PROPERTY firm Bizspace claims small firms in the North-West may struggle to find affordable commercial space once the recovery takes hold.
The company is blaming the “misguided” policy of the Government in scrapping empty property rate relief in 2008.
The Chancellor’s Pre-Budget Report last month announced a slight reprieve, stating that for the financial year 2009/10, empty properties with a rateable value of less than £18,000 would be exempt from business rates.
Property professionals across the UK say the policy is making speculative development much less likely, and Bizspace is also claiming that property owners are in some cases demolishing buildings to avoid the levy.
The company provides more than 7m sq ft of office, workshop, studio and industrial space across 109 business centres – much of it in the North-West.
Managing director Gareth Evans said: “More than 95% of UK businesses employ less than 250 people and when the upturn eventually takes hold many of these small firms will find their expansion plans severely hampered by a shortage of available space in the North-West caused by misguided government taxation policy.
“The provision of flexible workspace is a growing industry and will continue to be so as SMEs, start-up businesses and entrepreneurs realise that long-term leases are no longer a viable option for their business’ workspace needs.
“We have opened more than 50 business centres during the past three years for which demand will continue to increase, driven by our dynamic SME sector.
“This sector needs flexible space in order to prosper but this space will not be available as new developments have stopped and many building owners are now focused on demolishing vacant buildings.
“This is happening as a direct result of the punitive taxation penalties introduced last year when the Government decided to withdraw rate relief on empty buildings.” Basic empty property rate relief on commercial buildings was removed on April 1, 2008, prior to which vacant retail and office space previously received 100% relief for three months and 50% thereafter, while vacant industrial space received 100% relief permanently.
Since last year, full empty property rates (EPR) became liable on all, commercial, buildings, with three months grace for retail and office space and six months for industrial space.
Mr Evans added: “The Government’s intention by introducing the tax was to pressurise or incentivise property owners to let vacant buildings, but landlords do not keep buildings empty by choice.
“Buildings are empty because there is a lack of demand, so now, not only does an empty building produce no income, but it is also taxed.
“A recent report by the Royal Institution of Chartered Surveyors in conjunction with Lambert Smith Hampton, evaluated the period covering the first 12 months after implementation of EPR and found that building owners tended to wait 12 months once a property has become vacant before making a decision to demolish.
“So, in the current financial climate, the level of demolition is most likely to increase.
“By encouraging the early demolition of otherwise useful buildings and discouraging new speculative development, the imposition of EPR means that there will inevitably be a shortage of flexible workspace for the SME sector.
“The provision of flexible workspace will be stifled by the very government directives that set out to help our nation of small businesses. This misguided taxation policy will again set us firmly on a path to boom and bust with rapidly rising rents.”
