Is Business Rates uncertainty fuelling 
the end to the all-inclusive serviced office? 

Marcus Plows spent nine years at The Office Group (TOG/Fora) and has been at the forefront of recent Business Rates lobbying and strategy. Having moved to Compton, he is quickly becoming the name in strategic Business Rates advice for the industry. Below, he questions whether the persistent uncertainty surrounding business rates could be hastening the decline of the all-inclusive serviced office model.

If you run a serviced office, the chances are you are talking about Business Rates an alarming amount! It has never been so important to stay in the loop.

Business Rates are a property tax. Pretty simple in theory, and pretty boring to be completely honest… well, until recently.

Historically the industry has wrapped Rates into one nice and simple all-inclusive licence fee. This was ultimately what clients demanded, and regardless of the movement in underlying rates (positive or negative) it was a straightforward and predictable process for an operator to accommodate.

Each office historically had it’s own Business Rates bill depending on the occupier, and the operator picked up the tab on meeting rooms and event space accordingly. In essence, revenue generating space was considered rateable and included in the pricing, while corridor space was excluded.

Your corridor may be taxable:

However, recent changes have led to the creation of a “corridor tax” and are creating material uncertainty about the viability of the current business model. An increasing number of operators are testing the waters of moving to rates exclusive business models in order to survive.

The issue stems on a case of who is considered to “actually” be in occupation, or who is “actually” in control of an individual office on a day to day basis. Is it the client, or is it the operator?

Depending on which one it is, could change you Rates bill by a pretty shocking amount.

Research from Compton indicates that in some areas, such as Clerkenwell and Farringdon, this difference, combined with the impending revaluation, could lead to an operators Business Rates increasing by over 100%, pretty much overnight. And that’s ignoring the backdated liability!

How can corridors make such a difference?!

On paper, the change is mundane, but the unintended consequences of this action are huge.

In reality, this means:

1. The operator is paying on up to 25% more space

2. The operator loses all reliefs (Empty and Small Business Rates)

3. The building is subjected to the larger multipliers

4. There will be limited, or no, relief going into the 2026 revaluation

While much of the industry is unaware of these risks, it has never been more important to plan ahead and understand your risks.