Heathrow Airport –
Property Rents 2014/15
Consultation Document
Date: 6 August 2014
Prepared By: Heathrow Airport Limited
Status: Final
Heathrow Airport Property Rents Consultation
Heathrow Property Rents 2014/15
1.0 Introduction
1.1. The purpose of this consultation document is to set out Heathrow’s proposal for the level of property rents for 2014/15 and invite the Heathrow community to provide views on the proposals.
2.0 Heathrow Property Rents 2014/15
2.1. Heathrow consults every year with the Heathrow community on setting levels of rent from 1st April.
2.2. Heathrow is proposing to increase property rents for 2014/15 in line with the Guide Price formula and to add Terminal 2 to the Guide Prices. The details are set out in Schedule A. The final published Guide Prices will take effect from 6th April 2014.
3.0 Consultation Programme
3.1. Heathrow is inviting comments from the Heathrow property customers on the proposal so that these can be considered when we make our final decision.
3.2. A consultation meeting will be held w/c 1st September 2014 the closing date for written comments is 15th October 2014. Heathrow will then announce the final level of property rents by the 29th October 2014.
3.3. The reason for the start of the consultation after the start of the Guide Price year on 1st April is due to the late availability of the IPD data for the rents formula. The consultation period of twelve weeks has been chosen to enable a reasonable period for consultation and the Guide Prices to be published as soon as possible following the release of the IPD data.
3.4. The publication of this consultation paper on 6th August 2014 is the start of our consultation on the annual setting of property rents for 2014/15.
3.5. The consultation programme is as follows:
Date / Milestone6th August 2014 / Heathrow publish consultation letter on Heathrow 2014/15 rental proposals
w/c 1st September 2014 / Consultation meeting
15th October 2014 / Property customer written responses due
29th October 2014 / Heathrow publishes 2014/15 rents effective from 1st April 2014
1.0
2.0
3.0
4.0
4.1.
4.2.
4.3.
4.4.
4.5.
4.6. Any party wishing to comment on the proposal must submit responses in writing. Written responses should be sent to:
4.7. Alternatively, written comments may be posted to the following address:
Guide Price Rents 2014/15 Consultation
Heathrow Property Department
Heathrow Airport Ltd
The Compass Centre
Nelson Road
Hounslow
Middlesex
TW6 2GW
4.8. If you have any questions on the consultation document please contact Heathrow Property on the above e-mail address.
SCHEDULE A
1.0 Background – Property Rents at Heathrow
1.1. Since 1996 Heathrow has had a list of published Guide Prices. The Guide Prices are either a band or spot rent for the majority of standard property products.
1.2. Since 1996 the Guide Prices have been adjusted by the percentage change in a rental formula, which is applied annually to the Guide Prices once consulted with the AOC Rents Group.
1.3. Following consultation the tariff rents were simplified in 2008 and the formula has evolved since it was first introduced.
1.4. The components of the current formula, revised in 2002, are as follows:
1.4.1. Passenger Numbers.
1.4.2. Retail Price Index.
1.4.3. Investment Property Databank (IPD) Annual Property Index – the average of Central, Outer and West of London Office Indices (see Appendix 1 for the geographical area).
1.5. The formula gives equal weighting to each component.
1.6. The formula seeks to provide consistent growth flattening the peaks and troughs associated with the external property market. This can be seen in the attached graph at Appendix 2.
1.7. Desk licence fees are reviewed biennially also using the Guide Price formula, they are also reviewed in 2014.
2.0 2014/15 Rental Proposal
2.1. Heathrow is proposing to increase property rents for 2014/15. A full schedule of the proposed rents is attached at Appendix 3. A schedule of the 2013/14 rents is attached for comparison purposes at Appendix 4.
3.0 2014/15 Rental Calculation
3.1. The rental formula has produced an overall increase of +3.15% for 2014, the calculation is set out in Appendix 5.
4.0 Terminal 2
4.1. The rents for Terminal 2 were previously consulted upon and a copy of the consultation decision document is attached at Appendix 6.
4.2. The rents for Terminal 2 are being added to the 2014 Guide Prices in line with the implementation plan set out in the decision document.
4.3. The decision document describes the process for calculating the Terminal 2 rents. The rents in the T2 consultation were at 2011/12 prices, and the rents for Terminal 2 have a 4% discount applied until certain infrastructure items are delivered. To date the infrastructure remains to be completed and the 4% discount applies for 2014/15.
4.4. A table setting out the change in T2 rents from 2011/12 is set out in Appendix 7.
APPENDIX 1 – IPD Index Geographical Areas
APPENDIX 2 – Graph of Historic Changes in the Rental Formula Components
APPENDIX 3 – Draft 2014/2015 Guide Prices
APPENDIX 4 – Guide Prices 2013/14
Heathrow Airport Rental Guide Prices - Effective from 1st April 2013Rent £ / sq ft / Rent £ / sq M
Min / Max / Min / Max
Terminal 1
Second floor office / £64.48 / £694.08
CIP / £72.57 / £781.10
Piers - standard ramp / £36.28 / £42.95 / £390.49 / £462.33
Piers - first floor / £37.73 / £44.41 / £406.14 / £477.98
Terminal 3
North Wing / £58.04 / £624.79
South Wing / £64.48 / £694.08
East Wing / £62.40 / £671.72
Departures ground floor R/O check-in / £49.35 / £531.16
Departures ground floor off back corridor / £43.53 / £468.59
Infill Offices / £64.48 / £694.08
CIP – Departures / £72.57 / £781.10
CIP – Arrivals / £68.92 / £72.57 / £741.82 / £781.10
Piers - standard ramp / £36.28 / £42.95 / £390.49 / £462.33
Building 820
First and Second Floor / £51.62 / £555.61
Ground Floor / £54.42 / £585.74
Bays / £33.83 / £364.19
D'Albiac House
Bays / £30.45 / £327.81
Offices (Outer offices) / £46.74 / £503.07
Offices (Inner offices) / £45.43 / £488.97
Terminal 4
NE Extension, Balcony / £64.48 / £694.08
Departures rear of check in / £49.35 / £531.16
Mezzanine airside / £46.45 / £499.99
Standard ramp / £36.28 / £42.95 / £390.49 / £462.33
CIP / £72.57 / £781.10
Terminal 5
CIP - T5A / £79.81 / £859.08
CIP - T5B/C / £75.83 / £816.21
T5A - Landside offices/support accom / £69.96 / £753.06
T5A - Airside offices/support accom / £57.53 / £619.23
T5A - Airside apron level support accom (Ramp) / £45.11 / £485.51
T5B/C - Airside offices/support accom / £54.79 / £589.80
T5B/C - Apron level support accom (Ramp) / £44.03 / £473.92
Desk Frontage Rates - All Terminals
Check-In / £504.69 / £1,655.78
Sales and Reservation / £1,044.92 / £3,428.16
Transfer / £504.69 / £1,655.78
Information / £774.81 / £2,541.99
Unless otherwise stated:
The Rents are exclusive of Maintenance Rent and Heating Rent or Service Charge
All rents (except CIP) assume measurement based on net internal area
A discount of 10% is given for No Natural Light, unless all the accommodation in the category has no natural light
Where there is a price range, actual charge will be based on the overall quality and location of accommodation.
Typically, new build will be at the top of range.
APPENDIX 5 – 2014 Rental Formula Calculation
2012 / 2013 / % ChangePassenger No.s (1) / 69,984,868 / 72,332,919 / +3.36%
Retail Price Index (RPI) (2) / 246.8 / 253.4 / +2.67%
IPD Annual Property Index (3) / (3) / (3) / +3.42%
Average % Change / +3.15%
Notes:
1. Passenger numbers for the preceding year, January – December.
2. Retail Price Index (RPI) (All Items) – Index figure for December of the preceding year.
3. Investment Property Database (IPD) Office Rental Value Growth for the preceding year.
2012 / 2013 / % ChangeCentral London / 210.5 / 222.2 / +5.56%
Outer London / 175.4 / 181.8 / +3.65%
West of London / 131.3 / 132.7 / +1.07%
Average / +3.42%
APPENDIX 6 – Terminal 2 Property Rents, Decision Document
Heathrow Airport
Terminal 2 Property Rents
Decision Document
Date: 14th February 2013
Prepared by: Heathrow Airport Limited
Status: Final
7
Contents
Executive Summary Page
Chapter Page No.
1. Introduction and Consultation Programme 4
2. Review of Responses and Decision 6
3. Implementation Timescale 12
Annexes
A. Terminal 2 Guide Prices (2011/12 prices)
B. List of respondents
Executive Summary
· Heathrow Airport Ltd (Heathrow) commenced its consultation to set Property Rent Guide Prices for Terminal 2 on 26th May 2011. The proposal was to set Property Rent Guide Prices for Terminal 2 at the same level as Terminal 5.
· Heathrow has decided that it will revise the Guide Prices for Terminal 2 to take into account some terminal infrastructure not being available from the expected opening date.
· Heathrow’s decision was informed by user consultation meetings, bilateral meetings with users and written responses to the proposal. The consultation meetings were held on 3rd June 2011, 20th July 2011, 7th October 2011 and 27th April 2012.
· Heathrow received eight written user responses to the consultation.
· The Guide Prices for Terminal 2 will be effective immediately for rental discussions with ingoing occupiers and will be added to the annually published Guide Prices with effect from 1st April 2014 in the proposed year of opening.
Chapter 1
Introduction and Consultation Programme
Purpose
1.1 Heathrow proposed Property Rental Guide Prices for Terminal 2 for consultation and the purpose of this document is to set out Heathrow’s decision following consultation.
1.2 The schedule of Guide Prices is contained in Annex A.
1.3 The Guide Prices for Terminal 2 will be effective immediately for rental discussions with ingoing occupiers and will be added to the annually published Guide Prices with effect from 1st April 2014 in the proposed year of opening.
Background
1.4 Since 1996 Heathrow has had a list of published Guide Prices. The Guide Prices are either a band or spot rent for the majority of standard property products. As new Terminal infrastructure is developed or demolished the schedule of Guide Prices is amended to reflect the changes in infrastructure.
1.5 As part of the engagement with occupiers of the new Terminal 2, Heathrow has consulted with all property users over the level of rents for the new property space.
Consultation Programme
1.6 The consultation process was launched on 26th May 2011.
1.7 Heathrow initially requested written responses by 30th June 2011; however this was later extended to 14th September 2011.
1.8 The Consultation programme Heathrow has followed is as follows:-
Table 1
Date / Event26th May 2011 / Heathrow published Consultation document
3rd June 2011 / Consultation meeting
10th June 2011 / Consultation document addendum issued – Extension of time for user feedback
20th July 2011 / Consultation meeting
19th August 2011 / Consultation document addendum issued – Further information on how Terminal 5 rents were assessed
14th September 2011 / Written responses due from users
7th October 2011
27th April 2012 / Consultation meetings
Further Information
1.9 This document informs all users of Heathrow’s decision and concludes this Consultation on Property Guide Price Rents for Terminal 2.
1.10 If you have any questions on the decision please contact:
Heathrow Property Department
Heathrow Airport Limited
M.1.S
The Compass Centre
Nelson Road
Hounslow
Middlesex
TW6 2GW
E-mail:-
1.10.1 The following chapters in this document set out the comments raised by users and the solutions discussed prior to Heathrow making a final decision.
Chapter 2
Review of Responses and Decision
2.1 There were eight written responses to Heathrow’s proposal, a list of responders is contained in Annex B.
2.2 In this chapter we set out the proposals and give a brief summary of the points made by the respondents. We then go on to consider those responses and set out Heathrow’s decisions on the proposal.
Objectives
2.3 Establish property rent guide prices for Terminal 2 for assimilation into the Heathrow Property Rent Guide Price regime with effect from 1st April 2014.
2.4 Maintain consistency between guide price rents across the Heathrow estate.
Proposal
2.4 All standard terminal accommodation at Heathrow has property rents listed on the guide price schedule.
2.5 The proposal for Terminal 2 was to apply the same level of rent as applied to Terminal 5. This proposal applied the existing level of rent for Terminal 5 which represents a benchmark for new terminal infrastructure.
Responses
Set out in the attached table is a summary of the user responses and Heathrow’s assessment.
Property User Responses / Heathrow Assessment1. / Heathrow should maintain rental relativities between old and new terminal estates and assimilate into the guide price structure. / The principle of charging a higher level of rent for new terminal infrastructure was established when Terminal 5 rents were assessed. Heathrow agrees that rents should be assimilated into the Guide Price structure.
2. / A comparison of operational infrastructure between T1/3/4 with T5 and T2 shows T2 is inferior to T5 for the following reasons:-
1. surface access,
2. passenger car parking,
3. crew screening. / There are differences between T5 and T2 in terms of surface access, however there is no material difference in the availability of road and rail services. T2 will have a multi-storey car park, access to business and long stay car parking products. The reference to the difference in crew screening in T5 was to a dedicated crew facility, this is a separate facility funded by British Airways for their own staff.
3. / There are operational constraints with T2 phase 1 i.e.
1. No Track Transit System (TTS) between T2A and B
2. No new departures baggage system until phase 2,