Owners of London’s prime commercial buildings could soon be hit with a double-whammy of business rates increases as legislation kicks in next April, with the exact increase likely to be confirmed in November’s Budget.
Jonathan Young, partner and business rates expert at leading property consultancy Fisher German, has urged landlords in the capital to take action ahead of time.
The clock is ticking for owners of London’s most valuable office buildings and warehouses. Next April, a perfect storm of tax reform and revaluation will land on the commercial property sector, and it could dramatically alter the financial landscape for prime office and industrial landlords.
When the Non-Domestic Rating (Multipliers and Private Schools) Act 2025 received Royal Assent earlier this year, it confirmed the way business rates are calculated will change.
From April 2026, properties in England with a Rateable Value above £500,000 will be subject to a higher business rates multiplier. The exact rate will be confirmed in the Autumn 2025 Budget, but these more valuable properties may have to pay up to 10p in the pound more than properties with a Rateable Value below £500,000.
In central London, where Grade A and A+ offices dominate the skyline, the implications are stark. Most of these premium assets already exceed the £500,000 threshold, and when combined with the upcoming 2026 Rating Revaluation, due to take effect the very same day, many landlords will find themselves facing an unavoidable double hit.
The situation is even more bleak for industrial landlords who have been fortunate to experience rental levels skyrocket, in some areas of London more than 50 per cent between 2023 and 2024, but this ultimately means that they are likely to see even larger increases in business rates than the office market.
The revaluation will reflect rental levels as of April 2024, capturing a market that has been buoyed by the post-pandemic ‘flight to quality’. As occupiers chase sustainability credentials, wellness standards and connectivity, warehousing and Grade A office rents have risen sharply. That means higher rateable values, and, under the new rules, those higher values will attract a steeper multiplier.
Together, the two changes create a compounding effect that could see annual business rates bills climb significantly across London’s core markets.
Landlords are now faced with a difficult outlook. Higher costs for tenants may depress demand or push occupiers to downsize or re-locate, while rising operational expenses could squeeze yields.
The Government’s stated aim is to make the system fairer by asking those with the most valuable assets to contribute more to public finances. But in practice, central London will shoulder most of the burden.
Offices across the West End, the City, Docklands and other fringe locations are expected to breach the threshold, and while there will be little escaping the threshold for the industrial market, warehouses in areas in Slough and North London are some of those which have seen the most significant increases in rent. This leaves landlords exposed to some of the largest increases in the country.
This could test London’s global competitiveness. For international tenants weighing up relocation options, the prospect of having to pay higher rates might influence decision-making, particularly when coupled with elevated energy, fit-out and service charge costs.
Despite the coming changes, landlords are not powerless. The period between now and April 2026 offers a crucial opportunity to prepare.
The draft 2026 Rating List is expected later this year, giving property owners a chance to review and, if necessary, challenge their assessments before liabilities are confirmed.
Landlords should also be revisiting lease structures to ensure exposure to rating volatility is managed appropriately and working with rating advisers to model forward liabilities. Understanding the potential impact on yields, voids and rent negotiations will be key to maintaining investment performance.
At the same time, the ongoing flight to quality suggests that the best buildings, those delivering strong ESG performance, energy efficiency and wellbeing credentials, will continue to attract a premium. In this environment, strategic reinvestment may be the most effective defence.
For landlords of London commercial buildings, the coming reforms mark a decisive moment. The combination of revaluation and rate supplement is not just an administrative change; it is a fundamental shift in cost dynamics that could reshape London’s commercial market.
Those who act early by checking assessments, planning ahead and engaging specialist advice will be best placed to weather the storm. The countdown to April 2026 has already begun, and landlords will need to be ready.
