In the wake of the government's £1 billion package of measures to reverse the collapsing housing market this week, help for the hard-hit commercial property sector still remains conspicuously absent.
According to the specialist rating compliance audit arm of one of the UK's leading property consultancies, the abolition of business rates relief for empty properties in April this year equates to the funding for this latest round of government initiatives, thanks to the commercial property sector.
As John Webber at Colliers CRE's Accurates division points out: "The so-called empty property tax, which is boosting the public purse by £1 billion, is the equivalent of providing the lifeline to the housing market, and is further compounding the impact of the economic downturn on the commercial property market.
"From April 1st this year vacant industrial buildings are charged full business rates after six months, having previously been excluded, with retail and offices being levied 100 per cent, up from 50 per cent, after three months' voids. This is significantly increasing costs to landlords, stunting expansion plans for tenants and providing developers with yet more reasons to halt speculative projects.
"The changes to business rates have already started to hit property portfolios hard, and landlords and developers are now on the receiving end of what equates to be a double whammy in the current climate."
Since the new regulations were announced in the 2007 Budget, the Accurates team at Colliers CRE has been campaigning for change, having identified the potential problem and impact of such measures. Typically, charges per sq ft for business rates are around 40% of rental values.
Over the last 18 months the team has taken an active consultation role and has been helping clients to mitigate liabilities, but a high proportion of the sector have not heeded the early warning signs, simply because they didn't know how it was going to affect them.
High levels of concern have now been confirmed in a recent survey conducted by the Accurates team amongst landlords and developers, which has revealed that demolition is now being seriously considered as an alternative to paying business rates on empty buildings.
As John Webber adds: "The changes were conceived at a buoyant time, but now equate to a failure tax, which is kicking the market down further when it's already on its knees.
"The down valuation of commercial property has seriously exacerbated the situation, with portfolio costs rising significantly. Whilst there are no quick fix solutions, serious consideration must now be taken to giving empty business properties a one or two year rate holiday until the market comes back."
"If the government chooses to ignore the commercial property sector, they do so at their peril."
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