THE failure to address the issue of empty property rates is stifling new development in the North East commercial property market, a leading surveyor has warned.
Only commercial buildings with a rateable value under £2,600 are exempt from rates liability.
Rates relief of 100% is granted to office and retail premises which stand empty for the first three months while industrial properties are granted relief for the first six months after which full rates apply.
Richard Farr, partner for rating at Sanderson Weatherall LLP said the failure to address the issue would hamper the economic recovery of regions such as the North East.
“It’s been a challenging time for the commercial property market,” he said. “However, with the official announcement last month of the end of the UK’s double-dip recession you would expect light to start to appear at the end of the tunnel.
“Unfortunately, it’s just not that simple. As the situation stands, the lack of development in the past four to five years has all but stopped the flow of new stock coming on the market.
“Empty rates legislation has chiefly been cited as one of the principal causes and despite market-wide pressure to address the issue, nothing has changed.”
There was widespread market disappointment when Chancellor George Osborne’s 2012 Budget failed to offer any respite on empty rates, with many calling for the reintroduction on the concession of relief from empty rates for low value properties up to a rateable value of £18,000 that was withdrawn in 2011.
David Jackson, partner for agency, said: “Developers are not prepared to take on the risk of a speculative build when there are no guarantees of an occupier and they therefore can’t predict how long a property will stand empty for.
“What’s really frustrating is over the last eight to 12 months we have seen requirements for large, new stock in both the office and industrial sectors starting to appear – unfortunately, some of these are going unanswered.
“In some instances, those with the resources have gone down a ‘design and build’ route such as the new Clipper Logistics’ 343,000 sq ft warehouse at Teeslink on Wynyard Park. However, this isn’t an option for everyone, and the need to have ready-to-go stock remains key.
“It could quickly reach a point where the emerging lack of balance between supply and demand will have a massive impact on market recovery and growth.”
In the last couple of weeks, a group of MPs have put forward proposals to the Treasury which include a three-year exemption of empty rates on new-build commercial developments.
This empty rates working group which was commissioned by the Chancellor, has also asked for an increase in the rates relief threshold taking it from £2,600 to £18,000, providing a full exemption for industrial property and six months of relief for office and shops – two of the hardest hit market sectors.
Jackson added: “The measures, if approved, and it is a big ‘if’, would go some way to injecting much-needed confidence in the development market.”