Theatres, concert halls and opera houses
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section covers theatres, concert halls and opera houses.
1.1 Theatres
Most theatres may be categorised as one of the following types:
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theatres of any age run as commercial enterprises without public subsidy and which depend on productions playing largely to full houses. This includes West End theatres in London, with some enjoying the benefit of a considerable history.
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large, traditional theatres in the centre of large conurbations. These may suffer from superfluity and age, with high costs of upkeep and generally have difficulty in surviving. Subsidies are required.
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large, traditional theatres in smaller towns and cities. The problems met in the previous type (b) are exacerbated.
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smaller theatres of any age in county towns (or similar), where competitors, if any, have disappeared. The major theatres in this category may break even; the smaller theatres require greater subsidies in order to survive.
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post-war theatres, purpose-built where a demand was perceived; again these may need assistance to survive.
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theatres in seaside resorts, in other holiday centres or in “educational” centres. These inevitably are a “mixed bag”, the success of which largely depends upon the extent of competition, either from other theatres or other attractions.
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purpose-built civic theatres - occupied by local authorities, sometimes described as, or included in, arts or other cultural centres or forming an integral part of a civic centre complex (of offices, library, etc.). Local authorities often build these prestige properties having regard to the fact that the cost of providing such cultural amenities almost always results in operational deficit.
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as for the previous type 7 but where the local authority has relinquished paramount control to a private body. Such bodies may pay a rent to the local authority, or alternatively may receive a grant. In some instances the tenant may pay rent to, and receive grant from, the authority.
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small theatres operated by clubs, guilds etc. Typically these are in converted warehouses, churches, etc., and are used by amateur players and repertory theatre companies.
1.2 Concert halls and opera houses
Most concert halls and opera houses are owned by local authorities, although a few are run as a commercial enterprise by private undertakings, providing facilities for short-term hire, while others may be owned and occupied by trusts who may have charitable status.
Concert halls and opera houses tend to be located towards the centre of towns and cities, varying in character from Victorian buildings of excessive height and embellishment to modern, compact, well-planned halls.
Demand for the use of concert halls and opera houses varies considerably and most are able to remain in use only by the support of grants from local authorities or other public bodies.
Difficulties may be encountered in differentiating some concert halls from other classes of hereditament, notably public halls and conference and exhibition centres.
If it is not clear whether the hereditament is a theatre, concert hall or opera house as opposed to a public hall (see Rating Manual: section 5a), the following points should be considered:
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the presence of a permanent box office and a programme of events open to the general public will tend to indicate that the property should be regarded as a theatre or concert hall.
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if the auditorium has permanent seats, in particular raked seats, it is more likely to be regarded as a theatre or concert hall than if it has a level floor with no fixed seating.
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where the hereditament is used wholly or mainly as a venue for musical or theatrical performances it will tend to be considered as a concert hall or theatre, as appropriate. Where it is used for a wide range of cultural educational, political and/or sporting activities not utilising the stage the hereditament may be regarded as a public hall.
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where the use is predominately from let outs, particularly involving music and dancing such as wedding receptions, horticultural shows, etc. it will tend to indicate the property should be regarded as a public hall.
1.3 Further information
A further source of information for this class of property is the Internet with sites such as - http://www.solt.co.uk/, uktw.co.uk, the stage webguide its-behind-you.com, and its-behind-you.com providing details of many theatres complete with photographs, pictures, history, seating plans, etc. Larger theatres and concert halls will often have their own web site.
Primary description code: LT3
List description: theatre and premises
Scat code: 279 theatres (including properties used both as a theatre and concert hall) - Suffix S
Primary description code: LX
List description: concert call and premises
Scat code: 070 concert halls (including opera houses) - Suffix S
A public hall in local authority occupation, or community centre of superior specification adequate as a venue for professional theatrical or musical entertainment, and regularly (but not necessarily exclusively) so used, should be described as a theatre or concert hall, and given the appropriate Scat code. The valuation approach should be in accordance with the guidance contained within this section.
These are specialist classes of property, to be valued by the National Valuation Unit.
The Class Co-ordination team has overall responsibility for the co-ordination of these classes. The team is responsible for approach, accuracy and consistency of valuations. The team will deliver practice notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers and referencers have a responsibility to:
* follow the advice given at all times
* not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
* seek advice from the co-ordination team before starting any new work
5.1 Planning
Theatres in England and Wales which are in theatre use are “sui-generis” within their relative Use Classes Order. This means that theatres are not in any use class and any change of use from theatre to any other use requires planning permission. Concert Halls/Opera Houses fall under category “D2” of the Use Classes Order. A mixed use with “A3” permission will be required if food and drink are to be offered for consumption on the premises.
5.2 Theatre licence
Operators are required to obtain a single licence from the local authority. The 2003 Licensing Act removed the requirement for theatres to have a Public Entertainments Licence. Instead, plays, live music and dance are categorised as a ‘licensable activity’ under the act and organisations need to apply for a Premises Licence from their local licensing authority.
5.3 Fire prevention
Before premises open their doors to the public a Fire Safety Risk Assessment must be carried out.
5.4 Health and safety
A local authority’s rules relating to premises licences do not in any way replace or reduce the underlying statutory duty of employers to comply with the Health and Safety at Work etc. Act 1974. This legislation requires, amongst other things, an assessment of the risks to staff, patrons and others who may be affected by their business and identification of measures required to control or avoid the risks. Local authorities are responsible for monitoring compliance with this legislation, usually through their Environmental Health Services. Safety certificates required may include mechanical and electrical, ceiling, heating and ventilation and various insurances which must be kept up-to-date as a condition of a Theatre Licence and an operational building.
5.5 Sale of alcohol
The Premises Licence can extend to the sale of alcohol. Typically this will permit sales in bar/restaurant facilities only. If an operator wishes to allow customers to take alcohol into the auditorium a further extension will be required. Additionally the operator will need a Personal Licence. See Rating Manual: section 6 part 3 - section 825 - public houses, for more detail on licensing.
The preferred basis of measurement will depend on the type (age and layout, etc.) of property being valued and measurements may need to be taken for both a net internal area (NIA) and a gross internal area (GIA) to be calculated, as defined in the VO Code of Measuring Practice for Rating Purposes.
Referencers will need to consult with the relevant Specialist Valuer before inspection.
It is important for referencers to identify the number of seats in the auditorium areas. This should include details of the number of restricted view seats, spaces for wheelchairs and carers and any additional auditorium seats that may be contained within the hereditament. A seat location plan including any details on the pricing structure for different areas of the auditorium is also useful information.
The survey should also note the following information: use and type of premises, age, construction, services (including heating and/or air-conditioning), whether recently refurbished, size, type and layout of stage, orchestra pit, area in front of stalls, type/extent and quality of ancillary facilities (including seated/licensed capacity of function rooms), parking, location, transport links, and competing or complementing leisure attractions in the area.
All inspection notes, checklists, plans and other relevant material should be captured in EDRM. Photographs should be placed in RSA.
8.1 Rental method
The preferred method of valuation is one based on rental evidence.
However, the majority of theatres/concert halls are not generally the subject of a fully “arm’s length” rent and so there is unlikely to be a wealth of evidence of genuine lettings on terms that can be usefully analysed for rating purposes. The evidence that does exist should form the basis of arriving at a level of value for the wide range of building types.
This evidence should be subjected to careful consideration as to whether a market rent is being paid. A local authority may let a theatre, concert hall or opera house at below market value to ensure its continuing use as a service to the community, in order to reserve the right to use the hereditament for its own purposes at certain times or to reduce its current expenditure/subsidies in running the property.
Rents of theatres and concert halls often include non-rateable items such as furnishings and equipment, and where this is so an appropriate sum should be deducted in adjusting the rent to terms of rateable value.
Adjusted rents should be analysed to provide a comparison on a price per seat, as this has traditionally been the method used for central London theatres and this practice now extends throughout England and Wales.
The total number of seats should be the total of the number of theatre seats, including spaces reserved for wheelchair use, and the capacity of any function rooms in a seated format.
When comparing levels of value, this should be done by consideration of the level of rateable value per seat.
To assist in determining a particular theatre’s position in the hierarchy of values, regard may be had to gross receipts.
Firstly a varying percentage (2% to 10%+) should be applied to the various income streams that contribute to the gross receipts from all sources (including any subsidies) and then the outcome should be devalued to a price per seat. Comparison of this with established levels of value at other theatres and consideration of relative advantages and disadvantages, will provide a steer to where the subject theatre should be placed in the order of things.
The percentage adopted for each income stream reflects the fact that income from all sources is an imperfect tool due to differing income streams having different values to the occupier.
The differing income streams are as follows:
a) box office ticket sales these involve high risk of gain and loss and the expense of production. This is due to the four ways a theatre, concert hall or opera house can arrange for a production to be shown at their venue.
The first way is where the company undertaking the production simply rents the venue and bears all the risks - this is relatively rare.
The second way is where the venue guarantees the production company a certain return and anything over this amount is profit for the venue, but conversely if the production does not reach this level the venue has to meet the shortfall.
The third way is for the venue and the production company to agree a percentage split of the profits The final way is for the profits to be shared on a “slice” basis, with, for example, the first £10,000 going to the production company, the next £20,000 going to the venue, the next £20,000 to the company and so on.
b) catering (food and drink) this can be a profitable income stream when on a large enough scale
c) hall/room hiring to others this is a secure and low cost income stream
d) grants and subsidies this can be cash grants or support services from various local authority departments.
8.2 Receipts and expenditure method
The main motive for the operation, other than theatres described as type (a) in paragraph 1.1 above, is to fulfil a social benefit rather the maximisation of profit. This motive leads theatres, concert halls and opera houses to offer a wide variety of events including those for minority audiences and those at concessionary admission rates to benefit the community as a whole.
There are few commercially run theatres outside London and some of these may be heavily subsidised by the London theatres. It is rare for a theatre, concert hall or opera house to do more than break even. A valuation using the receipts and expenditure method is therefore thought unlikely to produce a positive divisible balance or a realistic valuation.
For type (a) theatres, where no rental evidence exists and the theatre is being operated as a fully commercial enterprise with the prime motive to make a profit, consideration may be had to a receipts and expenditure method of valuation, but there must be a final stand back and look view at the answer in order to see whether this fits into the pattern of other assessments.
When examining figures for ancillary income, such as bar, kiosk or restaurant receipts, it must be clear whether these are gross or net. In many cases, net receipts from these sources are shown.
8.3 Contractor’s basis
The contractor’s basis should be regarded as the only available method for theatres, concert halls and opera houses occupied by local authorities that form part of larger hereditaments providing a range of civic amenities that are not operated for profit.
8.4 Valuation considerations
8.4.1 Grants
Outside the West End of London, most theatres, concert halls and opera houses depend upon subsidies from local and/or central sources. Modern properties will almost certainly have received grants to enable building. Most receive operating subsidies. Many local authorities make up trading deficits at the end of the year.
Grants and subsidies that are received on a regular annual basis should not be left out of account, on the assumption that such sums would be likely to be available to the hypothetical tenant. Where rental evidence derives from a hereditament where the landlord provides an operating subsidy it should be treated with caution.
8.4.2 Other factors
Other factors that need to be considered when valuing theatres, concert halls and opera houses include the stage design, including its shape, size and any limitations, the orchestra pit and the flexibility of space in front of the stalls, the standard of ancillary accommodation, occupancy rates and local competition from other theatres and concert halls, and from other leisure activities as well.
All valuations should be entered onto the Non-Bulk Server (NBS) under the relevant Scat Code.
Additional support is available through:
- Survaid
- Class Co-ordination team
1. Market appraisal
1.1 The theatre industry has always been split between the more commercialised theatres in the West End, known as ‘Theatreland’, and the rest of the country, this is something that continues into the 2023 Rating List.
1.2 The 12 months leading up to Antecedent Valuation Date (AVD), 1 April 2021, was dominated by the COVID-19 pandemic. However, this market appraisal reflects the whole period since April 2015.
1.3 The calendar years 2015 to 2019 have seen increasing revenue for both West End and UK theatre in general. According to SOLT (Society of London Theatre) London’s West End theatres achieved a gross revenue of £799 million in 2019, which is a 20.8% increase from 2015. The increase in total audience numbers during this period is a more modest 3.8% from 14.75 million in 2015 to 15.32 million in 2019. However, 2019 saw record capacity levels reaching 81% of available seats.
1.4 Prior to the start of the COVID 19 pandemic the volume of attendances at UK theatres totalled an estimated 34.1million in 2019 with an estimated record ticket spend of over 1.3 billion. From 2015-2019 attendances remained almost flat however, there was a 22% rise in the value of box office sales. An increase in revenue of almost £240 million.
1.5 Funding for the arts continues to be a challenge that has a knock-on effect on shows produced and attendances. In recent years Arts Council Funding has been shifting from London towards regional arts organisations, including provincial theatres. This shift in funding can be seen in the current investment of 39.7% being London based compared to 44.2% in the 2015 to 2018 period, itself down from 46.2% in 2012 to 2015.
1.6 By contrast the tax relief scheme launched by the Chancellor of the Exchequer in autumn 2014 has enabled more touring, employment and risk-taking in theatre according to a joint survey by SOLT and UK Theatre. In the first two years of the scheme there were over 60 successful applicants with many saying the scheme had allowed them to be more adventurous and had compensated for reductions in funding from other sources. Applicants were a mix of commercial and not-for-profit organisations, theatres and production companies.
1.7 The COVID-19 pandemic had a major impact on Theatres in the period leading up to the AVD (1 April 2021). Details of the various restrictions implemented by statute in response to the pandemic, and of the vaccination rollout, can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions. Step 1, easing restrictions on outdoor gatherings, had already taken place by the AVD.
1.8 The later three stages of the Roadmap for England included
- the opening of outdoor hospitality, and non-essential retail (Step 2, no earlier than 12 April);
- most legal restrictions on meeting others outdoors to be lifted, opening of indoor entertainment venues such as cinemas, casinos and theatres (Step 3, no earlier than 17 May 2021); and
- the removal of remaining restrictions on social contact (Step 4, no earlier than 21 June)
1.9 Subsequent to 1 April 2021 steps 2 and 3 took place.
1.10 The situation in Wales, both leading up to and after the AVD, was similar although not identical.
Theatre performance in 2020
1.11 Following the first lockdown theatres in some areas were permitted to reopen with limited capacity from the Autumn of 2020 and whilst some reopened some operators took a phased approach in reopening. Theatres were allowed to open with full capacity in July 2021.
2. Changes from last practice note
2.1 There are no significant changes to the last practice note which applied to the 2017 Rating List.
3. Ratepayer discussions
3.1 To date (November 2021) discussions have taken place with representatives of the industry in respect of the West End theatres these are expected to continue prior to 01 April 2023.
4. Valuation scheme
4.1 Approach to valuation
4.2 This scheme should be applied to all 2023 Rating List assessments of theatres, concert halls and opera houses in England and Wales.
4.3 Valuation of theatres is by reference to a price per seat, based on an analysis of rents. Useful comparison may be made by reference to income per seat. As a secondary check, rateable values should be considered as a percentage of total turnover, including deficit funding. Factors such as the proportion of deficit funding and occupancy may assist in achieving a hierarchy of assessments.
4.4 By its nature, the theatre industry can be very volatile and it is therefore essential to consider receipts over a minimum of three years leading up to the AVD in order to estimate the level of receipts for the forthcoming year that a hypothetical tenant might anticipate.
4.5 FMT is an estimate of annual receipts that could be derived by occupying the property and conducting the operation with the skill and expertise that could be reasonably be expected from a potential tenant of the hereditament. This figure will represent the gross annual receipts from all sources (exclusive of VAT).
4.6 The effects of the COVID-19 outbreak need to be taken into account as they would have been anticipated by the parties at the AVD. Trade evidence that includes long periods of lockdowns is unlikely to provide good evidence of the FMT at the AVD. Valuers are advised to take as their starting point the closest reliable trade, which is likely to be the 2019/2020 (ending March or before) trading year and any previous trading years.
4.7 Having established the likely FMT for the 19/20 (ending March or before) trading year, the valuer should then consider any further adjustments needed to reflect the receipts envisaged as at 1 April 2021. The reasonable efficient operator (REO) will take a view not only on the trade immediately achievable at AVD, but the trade over a period of time ahead, as they are assumed to be taking a tenancy with a reasonable prospect of continuance.
4.8 Care must be taken to compare theatres on their physical aspects together with their facilities. Managed theatres may have a different income profile than “normal” local authority / Trust theatres. Such incomes must be either grossed up or examined with the benefit of accounts. Theatres run as commercial presenting theatres should have similar levels of value to comparable theatres where the full production costs are borne and deficit funding is available.
4.9 Theatres in central London (West End and beyond) will have a specific scheme of valuation which is derived from open market rental evidence. Theatres are ranked in a series of groups relative to location and physical characteristics. The seat prices produced in this scheme will assist by acting as a reference point when considering the relative value of theatres across the rest of the country.
5 Treatment of income
5.1 The revenue generated per seat will vary depending on the way the theatre is operated therefore the level of receipts adopted needs to be considered with caution.
5.2 A number of occupiers operate as “presenting theatres”, for example by providing the accommodation to a production company in return for a fee. The production company will normally retain all income from ticket sales out of which will be paid the running expenses of the show. In addition to the fee, the presenting company may also retain all income from ancillary sales, for example bar, restaurant, programmes, etc. The totality of this income is, in effect, net of production costs, the presenting company only being liable for ancillary staff and sale costs, maintenance of theatre, etc.
5.3 The level of fee agreed between the parties is often based on a percentage of the total anticipated ticket (box office) sales over a given period and is likely to vary between productions depending upon a number of factors, including type of show and anticipated running length. Percentages can vary from as little as 10% of gross receipts to more than 50%.
5.4 Alternatively, some occupiers will operate as “producing theatres” where shows are produced in-house by the theatre operator. In this scenario the theatre operator will retain all of the income from ticket and ancillary sales but they will also be responsible for all of the production costs and risk. This will result in a much higher income per seat being generated in comparison to presenting theatres.
5.5 It is therefore vital to consider the type of operation before determining the appropriate percentage of gross receipts that should be adopted. A presenting theatre that is fully let out to a production company would warrant up to 8% of gross receipts to be adopted, possibly higher if the production company pays a flat rental fee and is responsible for all ancillary bar/restaurant revenue and costs in addition to the production revenues. By contrast a theatre that produces all shows in-house will warrant a much lower percentage, possibly as low as 2% for those that specialise in complex productions. It should be noted that there is a spectrum of operating models in the theatre industry and many theatres will be run as a combination of the two models described.
6 Management contracts for local authority theatres
6.1 There is still a trend in the public sector for private companies to be appointed to manage local authority theatres under a Management Contract, whereby a fixed fee replaces the Council’s variable annual liability to deficit funding. This does not seem to be a widening trend and is limited to only a small handful of operators.
6.2 The arrangement carries the benefits of certainty, transfer of staffing costs and repairing liabilities for the local authority. The managing company brings market expertise, central booking and purchasing economies that may not be available to independently run theatres. A rent paid by the managing companies to a local authority under such an agreement is not necessarily at an open market level and the basis of the rent needs to be examined critically. Many of these agreements reserve the right for the local authority, or other community group, to use the theatre/hall for certain days/events such as elections or amateur dramatic presentations. This use should not be reflected as a negative factor in valuations.
1. Market appraisal
1.1 Overview
The theatre industry has always been split between the more commercialised theatres in the West End, known as ‘Theatreland’, and the rest of the country, this is something that continues into the 2017 Rating List.
The theatre industry accounts for £4.5bn worth of spending by tourists each year – more than a quarter of all spending by international visitors – and underpins more than 100,000 jobs across the length and breadth of Britain.
A large proportion of the UK population (76%) has been to at least one theatre show in the three years to September 2013, this includes - (plays, musicals, opera and dance performances) with 63% attending once in the last 12 months of that period, this is more than music concerts (53%) and sporting events (47%). (Source: Ticketmaster September 2013).
Overall London has seen a growth in revenue and attendance and has been the most resilient to the negative economic factors facing the country from 2009 onwards. Away from London, theatre attendance has fallen, the further away from the capital you are the more reliant on public funding productions and local theatres become. Funding for the arts has seen a decline over recent years and this is having a knock-on effect on shows produced and attendances. Discretionary spend outside of the M25 is also another factor to be considered, with the theatre potentially seen as a luxury item.
In 2014 West End ticket sales alone contributed £103,936,067 in VAT to the national exchequer and in London alone Cultural Tourism via the arts contributed £3.2 billion to the London economy in 2013. For Cultural Tourists attending the theatre was the second most popular activity after a gallery or museum visit.
In order to encourage new productions, particularly touring outside of London, a new tax relief scheme was launched by the Chancellor of the Exchequer in autumn 2014 that is designed to provide additional growth to an already successful industry. The scheme will support touring productions involved with plays, musicals, opera, ballet and dance at a rate of 25% for touring productions and 20% for other theatre productions.
1.2. West End
Theatre-going in the West End is well-documented by the Society of London Theatres (SOLT), the trade association that represents the producers, theatre-owners and managers of the major commercial and grant-aided theatres in central London.
A comparison between the years up to the 2008 and 2017 List AVDs shows :
| Year | Attendances | Gross Box Office Revenue |
| 2007 | 13,630,810 | £469,729,135 |
| 2008 | 13,892,460 | £483,349,423 |
| 2009 | 14,257,922 | £504,765,690 |
| 2010 | 14,152,230 | £512,331,808 |
| 2011 | 13,915,185 | £528,375,874 |
| 2012 | 13,992,773 | £529,787,692 |
| 2013 | 14,587,276 | £585,506,455 |
| 2014 | 14,744,887 | £623,616,401 |
Source : SOLT Box Office Data report 2014
Theatre-going attendance figures from 2007 onwards show continued growth in revenue and attendances despite the effect of the economic factors facing the country from 2009 onwards. The number of London theatres has grown from around 40 ten years ago to just under 50 now.
London’s West End has reported its 11th consecutive year of record box office takings
In addition, London theatres will inevitably generate a significant income through ancillary spending in bars and restaurants. The average ticket price paid in 2014 has risen to £42.29 and the industry has continued in identifying and filling potentially unsold seats at discount prices to maximise income streams.
That said, the way that theatre audiences and box office income have increased is a matter of some concern to many, with people pointing to the preponderance of musicals on offer. There is an ongoing debate within the industry about the perceived lowering of artistic content which limits the opportunity to show new and original drama in the larger theatres.
Long-standing musicals are highly popular amongst theatre attendees, with near universal awareness for the Phantom of the Opera (94%), Les Misérables (93%) and the Lion King (92%). They also boast the highest attendance and conversion rates from awareness to attendance.
1.3. Provincial Theatres
Many provincial theatres are reliant on grants or subsidies from public bodies, with the vast majority of theatres run by charitable or not-for-profit organisations. With the economic crisis post 2008 it has been well documented that they have seen significant funding cuts which requires theatre operators to be more cost aware and innovative in securing funding from other sources in order to survive. For example, increased diversification such as live screening of opera and other televised events, stand-up comedy and other community inspired events. Often a cafe/bar has been established in order to generate extra income during the daytime. Some may have evolved into community arts centres.
The wider social and economic contribution of theatres to the local economy is very significant, despite the fact that most, if not all, are technically loss making.
1.4. Funding
Central funding is a vital part of the income of medium to large sized theatres. The Arts Council England (ACE) announced a major review of funding in its investment programme for 2008-2011, which resulted in 185 mainly small arts organisations (not all theatres) losing all their funding and 27 organisations having their funding reduced. Some theatres, predominantly London based enjoy high profile corporate partnerships.
1.5. The Fabric of the Theatre Industry
It is well known that a very high proportion of theatres nationally are listed buildings, for example 38 of London’s West End theatres are listed and therefore are subject to high maintenance costs.
2.Changes From the Last Practice Note
There are no changes from the broad principles followed for the 2010 Rating Lists and the approach therefore is the same.
3. Ratepayer Discussions
To date (September 2015) initial discussions have taken place with representatives of the industry in respect of the West End theatres and these are ongoing.
In that regard, it is still expected that detailed rental schedules are going to be provided by the main operators (or their agents).
4. Valuation Scheme
4.1 Approach to Valuation
For 2017, the primary approach adopted for 2010 should continue. This is valuation by reference to a price per seat, based on an analysis of rents. Useful comparison may be made by reference to income per seat. As a secondary check, rateable values should be considered as a percentage of total turnover, including deficit funding. Factors such as the proportion of deficit funding and occupancy may assist in achieving a hierarchy of assessments.
By its nature, the theatre industry can be very volatile and it is therefore essential to consider receipts over a minimum of three years leading up to the AVD in order to estimate the level of receipts for the forthcoming year that a hypothetical tenant might anticipate.
Care must be taken to compare theatres on their physical aspects together with their facilities. Managed theatres may have a different income profile than “normal” Local Authority / Trust theatres. Such incomes must be either grossed up or examined with the benefit of accounts. Theatres run as commercial presenting theatres should have similar levels of value to comparable theatres where the full production costs are borne and deficit funding is available.
Theatres in central London (West End and beyond) will have a specific scheme of valuation which is derived from open market rental evidence. Theatres are ranked in a series of groups relative to location and physical characteristics. The seat prices produced in this scheme will assist by acting as a reference point when considering the relative value of theatres across the rest of the country.
4.2 West End
The underlying trend is of rental increase in London’s West End since the last Revaluation. Property specific occupational arrangements, connected party transactions and lease conditions have the potential to mask the true picture and care is needed in isolating the circumstances where these arise.
4.3 Provincial
Rental evidence in the provinces is limited and shows a wide diversity on a rent per seat basis. Where there is no direct rental evidence available a percentage of total turnover should be considered within the range of 4% to 8%. The valuer should “stand back and look” at the outcome in terms of the price per seat relative to the London scheme as mentioned at 4.1 above.
4.4 Treatment of Income
The level of receipts adopted needs to be considered with caution. A number of occupiers operate as “presenting theatres”, i.e. by providing the accommodation to a production company in return for a fee. The production company will normally retain all income from ticket sales out of which will be paid the running expenses of the show. In addition to the fee, the presenting company may also retain all income from ancillary sales, i.e. bar, restaurant, programmes, etc. The totality of this income is, in effect, net of production costs, the presenting company only being liable for ancillary staff and sale costs, maintenance of theatre, etc.
The level of fee agreed between the parties is often based on a percentage of the total anticipated ticket (box office) sales over a given period and is likely to vary between productions depending upon a number of factors, including type of show and anticipated running length. Percentages can vary from as little as 10% of gross receipts to more than 50%.
When considering receipts, caution must be exercised when comparing, for example, repertory theatres (where a resident theatre company presents work from a specified repertoire) - these can have many “dark days” and there may be no other rehearsal facilities - and presenting theatres, which are run to maximise usage. The lower and higher elements of the percentage range stated at 4.3 will apply respectively.
There is still a trend in the public sector for private companies to be appointed to manage local authority theatres under a Management Contract, whereby a fixed fee replaces the Council’s variable annual liability to deficit funding. This does not seem to be a widening trend and is limited to only a small handful of operators.
The arrangement carries the benefits of certainty, transfer of staffing costs and repairing liabilities for the local authority. The managing company brings market expertise, central booking and purchasing economies that may not be available to independently run theatres. A rent paid by the managing companies to a local authority under such an agreement is not necessarily at an open market level and the basis of the rent needs to be examined critically. Many of these agreements reserve the right for the local authority, or other community group, to use the theatre/hall for certain days/events such as elections or amateur dramatic presentations. This use should not be reflected as a negative factor in valuations.
1. Co-ordination Arrangements
This is a Specialist Rating Unit (SRU) Class. Responsibility for ensuring effective co-ordination lies with the SRUs.
Special Category codes apply as follows:
070 Concert Halls (including Opera Houses)
279 Theatres (including properties used both as a theatre and concert hall)
A public hall in local authority occupation, or community centre of superior specification adequate as a venue for professional theatrical or musical entertainment, and regularly (but not necessarily exclusively) so used, should be described as a theatre or concert hall, and given the appropriate SCAT Code. The valuation approach should be in accordance with the guidance contained within this practice note.
As SRU classes the appropriate suffix letter should be S.
2. General
These guidance notes refer to all private and local authority run theatres, concert halls and opera houses. In addition to the general valuation advice contained in Rating Manual Section 6 - Part 3 - Section 1050, the following guidance should be adopted for R2010 purposes.
Following an examination of the limited rental evidence available it is recommended that the basis of valuation to be adopted be by reference to a price per seat. This should be applied to all properties within these classes.
3. Background
The theatre industry has always been split between the more commercialised theatres in the West End, known as Theatreland, and the rest of the country.
3.1 West End
Theatre-going in the West End is well-documented by the Society of London Theatres (SOLT), the trade association that represents the producers, theatre-owners and managers of the major commercial and grant-aided theatres in central London.
A comparison between the years up to the 2005 and 2010 List AVDs shows :
| Year | Attendances | Gross Box Office Revenue |
| 2001 | 11,734,767 | £298,989,461 |
| 2002 | 12,064,100 | £327,971,671 |
| 2003 | 11,585,446 | £321,485,161 |
| 2005 | 12,318,625 | £383,941,704 |
| 2006 | 12,357,427 | £400,804,654 |
| 2007 | 13,630,810 | £469,729,135 |
source : SOLT Box Office Data report 2007 and press release 18 January 2008
The resilience of the theatre-going attendance figures year-on-year is impressive, despite the effect that might be expected to impact on them by such external factors as World Trade Centre events in 2001 (both 2001 and 2002 recorded increases 1.6% and 2.8% respectively), the London bombings in 2005 (2.4% increase on 2004), major sporting events and the various set-backs in 2007 (up 10.4% on 2006). In addition, London theatres are estimated to generate £400m in ancillary spending in bars, restaurants and transport throughout the capital. The average advanced booking ticket price is in the region of £50 and the industry has in recent years become much more adept at identifying and filling potentially unsold seats at discount prices to maximise income streams. An example is the Get Into London Theatre (GILT) scheme, a marketing initiative that has been running for the last four years.
That said the way that theatre audiences and box office income have increased is a matter of some concern to many, with people pointing to the preponderance of musicals on offer (estimated at 66% of ticket sales in 2007). It is suggested that the perceived lowering of artistic content limits the opportunity to show new and original drama in the larger theatres. Many of the musicals owe their success to television talent shows or films.
The number of London theatres has grown from about 40 ten years ago to about 50 now.
3.2 Provincial theatres
Various reports indicate that theatre audiences have been increasing, partly due to increased Arts Council funding, from 2000 to 2004. However, smaller regional theatres and repertory groups face far different pressures to large, town or city venues. Apart from those run directly by local authorities, or managed on their behalf, it is thought the vast majority of theatres are run by charitable or not-for-profit organisations.
Information on specific properties, including accounts, can be often gleaned from websites or local authority minutes.
New theatres are opening across the country and major refurbishments have, and are being undertaken. Examples of refurbishments include the renovation of Bristol Old Vic, the Theatre Royal Bury St Edmunds, Bournemouth Opera House, Royal Shakespeare Theatre Stratford-upon-Avon, Waterside Theatre Aylesbury, Grove Theatre Dunstable, London Young Vic, Belgrade Theatre Coventry; new theatres Theatre Severn in Shrewsbury and Northern Stage Newcastle upon Tyne.
The wider economic contribution of theatres to the local economy is very significant, despite the fact that most, if not all, are technically loss making.
3.3 Funding
Central funding is a vital part of the income of medium to large sized theatres. The Arts Council England (ACE) announced a major review of funding in its investment programme for 2008-2011, which resulted in 185 mainly small arts organisations (not all theatres) losing all their funding and 27 organisations having their funding reduced.
3.4 The fabric of the theatre industry
In 2005 the industry identified an urgent need to spend £250m on basic repairs and renovation on the interiors of West End theatres. A study is currently being carried out by the London Assembly on how best to proceed and whether the investment should come from the private or public sectors. It should report in 2009.
4. Rental evidence
4.1 West End
The underlying trend is of rental increase in London’s West End since the last Revaluation. Property specific occupational arrangements, connected party transactions and lease conditions have the potential to mask the true picture and care is needed in isolating the circumstances where these arise.
4.2 Provincial
Rental evidence in the provinces is limited and shows a wide diversity on a rent per seat basis. What evidence there is does suggest that rents for many theatres have gone up by 10% or more.
5. Treatment of income
The level of receipts adopted needs to be considered with caution. A number of occupiers operate as “presenting theatres”, i.e. by providing the accommodation to a production company in return for a fee. The production company will normally retain all income from ticket sales out of which will be paid the running expenses of the show. In addition to the fee, the presenting company may also retain all income from ancillary sales, i.e. bar, restaurant, programmes, etc. The totality of this income is, in effect, net of production costs, the presenting company only being liable for ancillary staff and sale costs, maintenance of theatre, etc.
The level of fee agreed between the parties is often based on a percentage of the total anticipated ticket (box office) sales over a given period and is likely to vary between productions depending upon a number of factors, including type of show and anticipated running length. Percentages can vary from as little as 10% of gross receipts to more than 50%.
When considering receipts, caution must be exercised when comparing, for example, repertory theatres (which have many “dark days” and where there may be no other rehearsal facilities) and presenting theatres (which are run to maximise usage).
It was noted in the 2005 Practice Note that there was a trend in the public sector for private companies to be appointed to manage local authority theatres under a Management Contract, whereby a fixed fee replaces the Council’s variable annual liability to deficit funding. This does not seem to be a widening trend and is limited to only a small handful of operators.
The arrangement carries the benefits of certainty, transfer of staffing costs and repairing liabilities for the local authority. The managing company brings market expertise, central booking and purchasing economies that may not be available to independently run theatres. The management fee in itself does not represent rental value. A rent paid by the managing companies to a Local Authority under such an agreement is not necessarily at an open market level and the basis of the rent needs to be examined critically. Many of these agreements reserve the right for the Local Authority, or other community group, to use the theatre/hall for certain days/events such as elections or amateur dramatic presentations. This use should not be reflected as a factor in valuations.
6. Valuation approach for 2010
For 2010, the primary approach adopted for R2005 should continue. This is valuation by reference to a price per seat, based on an analysis of rents. For 2010, the primary approach adopted for R2005 should continue. This is valuation by reference to a price per seat, based on an analysis of rents. Useful comparison may be made by reference to income per seat. As a secondary check, rateable values should be considered as a percentage of total turnovers, including deficit funding (subject to the difficulties outlined above on the treatment of income). Factors such as the proportion of deficit funding and occupancy may assist in achieving a hierarchy of assessments.
By its nature, the theatre industry can be very volatile and it is therefore essential to consider receipts over a minimum of three years leading up to the AVD in order to estimate the level of receipts for the forthcoming year that a hypothetical tenant might anticipate.
Care must be taken to compare theatres on their physical aspects together with their facilities. Managed theatres may have a different income profile than “normal” Local Authority / Trust theatres. Such incomes must be either grossed up or examined with the benefit of accounts. Theatres run as commercial presenting theatres should have similar levels of value to comparable theatres where the full production costs are borne and deficit funding is available.
Useful comparison may be made by reference to income per seat. As a secondary check, rateable values should be considered as a percentage of total turnovers, including deficit funding (subject to the difficulties outlined above on the treatment of income). Factors such as the proportion of deficit funding and occupancy may assist in achieving a hierarchy of assessments.
This property is valued using the non-bulk server. The manual can be accessed here.
7. IT Support
The development a new facility on the Non Bulk Server (NBS) should enable input of factual data to achieve valuations that follow the recommended approach for theatres and concert halls. All valuations should be entered onto the NBS under the relevant Scat Code.
This is a Specialist Rating Unit (SRU) Class. Responsibility for ensuring effective co-ordination lies with the SRUs