Sucking cash out of logistics

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Property problems have been hitting the headlines recently with the scandal of the Members of Parliament who make outrageous claims for their second homes – such as moat-cleaning and payments for non-existing loans.

And, if they hadn’t got caught, there might be a few cynics now suggesting that such creative thinkers should be charged with the task of finding a creative solution to the logistics industry’s growing problem of rate charges on empty warehouses.

There was never any question that the change in the regulations on industrial rates would cause big problems for warehouse users and landlords alike when they came in last year. There are plenty of examples of warehouses being demolished to avoid the need to pay rates on an empty building.

For example, St Modwen last year demolished the 750,000 sq ft West Works building on the former Rover site at Longbridge. The original plan had been to let the building as a going concern and £300,000 had been spent on upgrading it.

However, the company said that the Act put a stop to that: “Faced with an annual empty rates bill of £697,700 – that’s £2,300 per day – before we even consider the other maintenance costs, the building became completely economically unviable.”

As the economy has weakened the number of warehouses coming back onto the market has grown dramatically. As Liza Helps reports in this issue, the West Midlands, North West and Yorkshire have seen some 15 million sq ft of second- hand space becoming available.

The government is collecting millions of pounds in rates on these empty buildings – a massive burden on an already hard-pressed sector of the economy. And, of course, there are more empty warehouses on the market than just these.

The empty rates charge is sucking money out of the industry at a time when it can least afford it – it’s time for the government to end this misconceived policy.

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