The Valuation Office Agency (VOA) is responsible for valuing all business properties in England and Wales, including petrol stations.
With over 7,000 stations registered in England and Wales, they play a big role in the daily lives of commuters and communities. Alongside supplying fuel, they are important hubs for a range of services including retail, ATMs, car washes, and even postal services.
Our valuation method
We value petrol stations using the rental comparison method. This means that a property's rateable value is calculated based on its rental value. Specifically - the annual rent it could reasonably be expected to generate at a certain date (this is known as the Antecedent Value Date, or AVD).
When valuing a property, the best evidence we look for is rents that have been agreed around the AVD. However, the rent paid on a petrol station may not always reflect its true market value. This is because some contracts include conditions that affect the rental price.
For example, some contracts may require the tenant to purchase petrol exclusively from a specific oil company. The oil company benefits from guaranteed fuel sales. In return, they may offer the tenant a rental price that is lower than what the petrol station would be worth on the open market.
To account for these factors, we need to look at other evidence that helps us to understand what a property is worth on the open market. The measure we use for petrol stations is Fair Maintainable Trade (FMT).
Fair Maintainable Trade (FMT)
FMT simply means the earning potential of a property – so what an efficient operator could expect to turnover.
We use the concept of ‘earning potential’ rather than actual trade, as for some types of property the level of trade could be deceptive. For example, if a pub was run by a celebrity, it would probably generate more trade than if Joe Bloggs ran it. As we value property – not business models – we need to make sure our valuations are based on what a reasonably efficient operator could earn.
However, unlike properties such as pubs, the FMT of a petrol station is usually very similar to its actual trade.
We consider trade information because it helps us to understand what a reasonable rent would be. This is because prospective tenants will be aware of the trading potential before signing a lease and will factor this into the rent they are willing to pay.
Calculating Fair Maintainable Trade (FMT)
We work out FMT by considering income from various revenue streams, including fuel sales, shop sales and car wash services.
We consider the specifics of the petrol station, like its design and location, because this will impact its revenue. For example, a modern petrol station on a busy road with a range of facilities will achieve better trade than one that is older and in an area with low traffic.
The VOA also works closely with the petrol station industry to stay up to date on trends and practices that could affect a site’s trading potential. For example, we consider the pricing policies of individual petrol stations and request trade information from operators directly.
So, petrol stations are valued by calculating the annual rent they could realistically generate on the open market. In simple terms - if a petrol station has a high earning potential and turnover, it is likely to be able to achieve a higher rent and will therefore have a higher rateable value.
Agreeing our approach with industry experts
Our approach to valuing petrol stations has been established in collaboration with industry experts, including the Petrol Retailers Association (PRA) and Fuels Industry UK.
We have recorded a webinar with the PRA, which goes into more detail about how petrol stations are valued for business rates. You can watch this on our YouTube channel: https://youtu.be/B7YBvPqyP10
We also outline our approach in full in our Rating Manual. We use recognised valuation methods approved by the Royal Institution of Chartered Surveyors (RICS).
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