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

Section 290: conference and exhibition centres

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

1. Co-ordination

Conference and Exhibition Centres are subject to co-ordination procedures as outlined in the relevant Practice Note.

2. Description

The number of hereditaments within this class is relatively small. Examples of the older centres are the Brighton Pavilion, Blackpool Winter Gardens and Earls Court in London. Modern provincial centres include the National Exhibition Centre at Birmingham, the International Convention Centre at Birmingham, the Scottish Exhibition Centre in Glasgow, the Conference Centre at Harrogate and G-Mex Centre in Manchester.

Hereditaments vary from the multi-purpose hall used for trade exhibitions and “Arena Events” such as 5-a-side football to the larger complex with separate buildings for each type of event, eg conference hall/theatre; exhibition hall; arena. The International Convention Centre at Birmingham has 11 main conference halls plus 10 smaller meeting rooms which can accommodate a total of 10,000 delegates simultaneously. Its nearest British rival, the QE2 Conference Centre in Westminster (a Crown occupation), has only four halls catering for 2,500 people. Ancillary amenities such as restaurant, bar, banking facilities and newspaper kiosks are usually provided and the larger complexes may even include hotel and office accommodation. Extensive car parking either within the centre or close-by is a necessity.

Conference and Exhibition centres are usually owner-occupied, sometimes by public bodies, sometimes private undertakings, often by a combination of the two. For example, a local authority scheme may be backed by a major insurance company and the two will form a consortium to run the enterprise. They are available for hire for commercial, cultural, educational, political, sporting occasions, etc.

As conferences provide up-to-date information, the life-blood of the rapidly changing economy of the late 20th century, they are a boom industry. Most towns present a line-up of conference centres, and every hotel purports to be one.

For the large conference centres to work commercially, the inevitable gaps in the conference diary must be filled with alternative spectator fixtures, such as concerts (classical and popular), sports and media events. In Birmingham, the largest of the centres eleven halls is a 2,200-seat purpose-built symphony hall and some 200 metres away, the new National Indoor Sports Arena has been constructed. A 350 bed hotel, adjacent and linked to the convention centre, has been developed by a major hotel chain.

The Birmingham Convention Centre and the Scottish Exhibition Centre are both Municipal ventures, supported by very substantial European Community development grants.

Conference and exhibition centres are usually built to a high standard. They are also usually built to permit flexibility of layout and use.

Special features of some designs include water, electricity, waste, telephone and compressed air facilities carried through a large diameter walk-through tunnel under the halls. In order to secure maximum usage of floor space, all plant and ducting for ventilation, heating, smoke extraction, sprinklers and lighting systems may be mounted in the roof voids. At the G-Mex Centre in Manchester, a grid of cross-ducts at 5-6 metre centres within the floor, spans the building to carry electric cables, water, gas, drainage and compressed air as well as 500 telephone lines and gas detection equipment. Every exhibition stand is within 3m of a duct.

Facilities at the larger centres feature halls of nearly all sizes, shapes, and characters; raked auditoriums for conferences, lectures, cinema and theatrical performances. Auditoriums are likely to be equipped with translation facilities in up to 12 languages simultaneously. Halls may be adapted for a wide range of uses by means of variable acoustics, retractable seating and an array of high-technology facilities.

Support services are vital to conference and exhibition centres. For example at the Birmingham International Convention Centre, all eleven halls can be catered for simultaneously. Dinners are prepared in a central kitchen, distributed through a network of passages and hoists and then reheated in serveries adjoining each hall. Each hall also has its own outer ring of “break-out facilities”, including foyers, toilets and bars.

The services installations, which can amount to some 40% of the cost of the building, are usually specifically designed to assist in the flexibility of the use of the conference and exhibition centres. Computer controlled management systems of the services may include monitoring of the gas and electricity usage. Large areas for product exhibitions result in an increased air-conditioning load to care for the theatrical lighting required.

3. Survey Requirements

3.1 Basis of Measurement

The basis of measurement for this class is Gross Internal Area. Reference should be made to the VO Code of Measuring Practice for Rating Purposes.

3.2 Plant & Machinery

The following list of plant and machinery likely to be found as part of a conference or exhibition centre includes rateable plant and machinery and some which should be identified in connection with possible rental analysis, and/or comparison generally:-

(i) Boilers for heating purposes, plus boiler accessories.

(ii) Air compressors.

(iii) Foundations and settings.

(iv) Fire protection system including sprinklers, pumps, tanks, hydrants and fire alarm system.

(v) Security systems.

(vi) Ventilating and cooling systems including plant, etc.

(vii) Standby generating facilities.

(viii) Passenger lifts.

(ix) Lighting of parking areas.

4. Basis of Valuation

No single method of valuation is appropriate to this class of hereditament. Each hereditament should therefore be considered in the light of all known facts and individual circumstances and an assessment determined after due weight has been given to evidence of value from all sources (see Garton v Hunter (VO) CA 1969 RA 11). However, since such hereditaments tend not to be let on terms that are relevant for rating purposes, it is unlikely that there will be sufficient direct rental evidence on which VOs can rely. In the absence of any useful rental evidence the Receipts and Expenditure basis of valuation is likely to be pursued as the primary approach in those cases where the hereditaments are either provided for profit (or are intended to be operated for profit) or are of a type which could be operated for profit by another potential hypothetical tenant. The contractors basis is likely to be the principal approach for all other hereditaments. The VO Cost Guide Section 5:080 has been issued specifically in respect of this class, although other parts of the Guide may be relevant.

Application of the respective methods of valuation are as follows:-

  1. The method of rental adjustment and comparison is as for all other hereditaments.

  2. The Receipts and Expenditure Basis should utilise actual accounts where the hereditament is operated with a view to maximising profit, but where it is being applied in circumstances in which the local authority has not sought to maximise profit, both receipts and expenditure may need adjustment to accord with the targets of a competing hypothetical tenant. An end addition may also be needed where the hereditament is operated for mixed motives, ie profit and intangible benefit. Where the particular hereditament (being of a type which is frequently found in private sector occupation) is likely to attract a private sector tenant who would operate it in a manner which would not differ from the policy of the local authority, the assessment should not differ from that of an exactly similar privately occupied hereditament. Receipts in the form of revenue grants should not be deducted, but it is incorrect to have regard both to such grants and to higher charges which would be made by a competing bidder, unless the same grants would be available to that bidder.

  3. In circumstances where the contractors basis applies, the five stages should be applied as follows:-

Stage 1 - It will be assumed that the occupying authority would have required either an exactly similar or a substitute building, had the hereditament in question not been available, unless evidence to the contrary can be shown. A substitute structure costed for Stage 1 may be smaller in size and/or cheaper in design than the actual hereditament, provided that it would fulfil the hypothetical tenants requirements. No deduction should be made in respect of grant aid or donations, unless it can be established that the hereditament or part thereof would not have been provided at the AVD in the absence of the specific grant involved.

Stage 2 - Allowance should be made for physical and functional obsolescence. The allowance for physical obsolescence should reflect the regular expenditure needed for annual repair of the subject hereditament as compared with a new structure. Functional obsolescence directly associated with features such as unnecessary height, excessive size, excessive ornamentation and inferior facilities should already have been identified and reflected in the lower costings adopted for the substitute building in Stage 1 and no further deduction is needed. But a specific functional obsolescence allowance will be appropriate for higher running and efficiency-in-use costs as compared with those incurred in the occupation of a new “substitute” building.

Stage 3 - Land value should be arrived at in a manner which accords with the principles set out in the decision of the Lands Tribunal in Dawkins (VO) v Royal Leamington Spa Corporation and Warwickshire County Council (1961).

Where the hereditament is located in an area of high land value, but could without material functional detriment operate from an alternative lower value site, it is appropriate to adopt the lower value on the footing that this would be the most likely location of a substitute hereditament. The immediate site of the structure(s) together with immediate landscaping, access and car park(s) should be subject to the same percentage obsolescence allowance as accorded to the buildings in Stage 2.

Stage 4 - The decapitalisation rate as prescribed ie 6% is to be adopted.

Stage 5 - Where a substitute building of smaller size and/or cheaper design is assumed for Stage 1, and where a cheaper substitute site is adopted in Stage 3, it may be necessary to examine whether a Stage 5 addition is appropriate to reflect the additional value which the actual hereditament has, as compared with the substitute building and site envisaged in Stages 1 and 3; such value should not be found by reference to cost, and must instead have regard to extra revenue receipts or other advantages which accrue to the occupier.

The result of all five stages must be consistent with assessments of comparable hereditaments; this may involve re-examining Stages 1-3, but no adjustment should be made whether directly or indirectly to the de-cap rate.

Where it is possible to use alternative methods of valuation, the result of applying the contractors basis should be compared with the receipts and expenditure basis and, if possible, adjustments should be made in order to produce consistent results. Where there is no reasonable scope for adjustment, a judgement must be formed of the evidential weight of each basis, on the facts of each case. Less weight should be given where the scope for error is greatest.

This property is valued using the non-bulk server. The manual can be accessed here.

5. Valuation Considerations

5.1 Surplusage

Exhibition Centres need to be large enough to accommodate the largest exhibition which is likely to be attracted to the venue. It follows that it is likely that a significant amount of the floor space will be unused for many parts of the year. The practicable maximum usage in any year is therefore likely to be considerably less than 12 months. Caution should therefore be exercised in conceding surplusage allowances which should be restricted to cases where the hereditament clearly exceeds its ideal design size.

5.2 Start-Up Allowance: Build-Up of Trade

Conferences for which the larger centres cater are normally booked well in advance, sometimes several years. As a result, it can take a similar period for trade to build up to what might be regarded thereafter as a normal level for a conference and exhibition centre. The rate of build up of trade in a new centre will also be influenced by the competition from established centres, from which conference organisers may be reluctant to move unless it is perceived that such a move will bring substantial advantages. The start-up period for a new centre if such a period exists, may be estimated by comparing projected bookings with practicable maximum occupancy rate.

5.3 Allowances for Unremunerative Expenditure Over Provision of Services

Where the conference and exhibition centre has recently been developed by a body which is itself the most likely hypothetical tenant, it would only be in exceptional circumstances that it would be held that there had been an over-provision of services.

5.4 Local Authority’s Overbid

In cases where property occupied by a local authority is valued by reference to profits, it may be necessary to increase the results thrown up by the profits basis to take into account the additional motives which a local authority may have as hypothetical tenant over and above those of a purely commercial competitor. This principle has been established by the Lands Tribunal in a series of cases concerning municipal markets, a beach and esplanade undertaking, and a pier. In Taunton Borough Council v Sture (Valuation Officer), 50% was added to represent the authority’s overbid. In two subsequent market cases, “overbids” of 35% and 25% were added. Where an overbid in excess of 50% is considered necessary in order to arrive at a realistic valuation on the receipts and expenditure method, it is probable that more reliance should be placed on alternative bases of valuation.

5.5 Incomplete Development

Section 290 Practice Note 2017: Conference and exhibition centres

1. Market Appraisal

Conferences and exhibitions are an extremely important part of the visitor economy. The sector is worth £30.9 billion annually in terms of direct spending by delegates, attendees, and organisers[1]. The UK conference and exhibition market is highly competitive, with many different types of venue competing to accommodate events. These include purpose-built conference and exhibition centres, hotels, academic institutions, visitor attractions, and sports venues. In addition to venues, the sector comprises a wide variety of other ‘players’, including conference and exhibition organisers, venue-finding agencies, audio-visual suppliers, catering and hospitality companies, IT specialists, and security companies.

The conference market can be segmented as follows:

  • International association conferences: This market includes a wide range of events, including medical, scientific, trade organisations, charities, political parties, and professional bodies. Most conferences are held at regular intervals (e.g., annual, biennial, etc.) and rotate between different venues/destinations. These events are termed peripatetic. The lead time is an important consideration for venues and destinations when bidding and planning for events. International association conferences typically have a relatively long lead-time (e.g., often as much as three or four years).

  • National association conferences: These events are broadly similar to international association conferences in terms of type of conference. There is also intense competition to attract them. The lead time is generally shorter at approximately two or three years. There are c. 6,800 trade associations, societies, institutes, and other voluntary bodies in the UK[2].

  • Corporate conferences: These involve internal company meetings as well as company annual general meetings, product launches and sales meetings. They include those events which are planned and organised up to 12 months in advance, as well as other meetings with shorter lead times (one to three months).

Many of the largest purpose-built conference and exhibition centres in the UK are owned and operated by local authorities, either directly or via ‘arm’s length’ companies. These include Manchester Central (Manchester City Council), Edinburgh International Conference Centre (Edinburgh City Council), Scottish Exhibition and Conference Centre (Glasgow City Council), Liverpool Arena and Conference Centre (Liverpool City Council), Harrogate International Centre (Harrogate Borough Council), and Bournemouth International Centre (Bournemouth Borough Council). However, there are examples of privately-owned, large-scale venues such as ExCel in London, and Event City in Manchester. Until early 2015, the NEC Group was owned by Birmingham City Council.

Because of market competition, the diversity of venue types, the commercial/economic development objectives of their owners, event programmes, income streams and operating costs the operating profit varies markedly from venue to venue. Whereas some generate operating profits, others have been shown to trade with operating losses requiring revenue subsidies from the local authority (if that local authority is the venue’s owner).

2. Changes From The Last Practice Note

There are no significant changes to the approach to valuation, as the modern substitute has always been valued and external works and fees have always been added separately,

3. Ratepayer Discussions

No discussions have so far been held either with ratepayers or their representatives and none are anticipated.

Valuation Method

The receipts and expenditure basis of valuation should be adopted only in cases where the hypothetical tenant’s sole motive for occupation is for profit. Conference and exhibition centres that do not make a profit should be valued using the contractor’s method.

There may be instances where a public body is or has been involved with the funding or running a venue which makes a profit, although the level may not be sufficient to reflect the true value to the hypothetical tenant, due to the associated socio-economic benefits. In these circumstances the contractor’s basis should be applied.

The costs shown in Appendix 1 are for ease of reference. In all cases where a Cost Guide code is shown, that must be input into the NBS template, not the costs shown here. Where the Cost Guide code shows options, the costs shown in this Practice Note should be used to aid selection.

Should the Cost Guide show differing costs to those shown in a current version of this Practice Note, please refer to the CCT.

4.1. Building Costs

The cost guidance to be adopted for core areas and conference and exhibition space is in the Cost Guide and Appendix 1. The costs specified are exclusive of external works and professional fees.

4.2. Location Factors

All costs will be adjusted for location in accordance with the R2017 Cost Guide.

4.3. Allowance for Obsolescence and build quality

Age and obsolescence allowances should be applied in accordance with the appropriate scale in the Rating Manual: section 4 part 3.

4.4. External Works Addition

External works will be added according to Appendix 2

4.5. Fees

Professional fees will be added to the unit building costs at the percentages shown in the

Cost Guide.

4.6. Contract Size Allowance

A contract size allowance will be applied in accordance with the Cost Guide

4.7. Land Value

Developed land consists of the footprint of all buildings, associated landscaped areas, roadways, car parks, hardstandings and paths. The value of this category of land will be taken at the prevailing alternative use in the locality. The disadvantage caused by the land being encumbered by older buildings is reflected in an allowance derived from the adjusted ERC

4.8. Developed Land

The capital values to be ascribed to Developed Land should relate to the prevailing land use in the locality and, in the first instance, reference should be made to the appropriate land values in the 2017 Land Valuation for the Contractor’s Basis Practice Note Rating Manual: section 6 part 3 - section 1200.

4.9. Stage 5 End Allowances

Any advantages or disadvantages which might affect the value of the occupation of the hereditament as a whole should be reflected at this stage. An adjustment under this heading should not duplicate adjustments made elsewhere. Allowances may be made for exceptional dispersal, poor layout, piecemeal development, etc.

4.11. Decapitalisation

The adjusted cost, net of allowances and including land value, is to be decapitalised at the higher prescribed rate.

APPENDIX 1

Unit Costs, Cost Guide Reference and Building Use Classification

Higher Quality Core  Areas

Higher Quality Conference/Exhibition Space

 

Lower Quality Core Areas

Lower Quality Conference/Exhibition Space

£1,900

 

42AB01

£1,600

 

42AB03

£1,455

 

42AB03

 

£1,255

 

42AB04

In the case of exceptionally high quality accommodation, a significantly higher rate may be applied.

APPENDIX 2

External Works Addition

Classification

Description

Percentage Addition

Restricted Site

Town centre or island site, typically with 90% or greater building ratio, no more than a small yard or garden area, and either no car parking or a very limited number of spaces

2

As above, but typically with an 80-90% building ratio, limited parking, external lighting and landscaping and some boundary fencing

2.5

Intermediate Site

Site typically 50-75% building ratio, some landscaping around buildings, secure boundary fencing, adequate parking and external lighting

 

5

 

As above, but typically with 25 – 50% building ratio, landscaping around buildings, secure boundary fencing, external lighting, adequate car parking which falls short of full requirements

7.5

Extensive Site

Site typically with about 25% building ratio, landscaping around buildings, secure boundary fencing, external lighting and adequate parking for all staff and visitors

12.5

Notes

  1. The plot ratio is the building GIA expressed as a percentage of the total site area (including building footprint).

  2. An appropriate percentage addition should be chosen from the above ranges to reflect the extent of external works within the hereditament using plot ratio as an indicative guide only.

[1] Business Visits and Events Partnerships (2014) Events are Great Britain – A report on the size and value of Britain’s events industry, its characteristics, trends, opportunities and key issues.

[2] Directory of British Associations (2014)

There may be circumstances where the conference centre is completed, but it forms part of a larger scheme for an area, and this is not yet finished eg a shopping arcade, swimming pool, hotel have yet to be built. In these circumstances the VO may grant an appropriate allowance until the development of the whole is completed.