Regional out of town shopping centres and city centre shopping malls
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This instruction applies to shops within Regional out of town shopping centres and shopping malls in city centres having a total gross internal area (GIA) of less than 1,850m². For shops with a total GIA in excess of 1,850m² see Rating Manual: section 6 part 3 - large shops. Regional out of town shopping centres are generally characterised by excellent transport links, extensive, often free car parking and a substantial retail and leisure offer.
Bulk class: shop
List descriptions: shop and premises, bank and premises, betting shop and premises, hairdressing salon and premises, kiosk and premises, kiosk.
Primary description: CS
SCat codes:
249 (shop and premises)
021 (bank and premises)
024 (betting shops and premises)
417 (hairdressing salon and premises)
243 (kiosk and premises and kiosk)
Suffix: G (Generalist)
3.1 Generalist caseworkers are responsible for the survey and valuation of this class.
3.2 It is anticipated that each Unit will have a named individual responsible for the class. More than one named individual is recommended for succession planning.
3.3 It is also recommended that each Unit should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Unit. This Lead Valuer will be responsible for assisting in the delivery of the Unit’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Units. The Lead Valuer will be responsible for ensuring compliance with this section.
4.1 The Regional shopping centre Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. The team is responsible for the approach to and the accuracy and consistency of Regional shopping centre valuations.
4.2 The practice note describes the valuation basis for revaluation and the National Valuation Unit (NVU) will provide advice as necessary during the life of the rating lists.
4.3 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
There is no specific legal framework for this class.
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 Shops in shopping 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.
6.3 Consistency of approach is essential and surveys must be carried out in accordance with the guidance in Rating Manual: section 6 part 3 - shops and shopping centres.
6.4 Inspection
An inspection checklist is appended (Appendix 1) and should be completed for all new properties, updated for maintenance work and stored in the property folder of the Electronic Document Records Management (EDRM) system.
The Survey Template can be found in EDRM. This will need to be completed following inspection.
8.1 Background
In order to maximise the return of the individual retailers it is in the Landlord’s interest to maintain tight control over tenant mix and to manage and promote the centre as a whole. This enables the traders to complement rather than compete to the benefit of all.
Shopping Centres have evolved in recent years and the more successful ones provide a considered balance of retail, food and leisure offers. Temporary ‘pop up’ shops within retail units, often in situ for a short period, typically in the run up to Christmas and short term lets of between 6 months and 2 years are now a feature in Shopping Centres. These seek to address void issues in addition to enhancing the retail offer.
8.2 Zoning
The depth and the number of zones may vary between centres dependent upon the characteristics of shops and according to how the market lets the units. It is recommended to apply 6.10 metre zones. See paragraph 4 Rating Manual: Section 6 Part 3 - Shops and Shopping Centres.
8.3 Rental Adjustment and Analysis.
Contracting out of the Landlord and Tenant Act 1954 may be normal practice. Analysis of the rents should be in accordance with Rating Manual Section 4: Part 1: practice note 1 2021 Rental Adjustment. Careful consideration needs to be taken of inducements and incentives.
8.4 Form VO 6066 should be issued if it is known that there is a turnover rent.
8.5 Many rent reviews under existing leases are subject to upward only rent review provisions. Care will need to be taken when considering their usefulness particularly if they are nil increase on upwards only rent review.
8.6 Temporary pop-ups and short term lets in retail units
These are now a feature in most centres, and are often let on turnover only or a reduced rent to cover service charge and other liabilities only. Care must be exercised when a number of these are sited together, perhaps in a side mall with lower footfall. The level of these lettings may not provide the full picture and appropriate measures should be taken to obtain all relevant details.
8.7 Large shops
Large shops are an integral part of Regional Shopping Centres and the size, quality and draw of these will be dependent upon the extent and quality of the catchment population and demographic profile together with the competition within the catchment area. Proximity within the centre to major anchors can be a factor enhancing rental value on standard units.
8.8 Kiosks and Retail Merchandising Units (RMU’s)
Location within the centre and footfall are the major factors determining value. There is usually sufficient rental evidence and the approach is either a spot figure or on a £/m² basis where devaluation of the evidence results in a consistent ‘tone’.
8.9 Residual mall assessment
The residual mall assessment remains in the control of the landlord and comprises short term, seasonal, temporary stalls and other income generating features such as vending machines; children’s rides, Father Christmas grotto, and similar.
8.10 Double decker units
These are units situated on more than one level within the shopping centre, having access from the mall to each level. They are internally connected by means of escalator, stairs, lift or a combination. Such units should be zoned from each level of the Mall. They tend to be prominent units from each level. Careful analysis of the whole deal (including the rent) is required in order to ascertain whether there is any justification for an adjustment arising from zoning from each level.
8.11 Mezzanine floors
These may be either provided by the landlord or constructed by the tenant. Care must be taken to determine what is included in the demised premises to ensure that the correct floor areas are used in the analysis of the rent. 8.12 Stairs, lifts and escalators
By improving access to an upper floor the tenant is seeking to enable a better and more valuable use of this floor. Care must be taken to ensure that the addition of improved access results in a rateable value that is no less than the rateable value without the improved access.
8.13 Mode and category of occupation
The hereditament must be valued vacant and to let for a use within the same mode or category of occupation as the actual use - for example a restaurant with A3 planning permission must be valued vacant and to let as a restaurant. The measure of value is, therefore, what the market would pay to occupy the hereditament in its existing physical state, and for a use within the same mode or category as the actual use. Rating Manual: section 3 part 2 - appendix 1: The City Duck case. Further guidance may be found in Rating Manual: section 6 part 3 - restaurants.
8.14 Coffee shops occupying a retail unit
The strategic positioning of coffee shops (typically A1 planning use) within the regional shopping centre is designed to increase dwell time and to generate footfall. This results in coffee shops being dotted around the mall. Therefore it may well be that some of these rents are below the levels of typical A1 fashion retailers but that lower rent may not be indicative of the general market in A1 shops from which the tone is derived. Each case will need to be reviewed with reference to individual rents and consideration needs to be given as to whether an overall approach may be more appropriate.
8.15 Open plan coffee shops in the mall
These comprise a defined seating area exclusive to that particular occupier together with a counter to prepare and sell drinks, reheated food and cakes etc. They are generally sited in the centre of the Mall, usually prominently positioned. Rental evidence indicates the approach should be on an overall £/m² basis.
8.16 Interaction of large shops with smaller zoned shops.
Shops below 1,850m² are generally zoned. It is possible that zoning may be continued for shops larger than 1,850m², but it is likely that the shop would have issues such as access, frontage, layout and position. Continuing to zone shops larger than 1,850m² may result in end allowances, specifically quantum increasing to unrealistic levels. Therefore careful consideration needs to be given to the size where an overall rate per m² basis becomes more appropriate. This needs to be reviewed in the light of all the available evidence. The size where an overall approach is used may vary from centre to centre dependent upon the particular circumstances in each case and it may be that shops under 1,850m² are valued on an overall basis.
8.17 Air conditioning
Where the unit includes air-conditioning that has been provided by the landlord and included in the demise of the unit, the value is considered to be reflected in the rent. Where air-conditioning is included as a tenant’s improvement it should be valued in accordance with Rating Manual Section 6: Part 3 – shops and shopping centres - practice note 1 Air Conditioning in Shops with the area served by the air-conditioning being captured as an ‘other addition’.
8.18 Car parking
Guidance notes on the rating of retail centre car parks can be found in Rating Manual: section 6 part 3 - car parks practice note 1.
8.19 Key rents
All hereditaments having key rents need to be inspected.
- Rating Support Application (RSA)
- Survaid
- Class Co-ordination team for regional shopping centres
- National Valuation Unit (NVU)
Appendix 1
| Centre | Address | Unit |
| Westfield White City | Ariel Way, London W12 7GF | London |
| Bluewater | Dartford, Kent, DA9 9SS | South East |
| Westfield Stratford | Montfichet Road, London E20 1EJ | London |
| Trafford Centre | Barton Dock Road, Trafford Park, Manchester M17 8AA | North West |
| Meadowhall | Sheffield S9 1EH | North East |
| Metro Centre | Gateshead, Tyne and Wear NE11 9YG | North East |
| Brent Cross | Hendon, London, NW4 3FP | London |
| Merry Hill | Level Street, Brierley Hill West Midlands DY5 1SY | Central |
| Cribbs Causeway | Bristol, BS34 5DG | South West |
| Lakeside | West Thurrock Way, Grays Essex RM20 2ZP | East |
| White Rose | Dewsbury Road, Leeds LS11 8LU | North East |
Section 925: Appendix 2 Section 925: Appendix 2
1. Market Appraisal
1.1 Regional out of town centres are very different in nature to the High Street. They tend to be actively managed by a single landlord or partnership and there is a science to their layout, organisation, tenant mix and presentation often requiring financial incentives to make the centres work.
1.2 In the months leading up to the antecedent valuation date, shops in shopping centres deemed ‘essential’ were permitted to open, whereas non-essential retailers, coffee shops and restaurants had to close under lockdown rules. Food retailers and home delivery businesses recorded a jump in sales and online trading soaked up the non-essential trade. During lockdown, footfall in shopping centres fell by up to 42%. The pandemic was the catalyst that in 2020 helped to push retailers into Company Voluntary Arrangements (albeit after years of underinvestment) and cause thousands of shops to close permanently with the loss of more than 175,000 retail jobs. Shopping Centres were hit particularly hard with vacancy rates rising, with the North East and Wales being the worst affected. Shoppers were turning to areas which provided convenience and essential products in their local community rather than visiting shopping centres. Some shopping centres are being repurposed as landlords acknowledge that they have more vacant space on their hands than they can reasonably expect to let.
1.3 With internet sales continuing to soar as a proportion of all retail sales and reaching 35.2% for a time. Shopping centre managers were having to promote their centres as places to shop, eat and play, encouraging shoppers to visit more and stay longer. One way to do this would be to increase restaurant use, but casual dining was one of the worst hit sectors in 2020. The number of sites fell by nearly 10% with 878 restaurants permanently shuttered. The restaurant sector can no longer afford to pay the high levels of rent it once did. Typically, all other things being equal, rents will be below those achieved in the fashion sector.
1.4 The Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 came in to force in England on 01-Sep-2020. This allows shopping centre owners much more freedom to decide what they use their retail units for, making it easier for them to switch premises, from an obsolete function to one that draws in the customers. The Regulations should make it easier for owners in England to rent out shops as they now have a much wider range of potential tenants. These changes may well affect shop rental levels, but at the AVD it was too early to tell with any certainty.
1.5 The new Use Class Order applies in England only. It consolidates a number of former retail, business and commercial uses into a single use class (Class E), and throws in some community uses for good measure. It contains:
- shops
- restaurants and cafés
- indoor fitness and recreation
- financial and professional services
- offices and light industrial uses
- medical or health services, and
- day-nurseries
1.6 Moving between any of these uses no longer requires planning permission to authorise a change of use – although physical alterations to the property may still need consent.
1.7 In the retail market that existed at AVD, many tenants were seeking longer rent free periods and stepped rents. They also sought and were often granted shorter more flexible leases, with an element of risk sharing with the landlord. Some landlords were even prepared to depart from payment quarterly in advance and accept rent and service charges on a monthly in advance basis. Tenants were pushing for turnover rents or rates only deals or total occupancy cost leases (TOCs), either linked to turnover or not. In cases where a base rent with a turnover top up was agreed, thresholds were often set at levels unlikely to be reached. Landlords, keen to escape unoccupied rates on vacant property were becoming more resolved to these ideas.
1.8 By the AVD, a major fashion retailer, which occupied several medium sized units (MSUs) in most of the large shopping centres, had failed and been bought by online giants that had no need for its bricks and mortar stores. Landlords of shopping centres were faced with a significant amount of vacant space. It was also well known at that time that a department store that anchored many shopping centres was collapsing and that the new owner would not require the physical stores. Indeed, several of its department stores had already closed by the AVD. The departure of an anchor tenant will reduce footfall in the centre, particularly in the immediate vicinity and can, on occasion, trigger a lease clause which enables tenants of small and medium sized units to claim a reduction in rent. However, landlords are doing what they can to re-let such units.
1.9 Unsurprisingly, shopping centre landlords have been unable to collect all of the rents on the quarter date they are due. Capital values of shopping centres have been falling and yields rising. Some centres have been valued at, or even sold at, half of what they had been valued at a few years ago.
1.10 With the announcement on the 22-Feb-2021 of the Government’s roadmap (for dealing with the Coronavirus pandemic), a return to some semblance of normality could have been anticipated, although it is appreciated that shopping centres will take some time to fully recover. As at the beginning of April 2021 the economy had contracted by 9.80%, the worst recession since 1709, but it was predicted that growth will bounce back to 7.25% in the same year. In the March Budget, the Chancellor said that he thought that the economy would recover faster than expected, returning to pre-COVID levels by the middle of 2022. The Governor of the Bank of England was more optimistic saying that the UK economy should return to its pre-COVID size by the end of the year [2021] following the success of the vaccination programme.
1.11 For a time it looked as if they could be right. When the non-essential shops in England re-opened on 12-April-21, shoppers flooded back to the high streets. Footfall doubled from the previous week and queues formed outside some of the more popular stores. Retailers realised the importance of trading from physical stores as well as online.
1.12 But what the Chancellor, the Governor and the hypothetical tenant could not have foreseen was the combination of poor growth and rising prices caused by high fuel prices, gas shortages, increasing transport costs, labour shortages and the spiralling costs of raw materials. This became evident later in the AVD year.
1.13 During April 2021, general statistics show that footfall was improving as restrictions were eased but it was still 32.3% lower than in the same period in 2019.
1.14 Non-retail uses are becoming more common in shopping centres and care should be taken over the mode and category of occupation when valuing these. Regard should be had t rents in that mode or category of occupation within the shopping centre.
1.15 At the antecedent valuation date, non-essential shops in England were closed due to the Coronavirus pandemic but a tenant in England could look forward to opening a non-essential retail unit on 12-April-2021 and, subject to the Rule of Six, a restaurant could open on 17-May-2021. Shops and restaurants in shopping centres are to be valued with a reasonable prospect of continuance thereafter. The situation in Wales, both leading up to and after the AVD, was similar, in that all shops were able to open on 12-Apr-2021, although there were some differences in the detail. In valuing shops within Regional Shopping Centres, the valuer should put themselves in the shoes of the parties at the antecedent valuation date and on the basis of the information available to them at that time look forward.
1.16 Subsequent to the Coronavirus pandemic, it is becoming common practice for landlords and tenants to agree a clause in the lease, which will stipulate what happens to the payment of rent in such an event.
2. Changes from last practice note
2.1 Market appraisal has been updated in line with economic and general retail market conditions and to reflect changes occurring within the centres.
3. Ratepayer discussions
3.1 Discussions have taken place with several shopping centre landlords, but there has been no prior agreement at the time of writing.
4 Valuation scheme
4.1 Regional shopping centres and town centre malls usually comprise a mixture of retail property that is the subject of separate instruction.
4.2 For advice on the adjustment and analysis of shop rents, see Rating_Manual_Section_4_valuation_methods_rental_adjustment. For advice on the valuation of shops in general see Rating_Manual_s5a_valuation_of_all_property_classes:_shops_and_shopping_centres.
4.3 A shopping centre is normally anchored by large stores. For advice on the valuation of this type of retail property see Rating_Manual_section_5a_valuation_of_all_property_classes:_large_shops.
4.4 Some shopping centres will be anchored by a large food store. For advice on the valuation of hypermarkets, superstores and large food stores see Rating_Manual_s5a_valuation_of_all_property_classes:_hypermarkets_and_superstores and Rating_Manual_section_5a_valuation_of_all_property_classes: large_food_stores and accompanying practice notes.
4.5 Centre Managers are increasing their food and leisure offer in order to attract customers to the centre. For advice on the valuation of food courts see Rating_Manual_s5a_valuation_of_all_property_classes:_food_courts. For advice on the valuation of restaurants dispersed throughout the shopping centre see Rating_Manual_section5a_valuation_of_all_property_classes:_restaurants and its accompanying practice note.
4.6 In many regional shopping centres and town/city centre malls there will be permanent kiosks or Retail Merchandising Units (RMUs) and an assessment in respect of the Residual Mall. For guidance on the valuation of these hereditaments seek advice from National Valuation Unit (NVU).
4.7 Automatic Teller Machines (ATMs) are often found in regional shopping centres. For advice see Rating_Manual_s5a_valuation_of_all_property_classes:_sites_of_automatic_machines.
4.8 For the unit of assessment and the valuation approach in respect of car parking see Rating_Manual_s5a_valuation_of_all_property_classes:_car_parks.
4.9 Sub locations, matrices and scales are subject to regional variation. Scale details may be bespoke and follow the letting pattern of the centre. Detailed valuation information and guidance can be accessed via Survaid.
1. Market Appraisal
1.1 The 2010 Revaluation had an AVD at the peak of the market just prior to the biggest recession of recent times. When the recession commenced, retail was one of the worst affected of the property sectors with several retailers having gone into liquidation. Coupled with the rise in internet shopping and interest generated in promotional days such as Black Friday, the impact on Regional Out of Town Shopping Centres in some areas has been severe. This effectively means that for the purposes of the 2017 Revaluation with an AVD of 1st April 2015 there may be rental evidence of limited value, affected by upwards only review provisions, and short term and temporary lets affecting the picture.
1.2 Regional Out of Town Shopping Centres are very different animals to the High Street. They tend to be actively managed and there is a science to their layout, organisation and presentation often requiring incentives to make them work.
1.3 Certain Centres have continued to prosper whereas others have not performed quite as well. The better Centres are continuing to improve their food and leisure offer.
1.4 Two new Regional Shopping Centres have opened in London in recent years: Westfield White City in 2008 and Westfield Stratford in 2011 which was opened in time for the Olympic Games. These have resulted in some competition for existing centres such as Bluewater and Brent Cross. Westfield White City appears to have benefited from substantially increased rents following the first round of rent reviews in 2013. Voids are few and incentives have appeared to have reduced in recent deals. The picture is less clear in Westfield Stratford as the first round of rent reviews is not due until 2016 and there have been a limited number of recent lettings.
1.5 Brent Cross has countered the effect of the Westfield Centres by a refurbishment programme and a planning application has recently been submitted for an extension. Similarly, Bluewater is continuing to improve the product it offers to the shopper. In 2012 it undertook a major refurbishment and extension to the Winter Garden Food Court and now offers a full range of restaurants. Numbers of shoppers are still high and very few units are vacant.
1.6 Lakeside is in direct competition with Bluewater and Westfield Stratford and as a result outline planning consent has been granted for an investment of £180M which will include improved transport links and increase the size of Lakeside by nearly a third incorporating 40 new stores. Improved transportation will be by means of a new bus station linked to Chafford Hundred rail station and a subsidised bus service through the Lakeside Basin. Further plans exist for the development of food and leisure facilities around the existing cinema. Any vacant units are let for short term often community based projects, or short term lets at low rents, consequently, voids are not an issue in the centre. In the current climate lease length tends to be shorter, typically five to ten years, with shops being re-configured to accommodate expansion by existing occupiers.
1.7 In response to the development at Trinity Leeds in the city centre which opened in March 2013, the food court at White Rose has been refurbished and plans to increase the retail offer with additional units and a cinema have been unveiled.
1.8 At Meadowhall the food court kiosk area and upper level restaurants have been refurbished and extended and significant rental growth has occurred. A planned multi-million pound refurbishment of the whole centre is due to take place over a 2-year period from late 2015, which will maintain its position in the shopping centre hierarchy.
1.9 The Metro Centre, which is a relatively old centre in shopping centre terms, opened in 1986 and consequently there is evidence of lease renewals available. The most significant changes at The Metro Centre are the rebranding and refurbishment of the mall on the first floor above The Parade, which has been rebranded as The Platinum Mall. The dining area, known as the Qube is being extended into the part of the centre known as the Mediterranean Village and a number of new occupiers have been pre-signed including TGI Fridays, Chiquito, Coast to Coast and Five Guys.
1.10 Merry Hill, has recently changed hands and is now operated by Intu. As with Lakeside, vacant units are let for short term periods and conventional leases tend to be shorter. A new food court was constructed in 2009, but continues to vary its offer. The Centre is due for a make over, but no firm plans have been detailed as yet.
1.11 Intu are in control of 45% of the Regional Out of Town Centres and Westfield in control of two (18%) high profile London Centres.
2. Changes from the last practice note
There was no Practice Note for the 2010 Revaluation.
3. Ratepayer discussions
3.1 A meeting has been held and general discussions have taken place. There has been no prior agreement.
4. Valuation scheme
4.1 Regional Shopping Centres and Town Centre Malls usually comprise a mixture of retail property that is the subject of separate instruction.
4.2 For advice on the adjustment and analysis of shops see Rating Manual - Section 4 - Part 1 : Practice Note 1 2017 and for advice on the valuation of shops in general see Rating Manual Section 6 - Part 3 – Section 920 : Shops.
4.3 A Shopping Centre is normally anchored by large stores such as John Lewis; Debenhams; Marks and Spencer; Boots; WH Smith and others. For advice on the valuation of this type of retail property see Rating Manual Section 6: Part 3: Section 550a : Large Shops and Department Stores and 2017 Practice Note.
4.4 Some Shopping Centres will be anchored by a large food store. For advice on the valuation of Hypermarkets, Superstores and large food stores see Section 6: Part 3: Section 520A: Hypermarkets and Food Based Superstores and Rating Manual Section 6: Part 3: Section 520B: Large Food Stores.
4.5 Centre Managers are increasing their food and leisure offer in order to attract customers to the Centre. For advice on the valuation of Food Courts see Rating Manual Section 6: Part 3: Section 920: Food Courts and 2017 Practice Note. For advice on the valuation of restaurants dispersed within the Shopping Centre see Rating Manual Section 6: Part 3: Section 875: Restaurants and 2017 Practice Note.
4.6 In most Regional Shopping Centres and Town/ City Centre Malls there will be permanent kiosks or Retail Merchandising Units (RMUs) and an assessment in respect of the Residual Mall. For guidance on the valuation of these hereditaments seek advice from national Valuation Unit
4.7 Automatic Teller Machines (ATMs) are often found in Regional Shopping Centres. For advice see Rating Manual - Section 6: Part 3: Section 1120: Sites of Automatic Machines.
4.8 For the unit of assessment and the valuation approach in respect of car parking see Rating manual - Section 6: Part 3: Section 200 : Car Parks.