisaged in some situations, e.g. on an industrial estate or retail park, that there may be no prominent road frontage and in these cases VS1 should be used to capture the most prominent display land for that particular showroom.

Car Spaces Not Marked Out

The gross area of the land should be measured and this total divided by a notional car size that reflects normal site circulation. One notional car space is to be taken to equal 20m2, reflecting circulation. The gross area required therefore includes circulation space between the rows of cars in the designated display/parking areas. Counting the actual number of vehicles on site is not an acceptable means of calculation and it is reiterated that these areas of un-marked land should always be measured.

The ratio between the car space values for VS1, VS2 and VS3 is anticipated to be 4:2:1 respectively. However, the actual values adopted per space should be determined locally.

5.8 Car Washes

The provision of a Car Wash facility at main dealerships is becoming more common.

The type of fixed car wash may vary substantially in terms of quality from rollover brush systems as often seen at petrol filling stations down to drag through vibrating ‘curtain’ type systems. The value to be applied to the car wash will depend on a number of factors including, location and availability to the public (some are continually available to dealership customers, some only for the valetting staff for new vehicles). In providing a car wash facility the occupier has forgone land that could otherwise have been used for display or parking purposes; this ‘opportunity cost ‘ might also be used to inform the value judgement.

Car Wash facilities are to be captured as a line entry in Other Additions. It is recommended that their value should be drawn from the petrol filling station valuation scheme see RM V5 S770., “Other Addition” codes CW1, CW2, CW3, CW4 & CW5 are available, the choice being dependant on the appropriate value required (These relate to car wash classes A, A-, B, C & D respectively as defined in the petrol filling station scheme ). However, it is considered that only Classes B, C, and D levels of value would apply to car washes attached to car showrooms and as a matter of valuation guidance it is therefore suggested that only codes CW3, CW4 and CW5 are used.

6. Valuation

The valuation approach recommended for the 2005 List is to divide the land and buildings comprising the hereditament into 4 ‘blocks’ in accordance with the following guidance.

  • Block 1 - Comprises those parts of the property involved in the retailing side of the business (usually the showroom with sales within and accessed from it). These areas will attract the premium level of value for the buildings.

  • Block 2 – Comprises those parts of the property serving the retailing and industrial elements. These areas are usually the main support office functions (e.g. accounts) with associated canteens, and the like. In the example plan the corridor would be in this block.

  • Block 3 – Comprises the ‘industrial’ parts of the property e.g. Workshops, Parts Departments, Tool Stores, Wash Bays, Staff WC’s etc. Would include mess rooms and offices serving the industrial side.

  • Block 4 – The land areas.

Common 2005 Revaluation codes: Based on ‘4 Block’ approach

Valuation Block

RSA Use Code

Description

Block 1: Retailing Area

SRM

Showroom

OFF

Offices

WCE

Toilets (Public)

Block 2: Office Support

ANO

Ancillary Offices

CAN

Canteen

Block 3: Industrial Areas

WKS

Workshop

OWK

Works Office

WCS

Toilets (Staff)

MSR

Mess/Staff Room

PLT

Plant Room

BAY

Loading Bay

ASI (M1 only)

Ancillary Store(s) Inside (o Mezzanine Floor only)

ASO

Ancillary Store(s) Outside

Block 4: Land Areas

VS1

Other Additions only: Primary display

VS2

Other Additions only: Secondary display

VS3

Other Additions only: Rear/tertiary, workshop parking etc.

LFH

Land used for Storage – Fenced, Hard Surfaced

LFG

Land used for Storage – Fenced Gravelled

LFU

Land used for Storage – Fenced, Unsurfaced

Other: Canopy: If CNP at rear, use OA code instead of relativity.

CNP

Standard Scale Factors Apply

7 Summary

Detailed below is a summary of the main data capture codes, and explanatory remarks.

7.1 Main Accommodation Use Coding:

Use

Code

Remarks

Showroom

SRM

The main vehicle retailing area.

Office

OFF

Sales Offices & reception areas within showroom. Also to include salesman’s closing offices facing the showroom.

Customer WCs

WCE

Accessed from the showroom. If not attached to Block 1 use WCS code.

Ancillary Offices

ANO

Admin type offices not within / facing the showroom (doors face away from the showroom).

Canteen

CAN

Staff rest areas serving the main support office functions (ANO areas).

Kitchen / Staff Restaurant

KTN / RES

May prefer to adopt the CAN code instead.

Works Office

OWK

Office uses ancillary to the workshop functions possessing a reasonable level of finish to walls & ceiling.

Mess room

MSR

Staff rest areas serving the industrial areas.

Workshop

WKS

The main code to capture area involved with the repair and maintenance of the vehicles. Include Valet bay, MOT bays unless of an inferior height/quality.

Store

ASI

Stores within the workshop structure.



e.g. Parts dept's

Plant Room

PLT

ONLY use this code if the plant room is within the workshop. Otherwise use ASO code and overwrite the desc'n.

Store Mezzanine

ASI

Open mezz store. Capture as floor M1

Store Outside

ASO

Plant Rooms and very basic stores not accessed from within the main building.

Canopy

CNP

Area of Display land beneath a canopy.

Portacabin

PKN

Portacabin office, usually outside.

7.2 Main Other Additions Coding:

Description

Code

Remarks

Vehicle Display Land / Spaces - Primary

VS1

Overtype description. Most valuable display land area/ number of spaces, usually in front of the building line. If a site has no ‘front land’ this land will usually be at the side of the Showroom.

Vehicle Display Land / Spaces - Secondary

VS2

Overtype description. Next most valuable display land area / number of spaces, usually at the side of the showroom and behind the building line.

Vehicle Display Land / Spaces – Rear/Tertiary

VS3

Overtype description. Display land at the rear of the site.

Customer / Staff / MOT / Workshop parking areas/spaces

VS1/2/3

Or, if considered appropriate, within Car Parking Matrix

Overtype Description. “Display land used for parking” for parking area/spaces in such a location within the site as to attract value akin to Display Land. Such land may also be captured within a car-parking matrix if no display value can be envisaged.

Storage Yard area. Land fenced hard surface.

LFH

Dedicated storage yard. Capture as an area, preferably in “Other Additions”.

Storage Yard area. Land fenced gravel/loose surface

LFG

Dedicated storage yard. Capture as an area, preferably in “Other Additions”.

Storage Yard area. Land fenced earth/no surface.

LFU

Dedicated storage yard. Capture as an area, preferably in “Other Additions”.

8. Conclusions

In all instances, careful judgement will be required when approaching valuations for this class. When preparing/defending valuations it is suggested that caseworkers liaise closely with their Group/Office specialists to ensure a consistency of approach to particular issues. The Group lead valuer co-ordinator will also be responsible for encouraging cross Group co-ordination with the aim of increasing consistency.