The Impact of Business Rates on Commercial Property Decisions

A cost that cannot be overlooked

When considering a commercial property, rent is often the first figure that comes to mind. However, one of the most significant ongoing costs for occupiers — and an important factor for landlords — is business rates.

Business rates can influence affordability, decision-making, and even whether a deal proceeds at all. For both tenants and landlords, understanding how rates work and how they impact property choices is essential.

At Citrus Commercial Circle, we regularly advise clients across Bury, North Manchester, and the wider North West on how business rates affect commercial transactions. This guide explains the key considerations.

1. What are business rates?

Business rates are a tax on non-domestic properties, including shops, offices, warehouses, and industrial units. They are set by the government and collected by local authorities.

The amount payable is based on:

• The rateable value of the property (set by the Valuation Office Agency)
• The multiplier set annually

This means that even similar properties can have different rates depending on their assessed value.

2. A key factor in affordability

For many tenants, business rates can represent a substantial proportion of overall occupancy costs.

When assessing a property, tenants must consider:

• Rent
• Business rates
• Utilities
• Service charges

In some cases, a property with lower rent but higher rates may be less attractive than one with slightly higher rent but lower rates.

Understanding the full cost picture is essential for making informed decisions.

3. Impact on tenant demand

Business rates can directly influence demand for certain types of properties.

Properties with:

• Lower rateable values
• Eligibility for relief schemes
• Efficient layouts

are often more attractive to SMEs and start-ups.

Conversely, properties with high rateable values may face:

• Reduced demand
• Longer void periods
• Increased negotiation on rent

Landlords need to be aware of how rates affect the attractiveness of their property.

4. Small Business Rates Relief

Many smaller businesses benefit from Small Business Rates Relief (SBRR), which can significantly reduce or even eliminate rates liability.

This relief typically applies to properties below a certain rateable value and can make smaller units particularly appealing.

As a result:

• Smaller retail and industrial units often see strong demand
• SMEs are more likely to commit to properties within relief thresholds

This is one of the reasons why smaller commercial units continue to perform well across the North West.

5. The role of property size and layout

The size and layout of a property can influence its rateable value and, therefore, the rates payable.

Efficient, well-designed spaces may:

• Maximise usability without increasing rateable value excessively
• Offer better value for occupiers

Larger or less efficient spaces may result in higher costs without delivering proportional benefits.

This is why many tenants prioritise practicality over size.

6. Location and its influence on rates

Location plays a significant role in determining rateable value.

Prime locations often attract:

• Higher rental values
• Higher rateable values
• Increased overall costs

Secondary locations such as Bury, Middleton, and Rochdale often provide a more balanced proposition, offering:

• Lower rates
• Competitive rents
• Strong accessibility

These factors contribute to sustained demand in these areas.

7. Negotiation and deal structuring

Business rates can influence how deals are structured.

For example:

• Tenants may negotiate lower rent to offset higher rates
• Landlords may offer incentives such as rent-free periods
• Flexible lease terms may be agreed to support affordability

Understanding the relationship between rent and rates allows for more effective negotiation.

8. Vacant property rates

For landlords, business rates are not only relevant when a property is occupied. Vacant properties can also be subject to rates after an initial exemption period.

This creates pressure to:

• Reduce void periods
• Secure tenants efficiently
• Consider short-term lettings or flexible arrangements

At Citrus Commercial Circle, we help landlords minimise vacancy and manage these costs effectively.

9. Revaluations and changing costs

Business rates are subject to periodic revaluation, which can result in changes to the amount payable.

These changes may:

• Increase costs for some properties
• Reduce costs for others
• Influence tenant demand and market behaviour

Staying informed about revaluations is important for both landlords and tenants when planning ahead.

10. The importance of professional advice

Business rates can be complex, and misunderstandings can lead to unexpected costs.

At Citrus Commercial Circle, we support clients by:

• Providing clear guidance on likely rates liability
• Advising on affordability and property selection
• Structuring deals to reflect overall costs
• Helping landlords position properties effectively

Our aim is to ensure that all costs are understood from the outset.

11. A strategic consideration, not just a cost

Business rates should not be viewed in isolation. They are part of a broader financial and strategic decision.

For tenants, the focus should be on:

• Total occupancy cost
• Operational efficiency
• Long-term sustainability

For landlords, the focus should be on:

• Market positioning
• Tenant demand
• Long-term income stability

Taking a strategic approach ensures better outcomes for both parties.

Final thoughts

Business rates are a significant factor in commercial property decisions, influencing affordability, demand, and negotiation. Understanding how they work and how they interact with other costs is essential for making informed choices.

By considering rates alongside rent, location, and property quality, both landlords and tenants can achieve better, more sustainable outcomes.

At Citrus Commercial Circle, we are proud to guide clients across Bury and North Manchester with clear, practical advice that supports confident decision-making.

Based in Bury. Active across North Manchester. Always on your side.
Call us today: 0161 383 1806
Email: info@citruscommercialcircle.co.uk
Visit: citruscommercialcircle.co.uk
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