Business rates revaluation 2026: What serviced office operators need to know

While the headlines positioned the Budget as a win for business, the detail reveals a more mixed picture. For flexible workspace operators in particular, understanding the nuances will be essential.

Understanding the budget impact 

Labour came into office promising to simplify business rates. This Budget doesn’t quite deliver on that yet—in fact, some of the new measures make the system more complicated rather than less. That said, several changes do signal an intention to reshape the way the tax is applied and to support smaller businesses.

The most visible announcement was a reduction in the business-rates multiplier. This initially feels positive, but it must be seen in context: rateable values for many offices are rising, in some cases significantly. In practice, this means that even with the lower multiplier, many occupiers are likely to see their rates bills increase from next year.

A new set of rateable values: what it means for serviced offices

Serviced offices are generally valued in line with the wider office market, which has continued to recover strongly post-Covid. That recovery is clearly reflected in the new draft rateable values:

Average office increases of 14% across England and Wales.

Standout uplifts in key cities, including:

• Cambridge: +50%
• Leeds: +38%
• Edinburgh: +35%
• Birmingham: +29%

And in London, some high-performing submarkets:

• Paddington: +31%
• Midtown: +25%
• West End: +23%

While rising rateable values bring cost pressures, they also reflect a market that has rebounded, reaffirming the importance of office space—particularly flexible, ready-to-use environments.

The valuation shift creating uncertainty

Perhaps the most impactful development for serviced offices is the Valuation Office Agency’s (VOA) evolving interpretation of how these buildings should be assessed.

Traditionally, each suite within a serviced office is given its own rateable value. This approach is well established and offers several practical benefits:

• A generally lower overall rateable value due to the exclusion of common areas
• Eligibility for small business rates relief on many suites
• Ability to claim empty rates relief when suites are vacated
• Straightforward cost allocation within all-inclusive licences

However, the VOA is now reviewing some centres with the view that the entire building should instead be treated as a single assessment. This has already started in certain cases and can be backdated to April 2023.

A single assessment can result in:

• Loss of small business relief
• Loss of empty rates relief
• Higher aggregate rateable values
• Exposure to the supplement applied to larger properties

It also introduces complexity for operators who structure their offers around inclusive pricing. Unsurprisingly, this has created concern across the sector.

While it is a challenging development, it is important to recognise that operators still have options, particularly around how they structure their licence agreements. Adjusting these agreements to better reflect occupiers’ security of tenure can help support the case for individual suite-based assessments.

Is the new approach a fair reflection of how serviced offices work?

Based on the sector’s response, the emerging approach does not yet fully capture the realities of serviced office occupancy. It is likely to remain a point of discussion, and possibly dispute, in the years ahead.

That said, there is precedent for Government intervention where valuation changes create disproportionate effects. We have seen this before in sectors such as ports, TV studios and mainstream offices. If the new approach creates significant structural pressure for operators, there is scope for legislative correction.

What will this mean for occupier demand?

Despite the complexity of the new rating environment, the fundamental demand drivers for flexible workspace remain strong.

At a time when the overall cost of occupying an office is rising—across energy, service charge, fit-out and now business rates—many businesses will continue to value the convenience and predictability of an all-inclusive serviced office model. This is especially true for SMEs, startups and project teams looking to avoid capital expenditure or long-term commitments.

The main question for operators will be how to manage and communicate any changes to costs if valuations shift from individual suites to a single assessment. With clear communication and careful modelling, operators can continue to keep their offer attractive and competitive.

Regional variations

One interesting trend is that increases in rateable value are often higher in regional cities than in London. Although certain London submarkets have seen strong growth, the average increase across the capital is around 13%, translating to an estimated 6% uplift in average rates liability once the lower multiplier is applied.

Conversely, cities such as Cambridge, Leeds and Edinburgh are experiencing much more pronounced rises. This will shape operator strategies region by region, but it also highlights the strength of these markets as hubs for research, innovation and enterprise.

Practical steps operators can take now

There are constructive actions serviced office providers can begin taking immediately:

1. Review licence agreements carefully

Making sure agreements are drafted in a way that supports individual assessments is key. The degree of control retained by the operator—such as the ability to move occupiers between suites—can influence the VOA’s view.

2. Get ahead of valuation changes

With some alterations already being backdated, early analysis of draft rateable values and potential challenges is essential.

3. Model both valuation scenarios

Understanding the financial implications of individual vs. single assessments will support decision-making around pricing, occupancy strategy and customer communications.

4. Take advantage of transitional relief where available

The relief system is more generous for smaller assessments. How a property is valued will have a material impact on access to these protections.

Looking ahead: what additional support would help the sector grow?

Should the VOA’s new approach create long-term pressures, the Government has the tools—and the precedent—to step in.

Looking forward, greater clarity around valuation methodologies, alongside targeted reliefs where appropriate, would help ensure the workspace sector can continue to expand and support business growth across the UK.

This Budget introduces a period of adjustment for serviced office operators. While the changes are complex, they don’t diminish the strong fundamentals underpinning demand for flexible workspace. With proactive planning—particularly around licence structures and valuation strategy—operators can navigate the new environment with confidence.

For more advice, please contact the Business Rates team.