Budget abolishes rate relief on sheds

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A plethora of large second-hand sheds coming onto the market could be a occupier’s dream, and this is likely to be the more so following the Chancellor’s Budget in March.

In a surprise move, the Chancellor abolished rates relief on industrial property from April 2008. After this time a warehouse will incur full rates within six months of it falling empty.

This means that landlords and those occupiers looking to assign a building will have six months to find a new tenant or incur extra costs and at 43p in the pound that could be a hefty bill to shoulder.

For those looking to secure space it will mean rents are likely to be very competitive and there will be plenty of bargains and bargaining to be had.

At present there are several excellent opportunities on the market, for example Colossus in Stafford. This 366,000 sq ft warehouse, comes with racking capable of accommodating 18,000 pallets, and is being let at £3.45 per sq ft through letting agents Savills and North Rae Sanders. It was formerly occupied by Argos.

Then there is Grantham 334, just off the A1. The 334,000 sq ft building has eaves height from 7.5m to 22m as well as 15 dock levellers. It is fully serviced to include lighting, heating and a sprinkler system together with racking in a combination of wide, narrow and automated systems.

The warehouse has been bought with vacant possession and Kilmartin has appointed Fisher Hargreaves Proctor, King Sturge and Knight Frank to act as letting agents. Quoting rent is £3.75 per sq ft.

In Wales, Rapleys is looking to assign the former Wm Morrison warehouse on Cribbs Causeway.

The 385,000 sq ft property boasts 55 dock and five level access doors, 270 car parking spaces and 97 HGV spaces. It has everything there down to the staff canteen.

“It’s a great opportunity to provide operators with an immediate solution. No one else is quite there at the moment,” says Colin Steele of Rapleys, which is quoting £5.10 per sq ft.

Although the Chancellor’s move will bring down the level of rents in the short term, as supply is ahead of demand, when it dries up it will be a different story.

There are concerns that this move will halt the development of speculative warehouses with the result that there will be little new stock ready for immediate occupation.

Richard Wackett of Lambert Smith Hampton said: “The proposed measure is essentially a tax on development and, in particular, the supply of industrial property.”

Atisreal pointed out that this was bad news in particular for the industrial and logistics sectors: “The proposed legislation is unlikely to stimulate the market.

Owners and occupiers will do everything they can to dispose of or obtain occupation on empty property but a void rate charge is only going to add to their burdens and may lead to ‘constructive vandalism’ in an attempt to avoid empty rates.

“Perversely, the changes could stifle speculative development in those areas most in need of space to stimulate economic development.”

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