Motorway service areas, let outs and truckstops
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This section refers to Motorway Service Areas (MSA) SCAT code 194 and Motorway Service Area Let-Outs SCAT code 193.
1.2 These sites are identified by blue signs on the motorways.
1.3 Major Road Service Areas are not included. See RM Section 880 Roadside Restaurants. Truckstops are not included, these are covered within RM 1085
1.4 MSA sites typically comprise:
- amenity building with shops, catering, amusements, toilets
- lodges
- advertising hoardings
- ATMs
- petrol forecourt and shop
- parking
- HGV driver facilities
- car washes
- tourist information
- business office/lounge
- catering vans outside the amenity building
1.5 Care must be taken in identifying the correct unit of assessment. From physical inspection it is often not obvious who is in paramount control of a particular area. Corporate branding and staff uniforms may give a false impression that a separate let-out exists when in fact franchise agreements may be in operation. Details of any contractual arrangements should therefore be sought, to establish if the motorway service area operator has in fact relinquished control.
Primary Description Code: CX
List description: MOTORWAY SERVICE AREA AND PREMISES
SCAT code: 194
Suffix: S (Specialist)
Primary Description Code: CX
List descriptions: RESTAURANT AND PREMISES / SHOP AND PREMISES / AMUSEMENT AREA AND PREMISES / KIOSK AND PREMISES
SCAT code: 193
Suffix: S (Specialist)
Motorway Service Areas are a Specialist class of property. Responsibility for inspection, survey and valuation rests with the National Valuation Unit (NVU), specialist referencers and valuers.
Motorway Service Area and certain Truck Stop responsibility sits within the wider Transport class-coordination team (CCT), which has overall responsibility for these classes.
5.1 MSAs have been planned and controlled by the Department of Transport ever since motorways were first built. This was seen as the best way of ensuring that all motorway users had regular opportunities to rest during their journeys and to obtain essential services: fuel, lavatories, food and drink.
5.2 Until 1980 MSAs were let following a consideration of tenders which were invited from interested parties by the Department of Transport. The tender documents required offers to be submitted on the basis of a lease, usually for a term of 50 years (three sites let on 21 year terms), at a fixed annual rent plus a “participating rent” calculated as a percentage on a sliding scale of the annual turnover after deduction of petrol duty, tobacco tax and VAT. Acquisition of the land, provision of access roads, landscaping, parking areas, lighting and basic services were financed by the Department of Transport. The operator paid for buildings and equipment. The leases initially required the operator to:-
a. Maintain the site and buildings in good repair, including those facilities provided in the first instance by the Department. b. Provide services for 24 hours every day including toilets, food and drink, petrol and repair facilities (since relaxed). c. Provide up to four brands of fuel.
The cost of provision of the free facilities, such as toilets, was heavy and 24 hour opening necessitated a three shift employment system. Because most sites are in rural locations site operators were obliged to convey staff from surrounding areas which added to their costs.
5.3 In 1980/81 the Government embarked on a programme of disposal of MSA sites to the operators following publication of a Report of the Committee of Inquiry into MSAs (known as the Prior Report) in 1978. The report recommended that existing contracts should be re-negotiated to achieve an equitable transition towards new consistent lease terms with the aim of redressing the imbalance of return between operators and the Exchequer, improving standards, removing unnecessary constraints and reducing fuel prices for consumers. The existing leases were surrendered to the Department and new 50 year leases granted to the operators at peppercorn rents and a premium.
5.4 Since the 1980s the method of providing MSAs has been for the DTp to:-
- identify gaps in the network;
- select suitable sites to fill these gaps;
- seek planning clearance;
- acquire the land by agreement or, more usually, compulsory purchase;
- offer the sites, usually by competitive tender, for design, construction and subsequent operation by private concerns (either oil companies or catering operators such as Granada, Trusthouse Forte etc).
Operation is governed by fifty year leases (granted by the DTp in return for a premium payment and peppercorn rent) which ensure that specified quantities of parking and other required facilities are provided 24 hours a day;
- avoid adjacent MSAs being operated by the same company;
- sign MSAs, but not off-motorway facilities, from the motorway;
maintain landlord controls over the use of the site (but not its day to day operation which remains the responsibility of the operator).
5.5 Some sites have been, and are being, identified by the private sector as a “private initiative”. In “private initiative” cases an MSA operator, developer, or land owner, obtains a suitable site which is sold, usually with planning permission, to the Department at market value ignoring the value as a service area. The site is leased back to the operator for a term of not less than 50 years at a peppercorn rent and a premium to reflect the right to put up a motorway sign and gain access to the motorway. In such cases the operator is responsible for building the access road, which can be a very expensive item. In cases where the Department of Transport already own the site it is usually put out to tender with the access road already constructed.
5.6 Under both of these methods the Department of Transport impose certain conditions on the operation of MSAs in order to secure basic services for all motorway users at all times. These conditions are that MSAs must provide:-
- Services for all motorway users 24 hours a day every day of the year;
- at least hot drinks and cold food at all times;
- unleaded petrol and diesel;
- free lavatories with public access;
- free parking for two hours (after which charges may be made) in quantities specified by the Department of Transport;
- a picnic area of at least half an acre;
- showers and shaver points for lorry drivers;
- public telephones;
- a tourist information point if required by the Regional Tourist Board;
- a police post if required by the local constabulary;
- all facilities to be made available and accessible to disabled people (eg. dedicated parking spaces to be reserved near amenities);
and they must not:
- allow the sale or consumption of alcohol;
- allow rear access to the site to be used other than by MSA staff, delivery vehicles, and the emergency services;
- be used for purposes unconnected with the use of the motorway. The MSA must not become a destination in its own right, generating extra traffic on the motorway. Its purpose is to serve the incidental needs of people in the course of a motorway journey.
5.7 In August 1992 the Government announced that they were reducing the central regulation of motorway service facilities in favour of a greater role by the private sector. The new approach is designed to increase competition and choice for drivers and passengers and the main features of the arrangement include:-
*responsibility for identifying new MSA sites, seeking planning permission and acquiring land will pass from the Department of Transport to the private sector;
- the minimum interval between MSAs will be reduced from around 30 miles to about 15;
continued guarantee of 24 hour access, fuel availability, free parking and toilet facilities.
5.8 In recent years restrictions on advertising signage on motorways has been relaxed with advertising of significant brands on blue motorway service signs now commonplace. This has resulted in increased competition between sites with each trying to increase visitor numbers.
5.9 Following a relaxation of licensing regulations on motorway sites in 2014, JD Weatherspoon opened the first public house at Beaconsfield services on the M40.
6.1 Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice.
6.2 Where the MSA operator is in control of all facilities there is no need to measure the amenity building or petrol filling station forecourt shop but plans should be obtained and a fulll written description of the facilities on site prepared.
6.3 Where the petrol filling station is occupied separately to the amentity building guidance in Rating Manual 5 Section 770 should be followed.
6.4 MSA Let-Outs should be measured to GIA for rating purposes in accordance with the RICS Code of Measuring Practice 6th edition or its replacement. Gross Internal Area (GIA) - Measurement definitions - isurv.
6.5 Advertising panels which are rented by third parties should be data captured in accordance with the instructions in Rating Manual 5 Section 20.
6.6 Automatic Teller Machines (ATMs) should be be data captured in accordance with the instructions in Rating Manual 5 Section 1120.
7.1 Rating surveys should be captured on the Rating Support Application (RSA) for SCAT 193 assessments of MSA let-outs.
7.2 Plans and survey sheets for all facilities on sites should be stored in the property folder of the Electronic Document Records Management (EDRM) System.
7.3 For SCAT 194 assessments and separately assessed MSA petrol forecourts survey data should be captured in the non bulk server even though the valuation application may not be available for Revaluation 2017.
8.1 The preferred basis of valuation is a profits basis. Full details of this method of valuation can be found in RM4:6.
8.2 This class will be the subject of central negotiations and the appropriate percentage, or percentages, to be applied to the gross receipts will be discussed with agents representing the motorway operators.
8.3 The gross receipts split between fuel, forecourt shop, amentity building shop(s), catering, accommodation and other receipts will be provided by the site operators on a form of return.
8.4 MSA Let-Outs will be valued on the rentals method.
All valuations should be entered either on the stand alone spreadsheets for MSAs, or RSA for let outs.
Additional support is available through:
- Survaid.
- Class Co-ordination Team
- EDRM
1. Market Appraisal
There are three major motorway service area (MSA), operators in the UK. Each offer motorists retail and refreshments via franchise outlets which they operate themselves. Re-fuelling may be in partnership with an oil company, or the petrol filling station element of the site may be separately operated by an oil company or independent. In addition, there are three other smaller MSA operators with far fewer service areas and these operate differently. One of these has introduced a relatively new MSA concept of selling local produce much akin to a farm shop and has earned awards for the quality of their sites. Another operator leases all elements to separate retailers.
Typically, MSAs provide 24-hour toilet facilities, 2 hours free parking, fuel and hot drinks. Hot food must also be available at all opening hours for consumption on the premises. Historically Department for Transport (DFT) restrictions meant there must be a minimum of 12 miles distance between MSA sites. The DFT Circular 02/2013 potentially allows for the relaxation of this rule and at B6 the Highways Agency recommends the maximum distance between MSAs should be no more than 28 miles and 30 minutes’ drive time, with preference for new services to be given to “on-line” (between junction) sites. In 2019 and beyond there are new sites under proposed or active development hence current positive demand for MSAs.
The DFT circular at B11 recognises potential for MSA sites to become destinations in their own right. Historically MSAs were not allowed to be destinations as such but were designed to ensure that motorists had access to basic rest and fuel facilities. In recent years, this requirement has been relaxed with advertising of significant brands on blue motorway service signs now commonplace. This has resulted in increased competition between sites with each trying to increase visitor numbers.
By the time of the 1 April 2015 statutory antecedent valuation date (AVD) this major change had meant that all major operators had moved from having their own in-house catering facilities/shops, and instead entered into partnerships with well-known fast food takeaway chains, coffee shop chains and major food retail chains. In 2021, these partnerships remain crucial to success, with the aim of increasing visitor numbers, dwell time and customer spend within the service area. Locational factors play an important part in the success of such partnerships and this may determine which ones are selected as partners on each site.
However, in some cases high profile brands can have a cannibalisation effect on existing outlets, including both catering and retail. Individual motorway service operators are therefore keen to offer a wide retail mix to reduce this impact within any given service area.
Another factor affecting turnover levels is the recent introduction of remote car parking technologies which effectively monitor any unauthorised overstay. The income generated by such penalties can at times be significant with third party companies normally receiving 50% of income generated from fines as an administration fee, and the MSA operator retaining the remainder.
Increasingly there is a preference from some MSA operators to divest themselves of the responsibilities of operating petrol forecourts, effectively concentrating their efforts in running the amenity buildings only.
There is an emerging trend for separate drive-thru buildings to be added and new digital advertising rights are being erected at some sites.
The three major operators report steady continuous growth in sales and profitability in the years up to and including 2019. As at the AVD of 1st April 2021 COVID was in existence. It was anticipated that the vaccine rollout which commenced in December 2020 would reduce its impact on society.
2. Changes From The Last Practice Note
The market appraisal section has been updated.
3. Ratepayer Discussions
Initial discussions have taken place with representatives of the major operators.
4. Valuation Scheme
There is currently no agreed 2023 scheme for this class. Valuations have regard to fair maintainable turnover from MSA income streams and throughput volumes and turnover levels from any forecourt where applicable. Valuations carried out using this approach have been agreed in previous rating lists with previous valuation schemes agreed for both the 2010 and 2017 rating lists.
1 Market Appraisal
1.1 Separately let out Motorway Service Area (MSA) retail units
As at 1/4/21 there are known to be several MSAs all owned by the same operator where the retail and catering areas within the amenity block are let out to individual occupiers. Leases are usually based upon a minimum base rent with tenant specific performance rent provisions in addition. This type of arrangement is unlike most sites where the MSA operator controls the entire amenity area and has franchise relationships with well-known brands, but the MSA remains the rateable occupier.
Where let outs do exist, typically base rents are subject to annual upward only rent reviews. All leases are the equivalent of full repairing and insuring terms with shopping centre style service charge and food court seating area contributions also payable to the landlord where applicable.
As at the AVD of 1st April 2021 COVID was in existence. It was anticipated that the vaccine rollout which commenced in December 2020 would reduce its impact on society.
1.2 Separately operated Petrol Filling Stations (PFS)
In recent years certain MSA operators have divested themselves of operation and occupation of PFS located within their MSA sites. This is due in part to focus being on operating the amenity block only, and either selling off the MSA forecourt or leasing it out to a third party. Consequently MSA forecourts can often be independently ran by a non MSA operator, such as an oil company or large independent fuel retailer, and separate assessment from the amenity block is usually required.
Due to often significant price differentials existing between roadside PFS and those located on MSAs, in most cases, the latter achieve higher gross margins on fuel and shop sales and are therefore considered more valuable.
2 Changes from the last Practice Note
This is the first Practice Note for MSA let outs and should be read in conjunction with the MSA Rating Manual entry and MSA Practice Notes.
3 Ratepayer discussions
Whilst initial discussions have taken place with MSA operators and their representatives, including those that act as landlord to any let outs, no discussions have taken place with the individual occupiers where separate assessments exist within an amenity building.
4 Valuation scheme
Due to the varying type of potential MSA let outs and separate assessments, no single prescribed valuation scheme is appropriate. However the following guidance is provided:
Retail/catering units – these are normally let on a 2-tier lease arrangement. A base rent is paid at the beginning of the lease with further ‘top up’ amounts paid as rent, depending on occupier performance. Careful consideration will be required when analysing such rental evidence. Assistance and guidance is available from the National Valuation Unit Transport Class Coordination Team.
Petrol Filling Stations – any MSA located forecourts should be valued on the MSA PFS forecourt scheme of valuation, irrespective of whether they are separately assessed from the amenity area or included within a single MSA assessment. A separate scheme of valuation exists which is different from the roadside PFS scheme where valuations are stored in the Non-Bulk Server. For advice and guidance please contact the National Valuation Unit Transport Class Coordination Team.
For any other potential types of separate assessment please consult relevant entries in the Rating Manual.
1. Market appraisal
Over recent years the term “truckstop” has not been in common use and equivalent stops are essentially motorway service areas (MSAs). There are relatively few areas on motorways solely designated for trucks to stop at, with most designated rest areas available for every sort of motor vehicle from cars to motorbikes to trucks.
On A roads (longer routes with lower speed limits, which generally avoid motorways), a truckstop may have no re-fuelling facilities but simply offer a place for tired drivers to rest and/or get food and drink in a transport café.
The nature of a truckstop can vary significantly from a small area of land with a café, to much larger sites including overnight accommodation, re-fuelling facilities, gaming machines, extensive parking plus a wide range of catering and retail offerings. As stated above however, any such sites simply restricted to truck use only are relatively few in number.
2. Changes from the last practice note
This is the first practice note for truckstops and should be read in conjunction with the relevant MSA Rating Manual entry and corresponding practice notes.
3. Ratepayer discussions
No discussions have taken place with the truckstop industry.
4. Valuation scheme
Due to the varying nature and type of truckstops a single prescribed scheme of valuation is not appropriate.
It is expected the majority of truckstops where facilities are limited would be a Regional Valuation Unit (RVU) class of property. Any areas such as land or café etc. should be valued on local RVU tone.
Only truckstops with an extensive range of facilities as identified above where use and occupation is similar to that of an MSA, should be referred to the National Valuation Unit (NVU), for guidance and advice.
For any assistance or guidance please contact the NVU Transport Class Co-ordination team.
1. Market Appraisal
Historically motorway service areas were not allowed to be destinations as such but were designed to ensure that motorists had access to basic rest and fuel facilities. In recent years, this requirement has been relaxed with advertising of significant brands on blue motorway service signs now common place. This has resulted in increased competition between sites with each trying to increase visitor numbers.
Since the last Antecedent Valuation Date (AVD) this major change has meant that all major operators have moved from having their own in-house catering facilities/shops and entered into partnerships with the likes of McDonalds, M&S, Greggs and Costa Coffee. These partnerships are crucial to success, with the aim of increasing visitor numbers/customer spend within the service area as a whole. ‘High profile’ brands can have a cannibalisation effect on existing outlets, particularly catering. Individual motorway service operators are therefore keen to offer a wide retail mix to reduce this impact within any given service area.
It is now commonplace for catering outlets, overnight accommodation and petrol stations at service areas to be ‘occupied’ in a variety of ways, ranging from formal leases to franchise agreements. Where franchises are in place, the motorway service area operator fits the unit to the specification of the franchisor and provides staff, purchases stock and retains the income. A franchise fee is then paid based on a percentage of sales.
Few new players enter into this market, however petrol forecourt operator Euro Garages opened their first site in 2011 (Rivington Services on the M61). Also new to the market was Gloucester services which opened on the M5 during 2014. Gloucester services introduced the new concept of selling local produce much akin to a farm shop, such innovation lead to the service area being awarded the title of ‘Forecourt Trader of the Year 2015’
Following a relaxation of licensing regulations on motorway sites in 2014, JD Weatherspoon opened the first public house at Beaconsfield services on the M40, this was despite intense opposition from safety campaigning groups.
A further change affecting turnover levels is the introduction of remote car parking technologies which effectively monitor any unauthorised overstay. The income generated by such penalties is significant with third party companies normally receiving 50% of income generated from fines as an administration fee and the motorway service operator retaining the remainder
Increasingly there is a move from operators to divest themselves of the responsibilities of operating petrol forecourts, effectively concentrating their efforts in running the amenity buildings.
2. Changes from the last practice note
No Practice Note was published for the 2010 list.
3. Ratepayer discussions
Discussions have taken place with representatives of the major operators and a scheme of valuation has been fully agreed.
4. Valuation scheme
The agreed scheme of valuation for this class applies relevant percentages to Fair Maintainable Trade derived from various income streams found at a typical MSA. This scheme has been fully discussed and agreed with representatives of the 3 major MSA operators in the UK. Details of the scheme for the amenity buildings are shown in the table below:
|
Total gross turnover |
Catering |
Retail |
Food Store |
Gaming |
Other |
Lodge |
|
|
8.00% |
5.50% |
4.00% |
12.50% |
12.50% |
See |
|
|
£1.8M to £3.6M |
8.50% |
6.00% |
4.50% |
15.00% |
15.00% |
note |
|
|
£3.6M to £5.4M |
9.00% |
6.50% |
5.00% |
17.50% |
17.50% |
below |
|
|
£5.4M to £7.2M |
9.50% |
7.00% |
5.50% |
20.00% |
20.00% |
|
|
|
£7.2M to £9M |
10.00% |
7.50% |
6.00% |
22.50% |
22.50% |
|
|
|
£9M to £10.8M |
10.50% |
8.00% |
6.00% |
25.00% |
25.00% |
|
|
|
£10.8M to £12.6M |
11.00% |
8.50% |
6.50% |
27.50% |
25.00% |
|
|
|
£12.6M to £15M |
11.50% |
9.00% |
6.75% |
30.00% |
25.00% |
|
|
|
£15M + |
12.00% |
9.50% |
7.00% |
30.00% |
25.00% |
|
Lodge – approach is to apply the agreed 2017 practice note and scheme of valuation for stand-alone lodges. Numerous 2017 challenges and assessments have been fully agreed on the basis of this scheme, including any petrol filling station (PFS) element to the valuation, which is valued on a separate basis from standalone PFS. Accordingly the 2017 MSA scheme is considered to be well established.
Background
Central discussions were held with Messrs Savills and Gerald Eve who act on behalf of the Motorway Operators Committee.
The MSA and MRSA organisations were extremely reluctant to provide details of turnover for fear that the information might be divulged to third parties. To allay their fears CEO(R2) entered into a Code of Practice which confirms the confidentiality of the information provided (copy attached Appendix 5:710:2).
Valuation Officers should ensure that all staff dealing with MSAs and MRSA files are aware of the Code of Practice and its importance.
Having given an assurance that the details of turnover would be treated in confidence, the agents completed Forms of Return. They also provided CEO(R2) with the accounts of 13 MSAs/MRSAs, covering a range of turnovers and geographical locations. The sample accounts were analysed in accordance with RM 4:6 and a scale of percentages was agreed with Messrs Savills and Gerald Eve. The details of the agreement are set out below:-
Gross Turnover % (Net of VAT, fuel of tobacco duties)
| Up to £4 million | 4 |
|---|---|
| £5 million | 4.5 |
| £6 million | 5 |
| £7 million | 5.5 |
| £8 million | 6 |
| £9 million | 6.5 |
| Over £10 million | 7 |
It was agreed to interpolate between the turnover bands to the nearest £1/2 million and 1/4 %.
Travel Lodges
In accordance with the centrally agreed basis travel lodges should be valued at £750 per bedroom. This figure is inclusive of reception areas, ancillary stores and car parking, but is exclusive of conference rooms, restaurants and other additional facilities which should be valued in line with local “tone” levels.
1.
The Valuation Office acknowledges the wish of the Motorway Service Area Operators to preserve the confidential nature of trade information contained in Forms of Return.
The Valuation Office accordingly agrees to enter into a general code of practice with representatives of the Motorway Service Area Operators Committee on the following basis:-
2. Disclosure of trade information in negotiations or prior to any rating appeal
(i) Trade details obtained in respect of a hereditament to which a Form of Return relates will not be disclosed to any person, other than the parties to an appeal in respect of that hereditament.
(ii) If, however, in order for the Valuation Officer to deal with the assertions made by any party to an appeal it becomes essential to refer to the actual trade of other Motorway Service Areas, those details (or, in the last resort, the returns in which those details are contained) will be disclosed, in confidence, only to the parties or their professional advisers.
(iii) Wherever possible, Valuation Officers will endeavour to give details of analysis, etc, which have had regard to trade details in such a manner that an individual property’s trade cannot be identified.
3. Disclosure of trade information in rating appeals
Section 83(4) General Rate Act 1967 provides that:-
- “sub-sections (2) and (3) of (Section 83) shall not apply to any proceedings relating to the ascertainment of net annual value of a hereditament on the profits basis.
- Provided that this sub-section shall not be construed as preventing the use of any return in such proceedings in circumstances where the return could be so used apart from (Section 83)”.
- It is agreed that the valuation of a Motorway Service Area made by reference to receipts disclosed in a Form of Return, VO 7177, is a valuation on the profits basis for the purposes of s.83(4).
- Prior to any hearing by the Valuation and Community Charge Tribunal or Lands Tribunal, the Motorway Service Area Operators and their professional advisers will co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparables to which either side proposed to refer.
- The Valuation Officer will treat sympathetically a request from any other party to a hearing before a Valuation and Community Charge Tribunal to be heard in camera where trade information is to be disclosed.
- If exceptionally another party should become entitled to inspect a Form of Return containing trade information in respect of a Motorway Service Area, by virtue of the provisions of Section 83(3)(b) or 83(5), that party will be offered a photocopy of the form with the trade details obliterated, so as to preserve the confidentiality of the trade information. Should any person offered such a copy insist on sight of the original, the person who completed the form will be advised.
Contact will be made with the Motorway Service Area Operator through Chief Valuer (Rating) and the Operator’s instructed agent.
4. General
(i) The Motorway Service Area Operators and their agents acknowledge that this code of practice, which is being issued as an indication of the general policy of the Chief Valuer’s Office on the disclosure of trade information regarded by the said operators as confidential, it is entirely without prejudice to any requirement to disclose such information by law, and to each Valuation Officer’s statutory duty.
(ii) The content of Forms of Return will not be disclosed to other Government Departments, subject to any statutory provisions to the contrary. It is understood however that no restriction can be placed on the use within the Inland Revenue of the returns or the information contained in them.