Despite the rumours of shortages in distribution warehouse space there was in fact an increase of 17 per cent in 2010. The problem is, according to Lambert Smith Hampton, that the total availability continued to be driven by the return of unwanted, lower quality stock to the tune of 60 million sq ft.
Now all that empty space will provide the government with income in the form of empty property rates and despite condemnation when the Labour government introduced it, the coalition has made no moves to rescind it, in fact local government minister Bob Neill said recently that it was unaffordable to give it up.
But aren’t they being a bit short sighted? The Tax Payers Alliance says that empty property rates hinders a private-sector led economic recovery. They cite the very high vacancy rates across the UK, as a reason to give up empty property rates but it seems to fall on deaf ears.
Anecdotally many buildings are being demolished, and to make matters worse some councils are using tax payers money to demolish the buildings they own but cannot let in order not to pay the rates. Barking mad I say!
The TPA and property pundits are warning that there is a contraction in the amount of fixed capital stock which will make the economic recovery more difficult. But it seems they don’t care. Balancing the books right now is all they can see.
Lambert Smith Hampton has added its weight to the argument because of the damage empty property rates is doing to business and the negative effect on new development.
Mark Clapham, director of rating in LSH’s Birmingham office, said: “While the coalition government is rightly seeking to rebuild the economy through industry and commerce, this legislation is acting as a disincentive to developers and it is estimated it will cost business owners £400 million this year alone.”
He added: “This can only exacerbate the challenge of synchronising future supply with the levels of demand which government policy is being designed to create. The time is right for empty property rates legislation to be scrapped. As we predicted, the policy has failed to manipulate the market towards the intended goal of realistic and affordable rents and it would be unfortunate if this government is viewed as having aided and abetted a policy disaster which was not of its making.”
Mark Clapham also pointed out that the combination of empty property rates and the recent announcement of a 12 month extension to Small Business Rate Relief for property with a rateable value below £6,000 would lead to unintended consequences.
He said: “Occupiers of property with a rateable value below £6,000 should ensure that they continue to occupy the property, at least until 1st October 2012. Otherwise, not only will they lose Small Business Rate Relief, but they will also become liable for 100 per cent empty property rates.”
Get rid of it now so that the tiny shoots of recovery can actually grow!