Effect of non‐domestic rates on commercial property rents: an empirical study

Abstract

Notes that, in the UK, there has been little empirical research undertaken to consider the effect of the commercial property tax (more commonly known as non‐domestic rates) on the level of openly negotiated market rents. Seeks, through the analysis of a large set of panel data obtained from the Investment Property Databank and the Valuation Office Agency, to develop econometric models which can measure the effect that an increase in non‐domestic rates has on commercial rents and ultimately the effective incidence of non‐domestic rates. Draws a number of conclusions, the most significant being that changes in rates bills prompt changes in commercial property rents in the opposite direction. Notes that this conclusion may, in the longer term, have an effect on the type and indeed the timing of government assistance to business occupiers through transitional relief schemes.