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

Section 435: garden centres

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

1. Scope

1.1 This instruction applies to all garden centres including retail nurseries

1.2 This class of property is widely disparate in type, ranging from the small nursery selling plants to the large national chain operated centres.

2. List Description & Special Category Code

List description: Garden Centre and Premises

Primary Description Code: CX

SCAT code: 114

Suffix: S/ G

Bulk Class: M (Miscellaneous)

3. Responsible Teams

3.1 The Garden Centre Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. The team are responsible for the approach to and the accuracy and consistency of garden centres and Retail Nurseries.

4. Co-Ordination

4.1 This class is split between Generalists and Specialists within each Unit. Generalists are responsible for those garden centres where the Rateable Value is under £40,000 unless occupied by chain operators, Specialists being responsible for the remainder, and taking a lead on the class as a whole.

4.2 The Garden Centre Class Co-ordination 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 • seek advice from the co-ordination team before starting on any new work

5.1 There is no specific legal framework in relation to this class of property.

5.2 Exemptions:-

‘Agricultural land’ and ‘agricultural buildings’ in paragraph 1 Schedule 5 Local Government Finance Act 1988, are exempt from rating. ‘Nursery Ground’ and “Market Garden” are included as exempt agricultural land in para 2(1)(d) of Sch.5.

5.3 Nursery ground

Definition

‘Nursery ground’ is also not defined in LGFA 1988, but can be taken to mean land in, or on which, young or immature trees and/ or young plants are reared (not necessarily being grown in the actual soil of the nursery) until fit for transplanting or sale: the emphasis on young plants should be noted. Even though plants are raised in containers on the land rather than by rootstock in the soil, such ‘grounds’ should be treated as exempt.

In Andsome Garden Products Ltd v King (VO) [1990] LT 30 RVR 31, the Lands Tribunal held that land and premises, used for the preparation of horticultural organic potting compost and the rearing of seasonal bedding plants for use substantially by others for gardening or horticulture elsewhere than on the hereditament, were rateable. This was in contrast to the land, some of which was covered by poly-tunnels, that was considered to be exempt as “nursery ground”. Note: It has been held that buildings which are used as a Plant Nursery cannot fall to be exempt as a Nursery Ground. This is because the exemption of land and buildings are mutually exclusive - See Smith v Richmond HL [1896] and W & JB Eastwood Ltd v Herrod HL (VO) [1971]

Note: It has been held that buildings which are used as a Plant Nursery cannot fall to be exempt as a Nursery Ground. This is because the exemption of land and buildings are mutually exclusive - See Smith v Richmond HL [1896] and W & JB Eastwood Ltd v Herrod HL (VO) [1971]

The word ‘anything’ in para 2(1)(d) was possibly included to ensure that the exemption was not limited to market or nursery gardening that took place literally on open ground but included cultivation of products in growing frames, raised beds, trays, pots or boxes. Whatever the word ‘anything’ was intended to include, it was not intended to include buildings.

Tunnel Tech Ltd v Reeves (VO) [2015] EWCA Civ 718 the Court of Appeal in an emphatic judgement confirmed that the hereditament, that produced Phase III mushroom compost (where the mycelium runs throughout the material) was not an agricultural exempt building under para 3 (b) as the product - fruit, vegetables or mushrooms, produced albeit by modern horticultural means, was not in a form intended to be sold directly or indirectly to the public for consumption. The court also rejected the argument that the hereditament qualified as a nursery ground under para 2(1)(d) Sch 5 as it comprised entirely of buildings. The Upper Tribunal (Lands Chamber) had found that the buildings were used as a plant nursery, however, para 2(1)(d) Sch 5 relates to agricultural exemption of land not buildings and as the exemption provisions are mutually exclusive, there can be no exemption of buildings used as a plant nursery unless they qualify under para 3(a) Sch 5 being occupied together with qualifying agricultural land and used solely in connection with that land. The word ‘anything’ in para 2(1)(d) does not extend so far as to encompass ‘buildings’. Finally, the Court rejected the ratepayer’s argument that there was no distinction between a ‘market garden’ and a plant ‘nursery’ provided that the operations could be described as ‘horticultural’.

5.4 Market Garden

Definition

The term ‘market garden’ is not defined in LGFA 1988. However, the words should be taken to mean a holding cultivated wholly or mainly for the production of vegetables, fruit and flowers for sale in the course of a trade or business. The phrase ‘market garden’ was considered by the Court of Appeal in Hood Barrs v Howard (VO) [1966] RA 212; CA [1967] RA 50, where it was regarded as applying to an area in which produce is grown for sale, as opposed to an area in which produce is grown for consumption by the occupiers.

A watercress bed has been held to be a market garden.

5.5 Generally, garden centres where container-grown plants and young trees are displayed and sold retail to the public will not come within the definition of nursery grounds. There may, however, be parts of the more traditional type of garden centre (which may, indeed, have once been called a nursery) where some rearing of seedlings and young plants or trees still takes place. The land on which this work is carried out will be exempt as ‘nursery ground’. It is unlikely that the general public will have access to such areas.

See Rating Manual Section 6 Part 6 – part D: Agricultural Premises

6 Survey Requirements (See appendices 1 and 2)

6.1 Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice. Arrangements for inspecting properties (Non-Domestic Rating)

6.2 Garden centres should be measured to Net Internal Area (NIA) for rating purposes in accordance with the RICS Code of Measuring Practice 6th edition or its replacement. Net Internal Area (NIA) - Measurement definitions - isurv

6.3 When inspecting a garden centre, referencers/ property inspectors should record the location and description of the garden centre to include the following:-

  • Location

  • Site - size, shape and topography.

  • Buildings infrastructure - age, quality, construction, yard surface

  • Services - heating energy source, fixed irrigation, mains drains, water source

  • Car Parking.

  • Plant Display areas including surface type (tarmac/ chippings/ concrete/ paviors)

  • Details of any third party occupiers within the centre. See paragraph 6.4 below.

  • Photographs of the main constituent parts of the centre. Typically, this can include:-

  • Conservatory Display areas

  • Main Glasshouse sales areas

  • Ancillary Storage

  • Plant Display Areas

6.4 Unit of Assessment

On inspection it is first necessary to consider the Unit of Assessment. Details of any third party occupiers within the centre including the extent and location of the occupation within the centre and also the terms that the occupation is held. Typically, Conservatory Display areas, Aquatics, Cafes, Car washes in car parks etc. See Rating Manual - Section 3 Part 1: Occupation and The Hereditament.

6.5 See Appendix 1 Referencing Aid for an example of a layout plan. An inspection checklist is appended to this section (Appendix 2) and should be completed for all new properties and updated for maintenance work and stored in the property folder of the Electronic Document Records Management (EDRM) system.

7 Survey Capture

7.1 Rating surveys should be captured on the Rating Support Application (RSA). Plans and Surveys should be stored in the Property Folder of Electronic Document and Records Management (EDRM)

7.2 Separately assessed third party occupations should be Scat coded as follows:-

Scat Code Description
500 Cafes/ Restaurants Within /  Part of Specialist Property
501 Car Parking Within /  Part of Specialist Property
502 Garages Within /  Part of Specialist Property
503 Gymnasia /  Fitness Suites Within /  Part of Specialist Property
504 Kiosks Within /  Part of Specialist Property
505 Nurseries/  Crèches Within /  Part of Specialist Property
506 Offices Within /  Part of Specialist Property
507 Salons /  Clinics Within /  Part of Specialist Property
508 Shops Within /  Part of Specialist Property
509 Sports and Leisure Centres /  Part of Specialist Property

7.3 The common Use Codes used to record the various structures and land comprising a Garden Centre are outlined in the table below:

ACCOMMODATION USE CODE DESCRIPTION DEFAULT % OF STANDARD GLASSHOUSE RATE REMARKS
SOV Sales (GF) Valued on an overall Basis 125% Superior accommodation to the average or standard Glasshouse
GHS Glasshouse 100% Standard or average Glasshouse
CNP Canopy 50% Canopied areas of the same construction as the main Glasshouse
COV Covered Area 30% Lightweight construction typically tubular Steel with plastic sheeting
RES/ KTN Restaurant/ Kitchen 100% Cafes and restaurants and ancillary areas within Average standard Glasshouses.  If cafe within superior sales adopt SOV or quality uplift to same rate
WHS Warehouse 75% Steel portal Frame construction typically clad in profile metal sheeting.
DIS Sales Display area 20% Open display land
LFH Land Used For Storage (Hard Surfaced & Fenced) 5% Land used for storage
LFU Storage land (unsurfaced & fenced) 2.5%  
OFF Office 100% Office areas within Standard Glasshouse. If office within superior sales adopt SOV/  Quality uplift to same rate
PRD Production Area 0% To identify Exempt buildings - line adjustment EXE
WCE Toilets (public) 100% If WC within superior sales adopt SOV or Quality uplift to same rate
WCS Toilets(Staff) 0%  
ASI Ancillary Store (s) Inside 100% If store within superior sales adopt SOV or Quality uplift to same rate  
ASO Ancillary Store(s) outside 40% External stores of poorer quality
PKN Portable Building 40% Where used as Offices
SHD Shed 30% Information sheds and poor quality stores including steel containers(overtype)

Refer to Survaid for the comprehensive list of use codes and percentages to be adopted.

8. Valuation Approach

8.1 Primary valuations are to be derived from local and national rental evidence. Secondary valuations may be undertaken as a check reference based on a percentage of gross turnover (excluding VAT).

Due to the disparate nature of this class of property, particular care should be taken in rental adjustment and analysis. Commonly, rent reviews are geared to turnover, RPI or some other formulae, they may exclude tenants improvements or include goodwill; there are increasing examples of centres being leased as going concerns with goodwill reflected in the rent rather than separated by way of a premium.

The Notice Requesting Statutory Information (Form of Return) for this class of property is typically obtained using VO 6030 - Turnover information will be stored in EDRM in the FOR folder.

8.2 Relativities

This class represents a diverse range of occupations and the relativities provide a framework for analysis and valuation, relativities may require tuning to reflect individual circumstances following the exercise of valuer judgement.

8.3 Average/ Standard sales glasshouse: 100%

8.3.1 Average/ standard sales glasshouse refers to traditional rod & truss retail glasshouses or more modern examples constructed of steel/ latticework providing equivalent accommodation.

8.3.2 There may need to be an addition of up to 25% on ‘average/ standard’ sales glasshouse value to reflect additional quality. The percentage addition should reflect the extent to which the quality exceeds average/ standard. It would be expected that the maximum 25% addition would be appropriate for retail accommodation highly superior to the average, where quality confers a substantial trade/ value benefit, e.g. high bay, steel portal frame buildings that can be clad in a variety of finishes (brick/ profile steel/ glass); or cavity brick/ block buildings which offer a superior retail environment by virtue of clear height, span etc. Although in most circumstances a superior finish to standard glass will warrant the application of uplift, there can be instances where, for example, profiled metal cladding to buildings may not necessarily add value, particularly where the finish is not in harmony with the other buildings on site or with the location/ setting.

8.3.3 Similarly a discount from the ‘average/ standard’ rate may be justified where the building provides a particularly low standard of accommodation compared with the average, for example where there is minimal conversion/ improvement from a primarily horticultural-standard building or due to specific ‘disabilities’ such as low internal height, closely-spaced supporting columns, lack of heating, frequent changes in floor levels etc.

8.3.4 In deciding whether an addition or discount for quality is warranted as conferring a trade/ value benefit, the turnover generated by the property may give a good indication as to whether or not such an addition or deduction is justified. It is important not to double count value in this respect by e.g. adopting a value at the top or bottom of the main space range and then adding or deducting for quality. This may be incorrect if the fair maintainable turnover does not support the end valuation figure.

8.3.5 Where the garden centre has no average glasshouse, the valuation approach will usually be to adopt a notional main sales space value of 100% based on an average/ standard glasshouse and to value the actual accommodation by reference to that adopted rate using the appropriate relativities normally applied to average/ standard sales glasshouse.

8.4 Warehouse/ storage buildings

8.4.1 These will represent a wide range and quality of building, generally 30% up to 75% of the main glasshouse space rate.

8.4.2 If part of the main sales building is used for storage, a view may be required if no other storage facility is available on site, the range is likely to be between 75%-100%

8.5 Covered Sales areas -

8.5.1 These are open sided structures generally attached to the main glasshouse sales areas.

8.5.2 30% - lightweight tubular steel construction with a domed roof covered with thick gauge plastic sheeting.

8.5.3 40% - for a more substantial framework construction and roof covering. (Referencing guide)

8.5.4 50% - canopied areas which are generally the same construction as the main greenhouse.

8.5 Metal storage containers

30% of Standard Glasshouse space.

8.6 Portable buildings

40% Standard Glasshouse Space.

8.7 Partitioned offices, mess rooms from main space

Adopt same rate as for the building in which they are located.

8.8 Restaurants/ coffee shop/ kitchens/ prep rooms etc

Same rate as for the sales building in which they are located.

8.9 Land (display/ sales)

20% Standard Glasshouse Space.

8.10 Land used for storage

5% Standard Glasshouse space for a clearly defined area of land used exclusively for storage.

8.11 Special features

Special features such as outdoor play areas etc, should be included at display area rate.

8.12 Car parking

Car Parking is reflected. However, there may be instances where there is considered to be insufficient parking provision with a particular centre. Investigation into the turnover of such a property may provide assistance in consideration of this matter.

8.13 Seasonal sales

8.13.1 If the property is a retail nursery and/ or there is a planning restriction imposing a requirement to grow a proportion of the plants sold on site, or if the site is physically constrained by its origins as a growing nursery and a substantial proportion of the sales is seasonal (either overall or in the necessary practical use of individual buildings and areas of open display), it may be appropriate to make an allowance against the % of main sales rate adopted. This may relate to the length of the sales season or the length of the pure growing season, or may relate to the size of the area in relation to what would normally be anticipated for the sale of a normal range of plants for a good average mainstream garden centre.

8.13.2 In particular, there are some garden centres that have large areas of ex-growing houses, which will be used very extensively (rather than intensively).

8.13.3 In addition, sensible adjustments should be made where buildings or display areas are used all year round for growing and retail customers have access but little in the way of sales per m² actually occur, or where buildings are not used at all other than at seasonal peak periods.

8.13.4 Some ex-nursery garden centres also have very extensive display areas which again may be unusually large and which may generate very low sales per m². In such cases it will be appropriate to reduce the standard percentage of 20% by a substantial factor, depending upon individual circumstances.

8.14 Concessions

8.14.1 Concessions are third party occupations of space which do not satisfy the tests of separate rateable occupation.

8.14.2 As a check to the primary valuation method a range of 30% to 50% of a fully inclusive concession rent as being attributable to rental value of the land and buildings. The balance represents the costs of the concession (e.g. repair, services, use of common parts, voids, type of concession etc. Particular care should be taken when considering garden centres where the concessions form a substantial proportion of the garden centre).

8.14.3 The quality of the concessionaire, strength of covenant and likely longevity may have an impact on the position within the range.

9 Valuation Support

  • Rating Support Application (RSA)

  • Survaid

  • Class Control Team (CCT) Valuation Panel & Class Co-ordination Team Members

  • National Specialist Unit (NSU)

Appendix 1 Referencing Aid

Appendix 2

GARDEN  CENTRE  INSPECTION  CHECKLIST Measure to NIA OVERALL  (Refer to referencing Aid at Appendix 1) Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.
Occupier/ Name of establishment  
Address including postcode.  
Retail Class Planning Use code Restrictions.   SCAT Code   Valuation Scale:
Location Rural/ Edge of town/ central.  Any restrictions on access; Any year round or trade restrictions  
Site - size, shape and topography (indentify any exempt areas on site plan)  
Unit of Assessment Details of any third party occupiers within the centre - Conservatory display areas, Aquatics, Cafes, Car washes in car parks etc. (Record extent, location within centre; terms)  
Transport – Availability and proximity of public transport  
Car Parking Provision of car parking for the Garden Centre: Good/ Adequate/ Poor  
Competition/ comparables  
Building Construction Walls; Floor; Roof 1     2     3     4     5   6 Include age; use; quality; construction; purpose-built/ conversion; yard surface.       Date Built  
Plant Display areas surface type (tarmac/ chip-pings/ concrete/  Paviors)  
Ext. Photographs Buildings and Plant Display Areas  
Building Internal Refurbished: Year     Fit out: Landlord/ Tenant    
Accommodation 1   2   3   4   5   6 Finish of walls; floors; ceiling        
Customer WCs  Extent and Quality      
Customer restaurant Licensed; Number of place settings; outside seating areas.      
Services - heating energy source, fixed irrigation, mains drains, water source Fire Precautions. Security CCTV          
Air Conditioning (age) Cassette or ducted. Purpose.  Extent of area covered. Heating. Fuel. System      
Plant and Machinery Details of any items present should be noted. For rateability and valuation, reference should be made to the VOA Rating Cost Guide.  Rating Manual: Section 6 Part 5 - Plant and Machinery    
Rental information - What buildings are included? Date of commencement of this level of rent. Incentives Contact details  
Internal photographs    
General remarks                        
Date of survey   Survey by:  

Practice note 2017 - garden centres

1. Market appraisal

1.1 There are approximately 2,500 garden centres in the UK. National chains account for approximately 12% of the market, with the very large super centres accounting for less than 3%.

1.2 Since the 2008 AVD there have been several factors which the garden centre industry has had to address. A steady reduction in home ownership which some have suggested is reducing the potential gardening spend. There is also an increasing amount of flats constructed and many new houses are sold with much smaller plots. Garden centres are answering this by diversifying into non-horticultural based sales such as clothing and furniture.

1.3 It is widely accepted by market experts that the weather is the biggest determining factor in garden centre income. Small garden centres who rely heavily on outdoor plant sales are more likely to see turnover fall when there is poor weather. It is worth noting that the spring/ summer of 2014 was average although there were significantly less frosts than the norm. Summer started well but August was wetter than average. 2013 started with near record cold but became a hot summer right through the autumn. 2012 started with a record wet spring season which left the market subdued.

1.4 Open A1 consent is desirable as garden centres can then offer a wider range of retail and lifestyle goods which will attract a wider range of custom. An essential element of garden centres is a cafe/ restaurant with some having farm shops. Such features increase dwell time and the frequency of customer visits.

1.5 Since the last AVD there have been major changes within Wyevale group, The Group changed its name to The Garden Centre Group and more recently it has reverted back to Wyevale. It has expanded its portfolio of centres during this period.

1.6 Whilst there have been garden centre closures as a consequence of the recession, there is evidence of market activity within this sector and garden centres are still changing hands.

1.7 Background

Webbs purchased Hurrans West Hagley and Hilliers took over Banbury Garden Centre, There were also plans to expand a number of centres with planning permissions approved. [2009]

Dobbies planned expansion of their portfolio in England (Peterborough, Speke, Liverpool and Ashford) [2010]

It has been reported that garden centres were having quite a good 2011 but were still under pressure from the Banks and there was an increasing appetite from garden centre operators looking at leasing as an alternative (6-10% turnover being reported). There were also reports that the weather was having a detrimental effect on turnover [2011]

Squires Garden Centres acquired Shoots Garden Centre Chain of three centres and Blue Diamond purchased Friars Garden Centre Cheshire. The Garden Centre Group/ Wyevale purchased Country Homes and Gardens. [2011]

There were reports of closure of 5 garden centres, but also evidence of new openings (Hillier Eastbourne, Carr Home and Garden Centre - Ribble Valley- Since closed again and on the market) and also Centres in the course of refurbishment and extensions (Squires - Shepperton Garden Centre, Haskins, Roundstone and Planters Brentby) [2011]

Quinton Edwards reported that in the 3 years following the banking crisis, values held up in contrast to other sectors but there was now evidence of a fall in values (10-15%) as a consequence of subdued appetite from chain operators to purchase and Dobbies preferring to build new stores. [2011]

The weather (wettest on record) was having a detrimental effect on trade reported to be at least 10% down or more but there was a feeling that the downturn could also be due to economic factors. Highgate Garden Centre was sold for redevelopment, Whiteleys Garden Centre, Huddersfield was placed into administration and Barton Grange Preston put development plans on hold. [2012]

There was however movement in the sector with the Hilltop Group acquiring Hilltop Garden Centre in Oxfordshire, The Garden Store took a lease of Burford House Garden Centre- Tenbury Wells, and Blue Diamond acquiring Grosvenor Garden Centre (Between Chester and Wrexham). The Klondyke Group leased Beverley Garden Centre near Hull. [2012]

Dobbies gained permission for New Centres in Kings Lynn (Joint Venture with Tesco),York and Harrogate. Next were also moving into the sector opening Home and Garden outlets (Ipswich and Warrington) with plans for 9 further stores nationwide. Morrisons also sought to open temporary centres in 100 stores. [2012]

Gilbert Evans reported (Gardenforum) that 4 centres have been sold in-line or in excess of expectations with further disposals in the pipeline with about 10-20 companies actively looking to acquire Garden Centres including Notcutts, Blue Diamond, Haskins and Garden Centre Group - Blue Diamond purchased/ leased Redfield Garden Centre in Farnham, Hampshire. [2013]

The Garden Centre Group showed static growth but improved margins with its name changing back to Wyevale. The group was very active on the acquisition front purchasing, Brooks Garden Centre Bude, Moreton Park Wrexham, Raglan Abergavenny, Trelawney Ashford, Barnstaple, Podington Garden Centre, Wellingborough and four Golden Acres Garden Centres in the Wiltshire, Dorset and Hampshire areas. [2014]

Otter Nurseries purchased Styles Garden Centre in Torquay, QD Stores added Lowestoft Garden Centre bringing its number of outlets to 10 and Blue Diamond acquired Trelawney Garden Centre in Wadebridge, Cornwall. [2014]

In October, the first Dobbies was opened within a Tesco at Bar Hill, Cambridge. There are also other reports of Waitrose looking for joint ventures. [2014]

Reported closures of two centres in London (Fulham Palace and Moreden Hall) [2014]

2014 was the year when online and High Street retailers sought to profit from footfall in Garden Centres- Brantano, W H Smith, Viners, Bonmarche looking to lease space within Wyevale Centres. The addition of concessions within garden centres has been a developing feature since the last revaluation.

There has been continuing activity in the market this year with Blue Diamond purchasing Newbridge Nurseries, Horsham.

Generally speaking, since the last revaluation, the recession has had an effect on most commercial properties. However the impression is that as a sector, garden centres have fared better than others. However, garden centres as a category of retail property cover a wide and disparate range of properties and it is difficult to make a general statement which would cover all properties. It is considered therefore that the likelihood is that the higher category centres (high end 3, 4 & 5) have probably faired better than the lower end of the sector.

There has been further consolidation in the market with the multiples purchasing independent centres with Wyevale and Blue Diamond being particularly active. However, it is considered that the main activity within the market is for the higher category centres

The majority of garden centres have their own internet sites with many offering on-line sales. There are also specialist internet sites within the garden centre sector. Garden4less offer an Amazon type service where garden centres can advertise their product and fulfil the order when the sale is made but at less commission compared to Amazon. Primrose.co.uk is looking to have joint ventures with garden centres where some of their merchandise (garden furniture) is displayed within garden centres.

2. Changes from the last practice note

2.1 Refinement of categorisation of garden centres by reference to turnover.

3. Ratepayer discussions

3.1 This Practice Note has been discussed with industry representatives and the approach in general agreed in principle.

  1. Valuation scheme

4.1 Garden Centre Categories

4.1.1 As an aid to comparison of different garden centres and rental evidence, reference is made in this note to five categories of garden centres. The approximate turnover bands refer to fair maintainable turnover up to 01-Apr-2015 - the Antecedent Valuation Date (AVD).

Category 1 – Turnover less than c. £250,000

Category 2 – Turnover between £250,000 and £750,000

Category 3 – Turnover between £750,000 and £1.5 million

Category 4 – Turnover between £1.5 million and 3.0 million

Category 5 - Turnover between £3.0 million and £6.0 million

Category 6 – (Supercentres). Turnover in excess of £6 million and at least one of the characteristics listed below:

  • Wealthy or large (or both) catchment area
  • Good access providing a large effective catchment
  • Very high quality of buildings and/ or an extensive range of buildings much larger than normal, typically in excess of 5,000 sq metres in terms of main glasshouse area. (Rating Manual Volume 5 – Section 435 paragraph 9 Relativities)
  • Other adjacent major attractions

4.1.2 The placing of a garden centre in any particular category should not to be taken as a specific determinant of a particular level of value, either per unit area of buildings and land or overall. In many cases determining an appropriate category can assist in providing at least an initial indication of value before the specific physical characteristics of the property, such as the quality of buildings and the location, are taken into consideration. In addition to this, categorising in this way also aids co-ordination across and between Units and Specialists.

4.1.3 When considering any classification of a property by reference to turnover there may be a number of instances where the personal goodwill of the operator is a factor to consider. ‘Celebrity’ branding may be indicative, but it has to be assumed that the hypothetical tenant is a reasonably prudent operator with experience and is fully conversant with the trade. But in practice there will be examples of particularly poor or good management. Retail nurseries may generate a large proportion of their turnover based upon the reputation of the owner as a general ‘Plantsman’, or as a specialist in bedding plants, herbaceous plants, shrubs, trees, etc, or for holding a National Collection of a plant genus on site. Such issues are an indicator of personal goodwill.

4.2 Range of Values

4.2.1 The value of the average/ standard glasshouse within the relevant range of values will depend upon a variety of factors including the location, catchment area, local planning policy, level and type of competition and general quality of the centre. The following advice has been prepared based on available rental evidence across the network.

4.2.2 Smaller garden centres and retail nurseries that fall within Categories 1 & 2 are likely to fall within a lower range of £12.50 - £27.50/m². The positioning within this range will depend upon the individual specific circumstances of the centre including location, construction, conversion from horticultural use, planning restrictions, extensive trading, poor car parking provision and duration of seasonal use of buildings for retail purposes. By way of general further assistance, a Category 1 centre would not normally be expected to be above £22.50/m² and a Category 2 centre would not normally be expected to fall below £17.50/m².

4.2.3 For the majority of centres in categories 3, 4 and 5 the range of values for ‘average/standard’ sales glasshouses can be expected to fall within the range of £25.00 - £55.00 per m² with an uplift of up to a maximum of 25% for additional quality. (Rating Manual Volume 5 – Section 435 paragraph 9 Relativities). By way of general assistance the range of values for each category is expected to be as follows: Wyevale have expanded their portfolio with the purchase of Armitage’s Garden Centre, Huddersfield.

Category 3 £25.00/m² £35.00/m²
Category 4 £32.50/m² £42.50/m²
Category 5 £40.00/m² £55.00/m²

4.2.4 Category 6 (Supercentre) values are expected to exceed £50.00/m² again with an addition of up to 25% for quality as above. (Rating Manual Volume 5 – Section 435 paragraph 9 Relativities)

4.2.5 In specific circumstances it may be appropriate to move outside of these value ranges.

4.3 Turnover

4.3.1 It has been established over previous Rating Lists that turnover can prove to be an appropriate aid to valuation as a check on whether the assessment arrived at by the conventional valuation method is broadly at an appropriate level.

4.3.2 In the majority of cases the rateable value should be expected to fall within 4 – 6.5% of the fair maintainable turnover for the last full trading year before 1 April 2015.

4.3.3 However, this range of percentage of turnover is given as a guide only. Where the profit margin is likely to be low, there is substantial competition or the centre is a smaller operation, the percentage of turnover may typically be at the lower end of the scale. Whereas larger garden centres with a high degree of prominence, less competition and with high quality buildings meriting a quality addition may typically be at the upper end of the range. All properties should be judged on their own specific merits.

4.3.4 When considering rateable value as a percentage of turnover, achievable profit margins may be of particular importance. Lower levels of net profit may typically be found in the following examples:

  • Small garden centres and retail nurseries, typically Category 1, but possibly higher categories in certain circumstances including those listed below.
  • Garden centres operating in a locality with a considerable amount of competition from other garden centres and DIY superstores with garden sections.
  • Garden centres and large retail nurseries that generate a substantial proportion of sales seasonally from bedding plants. This is a highly competitive market operating at low profit margins.

4.3.5 At the other end of the range, category 4 and Super Centre profit margins may be higher than the norm due to economies of scale, and the ability to offer a wider range of high margin merchandise.

4.3.6 It is therefore possible that certain centres, and particularly Super Centres, could fall within a higher range of 6.5 – 7.5%.

4.3.7 Conversely, some category 1 & 2 centres may fall below 4%. These are likely to be plant nurseries or small poorly located and low quality centres.

4.3.8 Where the rateable value as a percentage of actual turnover falls outside the range specified above, the actual turnover may not reflect the fair maintainable turnover. The following are examples of where this might occur:

  • Where there has been particularly good or poor management, so that the reasonably competent hypothetical tenant might be expected to achieve a significantly different level of turnover;
  • Where Tenant’s improvements have been completed after the year to which the turnover relates;
  • Where the nature of the tenant’s operations may result in a particularly low or high gross profit margin;
  • Where off-site sales have been included within the turnover figure. (This may be particularly pertinent with category 1 & 2 centres).

4.3.9 Turnover information has been requested as part of the FOR process. It is important to remember that this information is often considered to be trade sensitive and should be treated with care.

4.3.10 It should also be borne in mind that garden centre turnover is seasonal and can fluctuate one year to another being very dependent upon the weather especially during spring and early summer. Accordingly, consideration of turnover should always be treated with a certain amount of caution.

Practice Note: 2010: Garden Centres

1. Co-ordination

Co-ordination responsibilities are set out in Rating Manual Section 6 part 1.

This class is split between Groups and Specialist Rating Units, with SRUs taking the lead and responsibility for effective co-ordination. Groups value directly with those sites where RV is under £40,000, unless occupied by chain operators.

Special Category Code 114 should be adopted. The relevant suffix letter will need to be input manually.

The VOA Rating Support Application (RSA) must be used to support the valuation of hereditaments within this class. Survey Data should therefore be captured in RSA using the appropriate accommodation use codes detailed in Scale Ref VXMGARDEN1.

2. State of the Market

Traditionally, the Garden Centre market has been highly fragmented with the majority of sites being occupied by independent, mostly family run, businesses. However, there are a few established well-known chain operators including Wyevale, the largest with 122 sites at the AVD, and others such as Notcutts, Hillier, Squires and Dobbies with between 10 and 15 sites each.

Whilst the Garden Centre market is still largely fragmented, with the majority of centres remaining independent, there has also been considerable consolidation within the sector in the five years up to the AVD with established chains purchasing independent centres and other chains. Wyevale had been particularly active purchasing the Blooms Group of Garden Centres together with a number of quality independent centres including Bridgemere in Cheshire, Sanders Garden World in Somerset and Peter Barratts in Newcastle. Blue Diamond and Klondyke Groups had also acquired additional centres during this period. In June 2008 Tesco finally won the long battle over the control of Dobbies with Sir Tom Hunter (Wyevale) and were set to raise revenue from the issue of shares to commence their expansion plans.

It is expected that, post AVD, consolidation within the market is likely to continue.

There had also been significant new centre developments at Bicester (Blooms now Wyevale) with others planned in Peterborough (Van Hage). Dobbies were also set to expand their network countrywide. Existing established centres such as Van Hage and Bridgemere were planning major redevelopment.

The Tillington Group of Independent Garden Centres, which includes significant operators such as Bents, Frosts and Webbs, continued to expand to include new members. At the AVD, the group had 11 members with 30 branches and an annual turnover of £170 million.

Over the five years leading up to AVD, the degree of activity in the housing market had fueled an increase in the overall sales for the Garden Centre sector as a whole. However, as this increase in general sales levels was offset by the increase in the overall sales space within the market, individual sites did not necessarily experience this kind of rise in turnover and in some instances may have experienced falling sales in the light of increased competition. It has been reported that turnover levels from the 54 Garden Centres in the GCA (Garden Centre Association) showed sales for the seven months to July 2008 were on a par with the same period in 2007.

It has also been reported during discussions with the consortium of agents representing the industry that whilst turnover levels have been relatively flat for the period leading up to AVD, some operating costs may have increased which may have had an adverse effect on margins especially with the smaller centres operating from poorer buildings.

3. Valuation Approach

Following a number of consortium meetings attended by agents representing the industry and selected parties from the Specialist Rating Units this practice note reflects best practice for valuing and dealing with 2010 Rating Lists’ proposals.

This Practice Note should, of course be read in conjunction with RM: Section 6: Pt 3: 435 and should not be used in isolation from the guidance contained therein.

3.1 Garden Centre Categories

As an aid to comparison of different garden centres and rental evidence, reference is made in this note to five categories of garden centres. The approximate turnover bands refer to fair maintainable turnover in or around 2008.

i) Category 1 – Turnover less than c. £250,000

ii) Category 2 – Turnover less than c. £500,000

iii) Category 3 – Turnover £500,000 to c. £2.0 million

iv) Category 4 – Turnover in excess of c. £2.0 million

v) Super Centres - turnover in excess of c. £6 million and at least one of the characteristics listed below:

  • Wealthy or large (or both) catchment area

  • Good access providing a large effective catchment

  • Very high quality of buildings and/or an extensive range of buildings much larger than normal, typically in excess of 5000 sq metres in terms of main glasshouse area (see 3 Relativities below)

  • Other adjacent major attractions

The placing of a garden centre in any particular category should not to be taken as a specific determinant of a particular level of value, either per unit area of buildings and land or overall. In many cases determining an appropriate category can assist in providing at least an initial indication of value before the specific physical characteristics of the property, such as the quality of buildings and the location, are taken into consideration. In addition to this, categorising in this way also aids co-ordination across and between Groups and SRU units.

When considering any classification of a property by reference to turnover there may be a number of instances where the personal goodwill of the operator is a factor to consider. “Celebrity” branding may be indicative, but it has to be assumed that the hypothetical tenant is a reasonably prudent operator with experience and is fully conversant with the trade. But in practice there will be examples of particularly poor or good management. Retail nurseries may generate a large proportion of their turnover based upon the reputation of the owner as a general “Plantsman”, or as a specialist in bedding plants, herbaceous plants, shrubs, trees, etc, or for holding a National Collection of a plant genus on site. Such issues are an indicator of personal goodwill.

3.2 Unit of Measurement

Net internal area including customer WCs (excluding staff)

3.3 Relativities

The following relativities were agreed in respect of the 1995, 2000 and 2005 Rating Lists and will continue. They will apply to both major and minor centres. This class represents a diverse range of occupations and, while stated relativities provide a framework for analysis and valuation, situations will be encountered where relativities require tuning to reflect individual circumstances following the exercise of valuer judgement.

3.3.1 “Average/standard” sales glasshouse: 100%

“ Average/standard” sales glasshouse refers to traditional rod & truss retail glasshouses or more modern examples constructed of steel/latticework providing equivalent accommodation.

There may need to be an addition of up to 25% on “average/standard” sales glasshouse value to reflect additional quality. The percentage addition should reflect the extent to which the quality exceeds “average/standard”; it would be expected that the maximum 25% addition would be appropriate for retail accommodation highly superior to the average, where quality is agreed as conferring a substantial trade/value benefit, e.g. high bay, steel portal frame buildings that can be clad in a variety of finishes (brick/profile steel/glass); or cavity brick/block buildings which offer a superior retail environment by virtue of height clear, span etc. to that of the norm. Although in most circumstances a superior finish to standard glass will warrant the application of an uplift, there can be instances where, for example, profiled metal cladding to buildings may not necessarily add value, particularly where the finish is not in harmony with the other buildings on site or with the location/setting.

Similarly a discount from the “average/standard” rate may be justified where the building provides a particularly low standard of accommodation compared with the average, for example where there is minimal conversion/improvement from a primarily horticultural-standard building or due to specific ‘disabilities’ such as low internal height, closely-spaced supporting columns, lack of heating, frequent changes in floor levels etc.

In deciding whether an addition or discount for quality is warranted as conferring a trade/value benefit, the turnover generated by the property may give a good indication as to whether or not such an addition or deduction is justified. It is important not to “double count” value in this respect by e.g. adopting a value at the top or bottom of the main space range and then adding or deducting for quality. This may be incorrect if the assessed maintainable turnover does not support the end valuation figure.

Where the centre has no “average” glasshouse, the valuation approach will usually be to adopt a notional main sales space value of 100% based on an average/standard glasshouse and to value the actual accommodation by reference to that adopted rate using the appropriate relativities normally applied to average/standard sales glasshouse.

The maximum 25% uplift for additional quality will apply within all categories including super centres.

3.3.2 Warehouse/storage buildings

These will represent a wide range of quality. Generally 30% up to 60% will be the norm but possibly a maximum of 80% if of exceptional quality, down to a minimum of 20% for poor quality timber sheds. If part of the main sales building is used for storage a view is required if no other storage facility is available on site.

3.3.3 Nicotarp/polytunnels - Open

Typically 25% (on ex-growing tunnels) and from 30% to 40% on modern Nicotarps, being normally an uplift of 50% on the adopted main display land values (see 3.3.11 below).

3.3.4 Nicotarp/polytunnels - Enclosed

From 30% (on ex-growing tunnels) up to a maximum of 40% where modern, purpose built and lit, heated etc.

3.3.5 Covered sales, glass open sided canopy

40% to 50% assuming similar quality to main sales glasshouse.

3.3.6 Metal storage containers

30% should be adopted.

3.3.7 Portable Buildings

40% where in use as offices.

3.3.8 Partitioned offices, mess rooms from main space

Adopt same rate as for building in which they are located.

3.3.9 Concession sales offices (e.g. conservatories, sheds etc.)

Include in assessment if adapted for use as sales offices and serviced (telephone lighting etc.); exclude if no adaptation and in casual use or as display buildings only.

3.3.10 Coffee shop/kitchens etc

Same rate as for the sales building in which they are located.

3.3.11 Land (display/sales)

20% up to a maximum of 25% depending upon quality, size and layout. The standard value will typically be 20% for surfaced but otherwise un-enhanced display or sales land unless some substantial permanent good quality hard landscaping, such as high quality built-up brick finished display beds, rockeries, illumination and CCTV, has been added and which is likely to enhance sales.

3.3.12 Land used for storage

5% for a clearly defined area of land used exclusively for storage.

3.3.13 Specialist features

For example play areas, pets corners etc. should be included at spot values if of high quality and permanent construction.

3.3.14 Car parking

Car Parking is to be treated as reflected. However, there may be instances where there is considered to be insufficient parking provision with a particular centre. Investigation into the turnover of such a property may provide assistance in consideration of this matter.

3.4 Seasonal Sales

If the property is a retail nursery and/or there is a planning restriction imposing a requirement to grow a proportion of the plants sold on site, or if the site is physically constrained by its origins as a growing nursery and a substantial proportion of the sales is seasonal (either overall or in the necessary practical use of individual buildings and areas of open display), it may be appropriate to make an allowance against the % of main sales rate adopted. This may relate to the length of the sales season or the length of the pure growing season, or may relate to the size of the area in relation to what would normally be anticipated for the sale of a normal range of plants for a good average mainstream garden centre.

In particular, there are some garden centres that have large areas of ex-growing houses, which will be used very extensively (rather than intensively).

In addition, sensible adjustments should be made where buildings or display areas are used all year round for growing and retail customers have access but little in the way of sales per m² actually occur, or where buildings are not used at all other than at seasonal peak periods.

Some ex-nursery garden centres also have very extensive display areas which again may be unusually large and which may generate very low sales per m². In such cases it will be appropriate to reduce the standard percentage of 20% by a substantial factor, depending upon individual circumstances.

3.5 Concessions

Over previous Lists the practice has been to adopt a minimum of 33.3% of a concession rent as being attributable to rental value of the land and buildings. The balance represents the tenant’s profit plus the costs to the tenant of the concessions (e.g. repair, services, roadways, car parks etc.). This remains unchanged for the 2010 Revaluation.

3.6 Valuation Basis

Primary valuations are to be undertaken on the direct method derived from rental evidence on a national basis. Secondary valuations may be undertaken as a check reference based on a percentage of gross turnover excluding VAT.

3.7 Range of Values

Following on from the 2005 agreement on “ranges of values” detailed in the 2005 Practice Note, the following advice has been prepared based on rental evidence available across the network.

For the majority of centres, those in categories 3 & 4, the range of values for “average” sales greenhouses can be expected to fall within the range of £25 - £50 per m2 with an addition of up to a maximum of 25% for additional quality (as detailed above in 3.3.1) where the quality is agreed as conferring a trade/value benefit. To further assist, generally, a category 4 centre would not normally be expected to fall below £35 and a category 3 centre would not normally be expected to be above £35.

Super Centre values are expected to exceed this range and fall within £50 - £65 per m2 again with an addition of up to 25% for quality as above. **

Smaller Garden Centres and retail nurseries that fall within Category 1 & 2 are likely to fall within a lower range of £12.50 - £27.50 per m2. The positioning within this range will depend upon the individual specific circumstances of the centre including location, construction, conversion from growing use, planning restrictions, extensive trading, poor car parking provision and duration of seasonal use of buildings for retail purposes. By way of general further assistance, a category 1 centre would not normally be expected to be above £25 and a category 2 centre would not normally be expected to fall below £22.50.

The value of the average glasshouse within the relevant range of values will depend upon a variety of factors including, the location, catchment area, local planning policy, level and type of competition and general quality of the centre.

** With the exception of supercentres, the value ranges for all other category centres have been agreed with the consortium.

3.8 Turnover

It has been established over previous Rating Lists that turnover can prove to be an appropriate aid to valuation as a check on whether the assessment arrived at by the conventional valuation method is broadly at an appropriate level.

In the majority of cases the rateable value should be expected to fall within 4 – 6.5% of the fair maintainable turnover for the last full trading year before 1 April 2008.

However, this range of percentage of turnover is given as a guide only. Where the profit margin is likely to be low, there is substantial competition or the centre is a smaller operation, the percentage of turnover may typically be at the lower end of the scale. Whereas larger garden centres with a high degree of prominence, less competition and with high quality buildings meriting a quality addition may typically be at the upper end of the range. All properties should be judged on their specific merits.

When considering rateable value as a percentage of turnover, achievable profit margins may be of particular importance. Lower levels of net profit may typically be found in the following examples:

  • Small Garden Centres and retail nurseries, typically Category 1, but possibly higher categories in certain circumstances including those listed below.

  • Garden Centres operating in a locality with a considerable amount of competition from other Garden Centres and DIY superstores with garden sections.

  • Garden Centres and large retail nurseries that generate a substantial proportion of sales seasonally from bedding plants. This is a highly competitive market operating at low profit margins.

At the other end of the range category 4 and Super Centre profit margins may be higher than the norm due to economies of scale and the ability to offer a wider range of high margin merchandise.

It is therefore possible that certain centres, and particularly Super Centres, could fall within a higher range of 6.5 – 8%.

Conversely, some category 1 & 2 centres may fall below 4%. These are likely to be plant nurseries or small poorly located and low quality centres.

Where the rateable value as a percentage of actual turnover falls outside the range specified above, the actual turnover may not reflect the fair maintainable turnover. The following are examples of where this might occur:

  • Where there has been particularly good or poor management, so that the reasonably competent hypothetical tenant might be expected to achieve a significantly different level of turnover;

  • Where Tenant’s improvements have been completed after the year to which the turnover relates;

  • Where the nature of the tenant’s operations may result in a particularly low or high gross profit margin;

  • Where off-site sales have been included within the turnover figure. (This may be particularly pertinent with category 1 & 2 centres.)

Turnover information has been requested as part of the FOR process. It is important to remember that this information is often considered to be trade sensitive and should be treated with care.

It should also be bourn in mind that Garden Centre turnover is seasonal and can fluctuate one year to another being very dependent upon the weather especially during spring and early summer. Accordingly, consideration of turnover should always be treated with a certain amount of caution.