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

Section 922: convenience stores

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 A convenience store is defined by IGD - The Institute of Grocery Distribution - as being a retail store:-

  • With a trading area less than 280m2 (recognised in the industry as 3000 m2)

  • This is not subject to restricted opening hours under the Sunday Trading Act 1994. The Sunday Trading Act 1994 allows shops with a retail area less than 280m2 to open for unrestricted hours on a Sunday

  • Which stocks at least seven of the following categories of product; alcohol , bakery, canned and packaged grocery, chilled food, confectionery, frozen food, fruit/vegetables, health and beauty, hot food -to- go, household, national lottery, milk, newspapers/ magazines, non food, sandwiches, savoury snacks, soft drinks, tobacco

1.2 This section is intended to cover larger convenience stores which maybe occupied by larger supermarket chains and symbol groups (mainly franchises to independent operators) but can equally be occupied by an independent non affiliated operator. Consequently the industry definition is modified for the purposes of this section to only include stores which have dedicated sales area in excess of 80 m3. In this context, ‘dedicated sales area’ is defined as the area within the unit dedicated to the sale of goods only. It does not include stores, ancillary offices etc. It is the property’s attributes and not the operator which is important in determining whether it falls within the scope of this section.

1.3 The following types have been identified:

1.3.1 TYPE 1

A newly developed standalone purpose built store with dedicated parking.

1.3.2 TYPE 2

A new store which is the result of the conversion of a former public house, cinema etc these are typically standalone with dedicated car parking this will also include extended standalone village shops.

1.3.3 TYPE 3

A newly developed purpose built store within another development typically below a larger residential block or on the ground floor of an office block.

1.3.4 TYPE 4A AND 4B

Situated in an established parade of shops either in a town centre, village or a neighbourhood centre adjacent to other retail premises there are two scenarios within this type.

TYPE 4A The convenience store may have similar characteristics to other property in the parade or pitch.

TYPE 4B The convenience store may have different characteristics to all other property in the parade or pitch. For avoidance of doubt this includes convenience stores which have been created by the merger of two or more smaller units. For stores created from single larger retail premises please see Type 5.

1.3.5 TYPE 5

A conversion from a larger existing retail premises including former retail warehouse.

1.3.6 This is not an exhaustive list and additional types maybe identified in this developing market.

2. List Description & Special Category Code

Bulk Class: Shop Primary Description CS List Description Shop and Premises SCAT code: 106, suffix G

3. Responsible Teams

3.1 Convenience stores are a generalist class.

3.2 Each unit will be responsible for identifying, and valuing their own convenience stores. It is recommended that units appoint named co-ordinator(s) or Lead Valuer -(s) to act a point of contact within the Unit and so that they can liaise with other Lead Valuers within other units on technical and valuation issued.

4. Co-Ordination

The Convenience Store Class Co-ordination Team has overall responsibility for the co-ordination of this class. The team are responsible for overseeing the approach to convenience store valuations. 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

Sunday Trading Act 1994:

5.1 Under the Sunday Trading Act 1994, a store must have a retail area of less than 280m2 to be exempt from the restricted trading hours prescribed by the Act.

5.2 Consequently there are examples where an operator occupies a store as a convenience store which is exempt from the Sunday Trading Act but VO records show a retail premises with a retail area in excess of 280m2 m. This will normally be due to the fact that a trading area of 280m2 has been partitioned from a pre-existing retail area which is larger than 280m2. In many cases this has been achieved by erecting a non-structural wall. See TYPE 5 para 8.6.

6. Survey Requirements

6.1 Convenience Stores (Types 1,2,3,4b and 5) should be measured to gross internal area (GIA)

6.2 Type 4A convenience stores (see 1.3 above) are to be valued and measured in relation to the retail parade that they are situated within. The approach to measurement (GIA/NIA) should reflect the approach taken to the rest of the retail parade.

6.3 The survey should include the following information:

6.4 The Inspection Check List set out in Appendix 2 should be completed for each convenience store. In addition it is mandatory that photographs of the exterior of the property and its surroundings so that it is possible to identify the type of convenience store. In the case of TYPE 5 Convenience stores locations of non structural partitions must be marked on plans showing the dedicated sales area as defined in para 1.2.

6.5 Consideration should be given to the unit of assessment. Sites of ATMs should be identified and assessed separately as appropriate following the guidance in section 1120 of Rating Manual Section 6: Part 3.

6.6 It is mandatory to record the opening hours on the store on the inspection check list.

6.7 It is mandatory to record the type of convenience store under survey remarks.

7. Survey Capture

7.1 All types 1-5 should be scat coded 106.

8. Valuation Approach

8.1.1 The rental method is the primary method adopted in this class of property. Care should be taken when carrying out analysis and valuation of properties in Type 2 and Type 5 as they may have excessive areas of ancillary space and therefore are not directly comparable to Types 1 3 and 4B.

8.1.2 Material Change of Circumstance

When reviewing the impact of changes to the convenience and food store provision on a particular convenience store it is important to consider the type of convenience store and the basket of rents used in valuing the property. If the property is a type 4A and has been valued by reference to other retail properties in the locality regardless of the nature of the occupier then it would not normally be appropriate to consider any alteration to the valuation to reflect a change in the convenience store/food store provision in the locality. This is due to the fact that the convenience store will have been valued in accordance with the decision of Fir Mill Ltd v Royton UDC and Jones (VO) 1960 R&IT 389 where the Tribunal held; The mode or category of occupation by the hypothetical tenant must be conceived as the same mode or category as that of the actual occupier. A dwelling-house must be assessed as a dwelling-house, shop as shop, but not as any particular kind of shop; a factory as a factory but not as any particular kind of factory.

If any change in value is considered appropriate in respect of a Type 4A convenience store, advice must be sought from the CCT.

8.2 Types1-3

Evidence over a period of time has suggested that retail premises which are attractive to operators of larger convenience stores, may attract a premium rent due to their location and particular suitability to the needs of the operator. With operators keen to expand their share in this sector of the market, a property attractive to one operator may be attractive to another similar operator. It is the location of the property and its characteristics which make it attractive to convenience store operators. In the case of types 1-3 above this is likely to be reflected in the rents payable. Evidence should be derived from the rent passing on the property and other similar convenience stores sub located CON1 in the locality rather than from other non convenience store retail units in the area.

8.3 Type 4

These are not stand alone stores but are located within established parades or retail pitches within town centres.

8.4 Type 4A

8.4.1 The property occupied as a convenience store must be valued bearing in mind the decision of Fir Mill Ltd v Royton UDC and Jones (VO) 1960 R&IT 389 - see 8.1.2 above.

8.4.2 This means where a convenience store is surrounded by a number of other units which are of a similar size to the convenience store, the basket of rents of all of the units of a similar size and character must be considered rather than just the passing rent of the convenience store. This is because vacant and to let, more than one of the properties would be suitable as a convenience store. So evidence from all similar units must be considered when valuing the subject property.

8.5 Type 4B

Where there is a type 4 convenience store which is within a parade but is of a unique size or characteristic to other retail units in the parade or pitch, it can be valued by reference to the passing rent or other comparable convenience stores (i.e. those that occupy the only large unit within a parade or pitch locally) even if this shows a premium above other properties in the immediate area. In such instances there should normally be no allowance made for the size, shape or layout of the unit.

8.6 Type 5

The considerations set out under Type 4 may apply in this instance but there is an additional consideration: Under the Sunday Trading Act 1994, a store must have a retail area of less than 280m2 to be exempt from the restricted trading hours prescribed by the Act.

8.6.1 Consequently there are examples where an operator occupies a store as a convenience store which is exempt from the Sunday Trading Act but VO records show a retail premises with a retail area in excess of 280m2. This will normally be due to the fact that a trading area of 280m2 has been partitioned from a pre-existing retail area which is larger than 280m2. In many cases this has been achieved by erecting a non-structural wall. In such circumstances, the operator will either use the remainder of the original trading area as storage or welfare facilities or will leave it empty.

8.6.2 Care needs to be taken when analysing and valuing convenience stores in this category. Whilst the code of measuring practice must be followed and any non structural walls ignored, when comparing Type 5 properties to those in Type 1,2,3 and 4B care should be taken as the analysis will reflect a potential significant difference in GIA between purpose built stores and those converted from a larger store as envisaged under Type 5 (see 8.1.1).

8.6.3 Where there are a number of premises of a similar size to the convenience store (ignoring any non structural walls) then the comments regarding Fir Mill Ltd v Royton UDC and Jones (VO) 1960 at 8.1.2 above will apply. However if the converted retail store is unique in its location, care should be taken when valuing to ensure that any premium attaching to the property due to its desirability as the location of a convenience store is taken into account.

8.6.4 A comment MUST be made in the survey remarks regarding the presence of the non structural walls to create the trading area of 280m2.

8.7 Customer car parking

Customer car parking is commonly found at Type 1 convenience stores, (but can also be found in other types). Where car parking is present, it is reflected in the value of the store.

8.7.1 If there are unit of assessment issues with car parking related to convenience stores reference should be made to the specific guidance on car parking found in the Section 6 Part 3 section 200. Car parks

8.7.2 Where the car park has been identified as a separate hereditament it should be valued at a level appropriate to the locality.

8.7.3 It should be noted that the car park may not be in control of the store operator.

9. Valuation Support

The following sources are available to Referencers and Valuers dealing with the maintenance and defence of convenience stores.

  • Rating support application (RSA)

  • Survaid

  • Class Co-ordination Team for convenience stores

  • National Specialist Unit

Appendix 1

Illustrated guide to convenience store types

Type 1

Purpose built standalone convenience store with parking. To be sub located CON1 and valued with reference to its passing rent and that of other comparable convenience stores in the locality also sub-located CON1.

Appendix 1 - Type 1

Type 2

Convenience store converted from a pub or other comparable convenience stores in the locality also sub-located CON1.

Appendix 1 - Type 2

Type 3

Convenience store located in a newly developed purpose built store within another development typically below a residential block or ground floor of an office block. To be sub located CON1 and valued by reference to the passing rent and other similar CON1 properties in the locality.

Appendix 1 - Type 3

Type 4A

Example below shows a property occupied as a convenience store which should be valued as other properties in the parade owing to the fact that it has similar characteristics. Any premium paid for such a unit should be given less weight as the property must be valued by reference to the basket of rents for other similar properties in the parade/ pitch. Scat code 106 should be applied to these units but they should not be sub located CON1.

Appendix 1 - Type 4A

Type 4B

Example below shows a convenience store situated in an estate parade. It is notably different from other units in the parade due to its size. These properties should be sub-located as CON1. These should be valued by reference to the rent on the subject property or other similar properties in the locality.

Appendix 1 - Type 4B

Type 5

A conversion from an existing retail premises surplus space is likely to be present.

Appendix 2

Inspection checklist

Whilst carrying out the survey special attention should be given to the following features:-

CONVENIENCE STORE .  INSPECTION  CHECKLIST  
Occupier    
Address    
Rental details  
Convenience store Type See RM Section 6 - Part 1 section 1 standalone purpose built 2 Converted pub etc 3 Purpose built integrated into new development eg beneath flats 4A In parade but shares characteristics with other units within parade (to be on same sub loc as surrounding parade but scat code 106 to be adopted) 4B In parade but unique characteristics to all other retail 5 Conversion from larger retail premises      
Location    
Size TOTAL AREA   RETAIL AREA
Transport    
Car Parking Allocated/ communal, open/covered, number of spaces, staff/customers, free/ charge made/ refund given  
Competition/ comparables to include all sizes of food retail outlets  
Building External Built:     No. of floors  
Construction    
Customer access    
Delivery and Loading    
Other points     continued.../
Building Internal   Refurbished:   Fit out:  
Disabilities    
Accommodation         Access from loading      
Extraordinary features      
Natural light    
Customer WCs  Extent and Quality     Lifts & Escalators Type manual/automatic, goods, passenger, staff/ customers, capacity, floors served    
Other occupiers in the building       Shared facilities:    
Services.  Fire Precautions. Security    
Air Conditioning (age) Cassette or ducted. Purpose.  Extent of area covered. Heating. Fuel. System          
Surplus Accom. Notes should be made of any accommodation in excess of 400sq m with use type of excess accommodation being noted    
General remarks Including opening hours        
Date of survey     Survey by:  
Building Internal   Refurbished:   Fit out:  
Disabilities    
Accommodation         Access from loading      
Extraordinary features      
Natural light    
Customer WCs  Extent and Quality     Lifts & Escalators Type manual/automatic, goods, passenger, staff/ customers, capacity, floors served    
Other occupiers in the building       Shared facilities:    
Services.  Fire Precautions. Security    
Air Conditioning (age) Cassette or ducted. Purpose.  Extent of area covered. Heating. Fuel. System          
Surplus Accom. Notes should be made of any accommodation in excess of 400sq m with use type of excess accommodation being noted    
General remarks Including opening hours        
Date of survey     Survey by:  

Practice note: 2017: Convenience stores

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 food 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.

1.2 During the period since 2008 there has been a perceived shift in food shopping habits, with shoppers shopping more often in a wider variety of stores and retailers. As a consequence, occupiers of convenience stores have tended to benefit from this change in shopping trends.

1.3 Convenience store multiples opened 451 stores year ending July 2014. (Source The Institute of Grocery Distribution (IGD)).

1.4 By 2015 the four retailing channels of online, discount, convenience and superstore/ hypermarket format were 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. This suggests that demand for convenience stores will continue to grow.

1.5 Demographic changes such as an increase in smaller households, older population, together with changes in working patterns and a move to reduce food waste are likely to continue the trend of shopping a little and often.

1.6 The expansion of convenience stores is being accomplished by new openings of purpose built stores, conversion of existing premises such as public houses and the acquisition of existing retail premises. In the case of the last two the pace of expansion has been largely unhindered by the local planning process as convenience stores are often permitted development.

1.7 According to the IGD survey, in July 2014 there were 47,294 convenience stores nationally of which

18,630 Unaffiliated independents

17,080 Symbol Stores

5,133 Forecourts

3,771 Multiples

2,680 Co-ops

1.8 Whilst it is true that the there have been some store closures announced by the major operators such as Sainsbury and Tesco during 2014/2015 these have been relatively small numbers and looking behind the headlines, the closures fell into ‘fairly marginal’ locations and in places that were already well catered for by existing food outlets.

1.9 The demand for convenience store premises and the expansion into new locations is likely to continue after AVD as the growth in the trends of multi channel and multi destination shopping looks set to continue.

2. Changes From Last Practice Note

No practice was published for 2010.

3. Ratepayer Discussions

None to date.

4. Valuation Scheme

4.1 There is no agreed valuation scheme. Convenience stores are valued in accordance with RM section. The location and type of convenience store are important factors when valuing this type of property.

4.2 The valuer must bear in mind the following potentially value significant factors before arriving at their valuation:

1. Location – examples of prime locations include:

a.Within a densely populated environment.

b.Near office blocks where there is a high concentration of workers.

c.Near a transport terminus (train or bus station etc).

2. The demographics/affluence of the locality:

Convenience store operators tailor their offer according to the demographics of the locality. The affluence of the area can affect the profitability of the store and the rental bid.

3. Property characteristics:

a.Purpose built stores tend to have a GF area of between 300m2 and 400m2.

b.Older stores or extended retail units may be much smaller or have significant areas of superfluous storage.

4.3 Having considered the above factors the valuer must always refer to the rent on the subject property and always seek to compare similar stores. Generally speaking the convenience store market shows similar levels of value across a broad geographical area for properties with similar locations, demographics and characteristics.