Section 520a: hypermarkets and superstores
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
Hypermarkets and Superstores (food based) are subject to the co-ordination procedures outlined in the relevant Practice Note.
2.1 ‘Hypermarket’ means a primary single level retail store situated outside the principal shopping centre and having a GIA of more than 5000m2 of display and selling space for food and other goods together with ancillary stores, offices and extensive car parking.
2.2 ‘Superstore’ means a retail unit which has the characteristics of a hypermarket but with a GIA of between 2500m2 and 5000m2.
2.3 ‘Large Food Store’ means a retail unit which has the characteristics of a superstore but has a GIA in excess of 750m2 but less than 2500m2.
2.4 Floor Levels
Exceptionally food stores of any of the above three defined types may have sales at more than one floor level.
It is expected that most hypermarkets and superstores will be in edge or out of town locations. Large Food Stores are frequently situated in shopping streets but may also occupy edge of centre and district centre locations.
3. Survey Requirements
Reference should be made to the relevant Practice Note for general guidance and for details of the appropriate method of measurement.
3.2 Internal finish
Details of the internal finishes of the main areas should be recorded.
3.3 Plant and Machinery
Adequate information regarding all items of Plant and Machinery should be carefully recorded, including those frequently found - such as heating, air conditioning, lifts, etc. It is not uncommon in food based stores for the air cooling/heating system to utilise the food refrigeration cooling system for heat extraction. In such cases a careful note should be made of the extent of the plant and any additional machinery which forms part of the air cooling/heating system.
Reference should also be made to RM 4:3 and the Rating Cost Guide.
4. Basis of Valuation
4.1 Rental Basis
All food based hypermarkets and superstores will be valued on the rental basis. Valuation should follow the guidance set out in the relevant Practice Note to this section, or its Appendix.
4.2 Level of Values
It should be borne in mind that in many localities it will be essential to ensure that the level of values emerging within the hierarchy of retail outlets does not offend commonsense. In particular, consideration should be given to the following:-
(i) the degree to which foodstores in the hypermarket, superstore and large food store co-ordination groups can be directly compared;
(ii) the level of values adopted for retail warehouses of a similar size.
In all cases where comparability with some other retail group can be anticipated, it will be prudent to make a check valuation of the foodstore on a like for like basis whether it be on an overall or zoned approach.
4.4 Large Food Stores - check both zoned and overall basis
Likewise any Large Food Stores which has been valued on a zoned basis should also be checked on the overall basis in appropriate cases.
5. Valuation Considerations
5.1 Customer car parking
Adequate provision of their own customer car parking is an essential feature of hypermarket and superstore hereditaments, especially in out of town locations, both on grounds of planning and store operator requirements. To that extent its presence can be said to be reflected in the value of the stores. It may, however, be necessary to make adjustments to reflect differences in rateable occupation as between stores - See also RM5:200 on CAR PARKS.
5.1.2 Unit of occupation
It is important firstly to ascertain whether the available customer car parking area: a. forms a separate hereditament from the retail store, in the rateable occupation of the store operator, some other person, company or public body or b. is in the rateable occupation of the store operator as part of the main retail hereditament.
a. In all cases where the car parking area has been identified as a separate hereditament it should be valued at a level appropriate to the locality:
b. In those cases where the car parking forms part of the main retail hereditament added control will probably translate into enhanced value. Quantifying the additional value will be a matter of valuer judgement having regard to the facts in each case.
5.1.4 End allowances generally
It will be exceptional to make any end allowance for inadequate parking availability (as compared to an adjustment to reflect differences in occupation). It should be noted that store operators accept that there will be a shortage of spaces at peak periods (Saturday afternoons and Bank Holidays in particular).
5.2 Petrol sales
5.2.1 Unit of Assessment
When valuing petrol filling stations (PFS) operated by hypermarkets and superstores it is necessary to determine the correct unit of assessment. Where a foodstore and petrol filling station are separated by an internal car park distributor road, and the foodstore, car park and petrol filling station are contiguous and in the same occupation and effective control, they should be treated as one assessment. The PFS may form a separately rateable hereditament if it is physically separated from the main store (eg by a public highway or a separately occupied car park). The occupiers may argue that there exists an essential functional connection between the store and the PFS but the onus will be on them to provide evidence of this connection. There is no legal precedent to follow for this class of property but the general principles have been considered in the cases of Gilbert (VO) v S Hickinbottom & Sons Ltd 1956 CA 49 RIT 231 and Harris Graphics Ltd v Williams (VO) 1989 LT RA 211. Each case must be considered on its merits - CEO Rating should be contacted if difficulties arise.
5.2.2 Whether PFS is separately assessed or not
If it is determined that the PFS forms part of a single large assessment along with the main store it follows that it is an ancillary element and the most likely tenant is the occupier of that store who is primarily a food retailer. However, if the PFS forms a separate hereditament then the hypothetical tenant could be a company other than the operator of the main store and regard should be had to any competing demand for the site. In both cases reference should be made to the relevant Practice Note to this section.
5.3 Garden centres
Where an outdoor garden centre exists its valuation will be a matter for local judgement but assistance may be derived from the relevant Practice Note or Appendix (attached). The starting point will be a consideration of the level of value adopted for garden centres at retail warehouses in the locality.
Where all the ingredients of separate rateable occupation are apparent then the hereditament so identified should be separately assessed. It will be a matter of local judgement as to the appropriate level of value. The best evidence is likely to be derived from the payments made for the units themselves.
Access to the concessions is frequently common to the circulation area used by main store customers after they have passed through the checkout points. Because these areas are essential to the main store any allowance to the main hereditament for shared access to the concessions will be limited to situations where the extent of the access area is deemed excessive.
5.5 Unit shops absorbed into the Store
Absorbed shop units should be valued on the same basis as the main store hereditament of which they form a part rather than the basis (if different) which has been applied to other separately assessed shops which may exist nearby.
5.6 Automatic Teller Machines
See RM5 : 1120.
Practice note 2017
1. Market appraisal
1.1 Historically there has been almost continual growth in the food sector in the recent past. Like for like sales of the major operators have generally increased year on year and margins had been maintained. The sector as a whole was buoyant and was largely unaffected by the post 2008 recession. This background helped to explain the increase in floor space brought about by new openings and existing store expansions.
1.2 By mid 2014 forecasts were beginning to cast worries on the superstore market as like for like sales fell. There was also a growing view that problems within the superstore sector were likely to be the result of a permanent structural shift in the particular market that was reported to be suffering from:-
- A fall in margins, as major price cuts and promotions were brought in to reduce prices.
- Negative like for like sales
- A rapid increase in new space coming on line at a time when sales growth was reversing.
- Competition from discount food retailers
1.3 Late in the second half of 2014, overcapacity was identified for the first time. An ‘exit capacity’ from underperforming stores was openly discussed, even though values of alternative property uses are not necessarily an attractive proposition.
1.4 Tesco led the way in announcing store closures, but the majority of those identified were of the smaller Express or Metro type. Morrisons also announced a more limited closure programme.
1.5 Looking behind the headlines, the closures fell in ‘fairly marginal locations’ and in places that were already well catered for by existing food outlets. In contrast Sainsbury reported it had no plans to reduce store numbers, although it had identified excess space in a quarter of its stores where the intention was to reorganise and sell more clothes and homewares or put in concessions such as travel money, phone shops and Argos digital outlets.
1.6 New stores that can take years in planning, do not easily react to changes in the market. However, in late 2014 doubts over the long term outlook were again reflected when both Tesco and Sainsbury announced that a considerable number of planned new developments would be cancelled. The ‘dash for space’ had come to an abrupt end.
1.7 By 2015 the four retailing channels of online, discount, convenience and superstore/ hypermarket format are now firmly established. The perceived shift in shoppers’ behaviours, with a change to shopping ‘little and often’ as part of a multichannel approach to meet their grocery needs has caused the market to fragment. Continued growth for 2015-2019 in the first three areas is predicted, but at the expense of a fall in market share of the superstore sector. In context, however, the superstore sector still accounts for a large share of the grocery market. The predicted decline, 2015 - 2019, is modest and may well slow further as the superstore operators reinvent their larger format stores making them more attractive to recover shoppers who have defected to the other three channels.
2. Changes from the last practice note
2.1 There was no Practice Note for the 2010 Revaluation.
3. Ratepayer discussions
Discussions are ongoing to agree the value of Beacon Stores with ratepayer representatives.
4. Valuation scheme
4.1 Hypermarkets and superstores are measured to gross internal area and valued overall. There is one scale which applies nationally. A single rate is applied to all areas to reflect all aspects of the store including size, layout, location and age. The valuation scheme is founded upon actual rents and Beacon Values (under discussion for Reval 2017)
4.2 For Reval 2017 a protocol for valuation is being worked up with ratepayer representatives in anticipation of agreeing selected Beacon Values.
4.4 Upper floors included within the main building envelope are included in EGIA at the appropriate relativity.
2017 Rating List Basis. For reference, the 2010 basis is reproduced below but is for guidance only at this stage (20-May-15).
|Description of GIA Area to be included in Effective GIA||% of main space (2010)||% of main space (2017)|
|1||Main Building Envelope||100%|
|3||Upper level plant WITH direct internal concrete or steel stair (not ladder) access||100%|
|3a||Upper level plant WITH direct external concrete or steel stair (not ladder) access only||Value to be discussed on individual merit|
|4||Upper level plant with NO direct internal stair access. For example, ladder access/ accessed across roof.||Nil|
|5||Outbuildings & ‘add ons’ externally accessed||25%|
|6||Outbuildings & ‘add ons’ 100% within main envelope but externally accessed - (does not include roof plant)||100%|
|7||Plant ‘pods’ in service yard not in the nature of a building||Nil|
|8||PDC – cage store in yard translucent walls on steel frame with metal roof often connected to loading bay, walls open at base. (Typically Tesco)||10% to 25%|
|9||Large canopies – oversized from the norm such as Asda Bletchley, 1,870 sq m, percentage applied to whole area||Up to 20%|
|10||Canopies: loading, access, roof overhang, walkways||Nil|
|11||Fully enclosed drive through service yard (Typically ASDA) dependent on doors, utilisation for storage, layout, area used for access. Where utilisation of the drive thru has been increased with permanent storage, racking etc the range of values may be increased up to a maximum of 75%. The maximum value will apply where the area is fully utilised for storage with no drive thru function but provided there remains adequate yardage||25% to 35% or see text for up to 75%|
|11A||Drive-in enclosed unloading built as a planning requirement for noise reduction - value can range from 0% up to values above depending on practical benefit and whether any external yard||25% to 35% or see text for up to 75%|
|Description of GIA Area to be included in Effective GIA||% of main space (2010)||% of main space (2017)|
|12||Loading bank enclosed on 3 sides - excluding canopied area without raised loading bank (Typically Tesco).||15%|
|13||Roller shutter fully enclosed vehicle standing areas beneath floor above||15%|
|14||Open fronted vehicle standing areas beneath floor above not meeting any other criteria in this table.||Nil|
|15||Internet ‘Transit’ van delivery canopies – with or without raised platforms.||£300 per space|
|16||Mezzanine floors – see Paragraphs 1-2 below|
|16.1||Fully meeting GIA Criteria||100%|
|16.2||Retail Floor – all uses with Travelator up & down plus lift access||£100|
|16.3||Retail Floor – all uses with #2 Escalators plus lift access||£90|
|16.4||Retail Floor – all uses with #1 Escalator plus lift access||£80|
|16.5||Retail Floor – all uses Lift and/ or stair access||£70|
|16.6||Mezzanine/ First Floor Cafes – see 4 different types detailed in Paragraph 3 below|
|16.7||Stand-alone Cafe – escalator plus lift and/or stair access||£90|
|16.8||Stand-alone Cafe – lift and/ or stair access||£70|
|16.9||For all other cafes and rates to apply refer to notes below||See notes below|
|16.10||Storage Floor – Concrete with lift and/ or stair access||25%|
|16.11||Storage Floor – Timber or metal sheet non concrete with lift and/ or stair access||10%|
|17||Wind Lobbies/Entrance Enclosures – see paragraph 4 below|
|17.2||With doors, external floor finish and less than 100 sq m, but regardless of height/ design and whether new built or retro fitted||25%|
|17.3||With doors, floor finish same as the sales specification and less than 100 sq m||100%|
|17.4||With doors and in excess of 100 sq m – floor finish not a value consideration||100%|
|18||Unloading Bays with Poly Carbonate Wall(s) and air gap at wall base||50%|
|19||In-house Click & Collect units (situated within car park and remote from main store)||50%|
|20||Stilted Stores – see paragraph 5 below||See notes below|
Additional Notes – referred to above:
1.1 This framework memorandum (paragraphs 1 – 3) relates to sales mezzanines in existing stores, store extensions and new stores/ new builds.
2. Mezzanine Sales
- 2017 Rating List Basis (Note 2017 negotiations are continuing). For reference, the 2010 basis is reproduced below but is for guidance only at this stage (01-May-15). 2.1 The agreed approach encompasses the following sales mezzanine types:
2.1.1 Retro-fitted - inserted in already existing superstore buildings. This includes stores such as Asda Portsmouth, Asda Kingshill.
2.1.2 Extensions – similar to retro-fitted although sales mezzanine is added along with a store extension. The sales mezzanine can extend over both existing and extended areas. For example, Tesco Poole or Asda Hulme (Manchester). This would also encompass situations where the extended area involves an increased eaves height in part, thus enabling the functionality of the sales mezzanine. For example, Sainsbury, Newbury.
2.1.3 New Builds – this involves situations where a sales mezzanine is incorporated into a new build scheme. For example Asda Andover, Sainsbury High Wycombe, Asda Stockton, Asda Walsall.
2.1.4 No defined decapitalisation rate or decapitalisation period was formally agreed in arriving at the reduced inserted mezzanine rates to apply.
Set out below are the agreed rates to be applied for the mezzanine sales for the 2010
|Type of Mezzanine & means of access||Agreed 2010 Basis||Agreed 2017 Basis|
|Travelator up & down plus lift access||£100||£|
|Escalator up & down plus lift access||£90||£|
|Escalator up & stairs down plus lift access||£80||£|
|Lift and / or stair access||£70||£|
2.2 Criteria upon which agreed sales mezzanine rates (as referred to in 2.1.4 above) are based:
2.3.1 No distinction is to be made between retro-fitted, extended or new build sales mezzanines.
2.3.2 Sales mezzanines are assumed ‘fit for purpose’ and to be on one level with no split level. No adjustment to agreed rates to be made in relation to: •Direct access to upper level parking for example, Sainsbury Newbury. •Variable floor to ceiling height above and below inserted sales mezzanine area.
2.3.3 The exception is where the upper sales floor is accessed directly from a pedestrian access eg pavement, highway or shopping mall (for the avoidance of doubt direct access only from a superstore controlled decked car park will not qualify and also where there is some retail supporting facilities at decked parking level, this will similarly not qualify). This will be subject to individual discussion based on the particular property in question.
2.3.4 As per 2010 Rating List, the travelator area accessing the mezzanine sales is excluded if adjacent to the mezzanine floor plate, but is only included if it comes up through the core of the mezzanine floor plate.
2.3.5 The basic rate of the store should be assessed by comparison of the subject store to comparable stores having regard to total size, configuration and location. Each property will be considered on its own merits so that in stores with a predominantly large sales mezzanine this element is not precluded from consideration in assessing the basic rate to be adopted. It is agreed that the additional mezzanine sales area will not necessarily prove price sensitive. Not withstanding the above, it is noted that for valuation the sales mezzanine area will be added in accordance with the rates detailed in 2.1.4 above.
3. Mezzanine/ First Floor Cafes
- 2017 Rating List Basis (Note 2017 negotiations are continuing). For reference, the 2010 basis is reproduced below but is for guidance only at this stage (06-May-15). 3.1 Further to meetings with the VOA, four main types of mezzanine/ first floor cafes were identified and the 2010 Rating List basis agreed is as follows:
3.1.1 Fully Enclosed Mezzanine/ First Floor Cafe:
Applies whether at mezzanine or first floor level.
Relates to fully enclosed stand-alone cafes, or part of larger upper floor area.
For the purpose of valuation definition, ‘fully enclosed’ means no open balcony area.
Such accommodation will be valued at an unreduced level of 100%.
3.1.2 Cafe adjoining an enclosed first floor:
Consider split of ‘public’ and ‘non-public’ space.
If cafe adjacent to ‘non-public’ space, the greater part of which is fully enclosed and would otherwise be valued at 100%, and adjoining cafe area is not dominant (ie less than 50% of total floor space), then cafe to be valued at full secondary floor rate at 100%.
Where ‘public’ cafe area (including cafe servery/ preparation area and public WC’s) is majority use (50% or greater), then valued at prevailing cafe rate (refer to rates detailed in 3.1.3 below). Non public related use (eg offices, warehousing, staff ancillaries) should be valued in accordance with normal EGIA percentages.
3.1.3 Stand-alone Cafe:
Stand-alone cafe, by definition, is not integrated within a larger floor.
The servery and preparation area for usage by the cafe and public WC’s, are deemed to form part of the cafe area and are similarly to be reflected and valued at cafe rate applied, reflecting access to it.
Thus, if stand-alone and not 3.1.1 or 3.1.2 above, then valued at appropriate cafe rate, as detailed below:
|Type of Mezzanine Cafe & means of access||Agreed 2010 Basis||Agreed 2017 Basis|
|Escalator access, plus lift and/or stair access||£90||£|
|Lift and / or stair access||£70||£|
In summary, and by way of example, a standalone cafe area with an open balcony area element regardless of how small the open section is, will be valued in accordance with the agreed rates detailed above.
3.1.4 Cafe on Sales Mezzanine Floor:
Located on mezzanine sales floor invariably accessed via travelator and lift.
Cafe effectively forms part of a larger mezzanine sales floor.
Mezzanine sales area valued at appropriate rate (see 2.1.4); for example, £100 psm (where travelator access) and cafe including preparation areas and public WC’s should be valued at same rate.
4. Wind Lobbies/ Entrance Enclosures
- 2017 Rating List Basis (Note 2017 negotiations are continuing). For reference, the 2010 basis is reproduced below but is for guidance only at this stage (06-May-15).
4.1 The agreed approach to the valuation of wind lobbies/entrance enclosures is set out below.
|Description Criteria||Agreed 2010 Basis||Agreed 2017 Basis|
|Without doors||No value addition||%|
|With doors, external floor finish and less than 100 sq m, but regardless of height/design and whether new built or retro fitted||25%||%|
|With doors, floor finish same as the sales specification and less than 100 sq m||100%||%|
|With doors and in excess of 100 sq m – floor finish not a value consideration||100%||%|
5.1 Stilted Stores - 2017 Rating List Basis (Note 2017 negotiations are continuing). For reference, the 2010 basis is reproduced below but is for guidance only at this stage (01-May-15).
5.2 The agreed approach to the valuation of ‘stilted’ stores is set out below:
Ground Floor lobby circulation area at nil value, other than in respect of enclosed staff/store/office areas, concessions, cafes, WC or ATM areas*.
Travelator ‘cut-out’ and associated space where no floor at first floor (sales) level to be excluded (ie nil value).
Residue of first floor at sales level to be assessed at 100%.
Following exclusion of areas noted above, application of a 5% allowance on the whole.
Basic rate to be applied on this basis reflects the expectant rate if grade store at Ground Floor level.