Tax on empty property hampering recovery

CONTROVERSIAL legislation to charge rates on empty properties could harm the economic recovery by restricting the supply of cheaper commercial units to growing businesses, a major Yorkshire landlord has warned.

Dominic Gibbons, managing director of the Hull-based Wykeland Group, said the empty rates tax has had an adverse effect not only on the property industry but also on construction and business in general.

The Government introduced the legislation in 2008 in an attempt to increase incentives for landlords to let property or redevelop sites and said it would help reduce rents for tenants. But the move led to an angry backlash from businesses across the country.

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Mr Gibbons told the Yorkshire Post: "No responsible developer or property owner would let a building stand empty if it is capable of being occupied.

"They are our stock in trade and must produce an income to service the capital invested. Where there is little or no demand, as is the case at the moment, empty rates are a punitive tax rather than an incentive.

"Where a building is redundant, then demolition and subsequent redevelopment is driven by market demand, not because of an empty property tax.

"What is happening is that developers and property owners are demolishing properties that still have a useful life and could provide cheap and readily available accommodation when things improve."

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A Hull-based manufacturer recently took a lease on an empty 45,000 sq ft Wykeland property, at 1.70 per sq ft, he added. The business started trading 18 months earlier in 10,000 sq ft but soon outgrew the premises.

"If their options were only new-build properties, then for the same rent they would only have been able to afford a unit of 16,000 sq ft. They would have been unable to grow their space-hungry fledgling business which now employs more than 30 people," said Mr Gibbons.

Wykeland has decided to halt speculative new-build to avoid paying empty rates tax.

Mr Gibbons said: "The reason we used to develop industrial units on a speculative basis was always to have a new building on stock. It takes about 12 to 18 months to plan and construct a building, and, in our experience, most businesses want to move quicker than that.

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"It will be important as we come out of recession to have a stock of new and energy-efficient buildings to help businesses to take advantage of the economic up-turn.

"This also has a direct impact on the construction industry at a time when the economic climate is having a devastating effect on construction and regeneration projects."

He added: "Businesses are having to bear the cost of empty rates. For instance, a business may have to downsize to cut costs during this recession and, therefore, mothball buildings.

"Apart from the fact that there may be no demand, it may be physically impossible to dispose of a building within a complex. A business will be faced with an empty rates bill when it is trying to cut costs to stay solvent."

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David Garness, of Garness Jones chartered surveyors in Hull, told the Yorkshire Post: "One of the reasons given for bringing this in was the claim that landlords and owners of buildings sit on them and were prepared to leave them empty for commercial reasons. That's way off the mark.

"It has brought about the demolition of a lot of properties. The impact will start to occur when the recovery progresses. There is significantly less stock than there would have been, coupled with the fact there's no speculative development in commercial property. It could still affect the recovery."