Harris Lamb Blog – 15th Nov

 

 

Charles Dauncey

15th November, 2010.

VOID RATES RELIEF ON NEW BUILD EMPLOYMENT SPACE BADLY NEEDED

By Charles D’Auncey, Director.

Since the Rating (Empty Property) Act 2007 introduced a charge of 100% rates payable on empty properties after set periods of vacancy with industrial property having 6 months relief and office / retail having 3 months relief there have been many lobbying to have the Act repealed.

 

The route provides 27 miles of privately funded and operated highway from Coleshill in North Warwickshire to Cannock in South Staffordshire.  The road carried an average 47,592 vehicles on weekdays in the summer of 2010  and from my experience of the Toll Road, private cars form the vast majority of the traffic.
The M6 Toll Road was identified as an “M6 Relief Road” to alleviate congestion on the M6, which is something many people feel has not been adequately addressed and, with one way car tolls at peak periods of £5, this is something to be debated elsewhere.
From a property perspective the benefits have probably been more tangible than the traffic improvements.  The southern end of the Toll Road and the ‘T1’ junction close to J4 M6 coincided with some of the latter stage build projects at the Hams Hall National Distribution Park, a 430 acre business park which ranks as one of the best such employment parks in the UK.
Junctions T2 and T3 appear to largely function as commuter gateways for those living to the south and east of Sutton Coldfield from where national motorway access has improved considerably and the effect on house prices has been positive in these areas.
The access to Junctions T4 and T5 at Weeford and Lichfield has given a stimulus to residential and commercial property markets alike with possibly the biggest winner being the 300 acre Fradley Park, where some of the largest distribution buildings in the area have been built with more to come.  We are marketing the new Fradley Prologis Scheme with 70 acres and units to 700,000 sq ft available to be built and which will be on site shortly.
T6 Burntwood, a forgotten part of the West Midlands conurbation 10 years ago for business and for new build residential perhaps, has not quite been “transformed” but certainly “considerably improved”.
T7 & T8 and the Cannock access points to the Toll Road provided the catalyst that has helped to promote the former coal mining town into a first rate employment location.  Significant development of a cross section of employment type accommodation from offices to manufacturing and warehouse operations has bought vitality to Cannock which I think is largely due to the Toll Road passing the town’s doorstep.
For those drivers who still regularly sit stationary on the M6 between junction 8 and 10 bemoaning the state of the traffic and whether the Toll Road has done the job it promised, the tangible benefits are probably in property as much as traffic counts.  The commercial new build and viability of new schemes along the entire length of the Toll Road has been transformed since the road was built.
For the positive effects of the Toll Road you may look little further than the development and opportunity is has created alongside it.

Undoubtedly the introduction of rates on void property holdings has seen a fall out in various ways.  Many vacant older style factories and warehouses have been flattened even in cases where there may have been some prospect of beneficial use but the timings to occupation give property owners a nervousness that makes demolition a pressing issue.  We have been involved with several clients on properties where ordinarily we would recommend keeping existing buildings and offer them to the market rather than demolish and leave vacant sites.  The effect of this has been to remove many older style buildings from the market.

One other fall out from the rates legislation is the ‘cut price deal’, with property owners often facing large rates demands on empty property, in many cases this can be unbudgeted, leaving property owners with a double liability; the usual empty property holding costs (insurance, security, maintenance etc) plus full Business Rates.  In this case many owners have adopted a policy of ‘get it occupied at any cost’.  We have been involved in deals to let properties at significantly reduced rents to offset rating bills and a variety of other incentivised letting programmes to entice occupiers.  The upshot in some areas has been to reduce the tone of rentals and in turn property values.

The Rating Legislation introduction in 2007 pretty much coincided with one of the most severe recessions we have seen and by the measure of most studies with commercial property values falling by circa 30% from peak to trough.  To what degree the Rating Legislation contributed to this fall is a matter for debate.

With the UK in a fiscal straight jacket there is little possibility of the 2007 Act being rolled back as the rating revenue generated is but another method of valuable tax collection.  If the money is not raised here it will need to be levied elsewhere.

However, a plea, a just cause for at least some partial relief from the void rating legislation.  There should be an exception to the legislation on new build speculative development.  Funding new build speculative development was, even in the best of times, a difficult business.  Add to this the ‘ordinary difficulties in speculative development’ a continuing credit crunch and lack of development finance.  A generally risk averse culture with speculative development equalling risk then the prospect of void rates being payable if you cannot let or sell your product is a big punch to take.

What is needed is a blanket exemption on the void rates payable for new build speculative commercial property.  We haven’t yet heard cries of ‘shortage of accommodation’ but with the economy growing and the private sector expected to pick up the baton with new employment then it won’t be long before a lack of available speculative building product becomes a reality.

With considerable lead in times to plan and deliver building product then something needs to be done to encourage new build developers back to the market in sufficient volume.

 

If you wish to discuss any aspects of your commercial prope
rty, please contact Charles on 0121 455 9455 or email charles.dauncey@harrislamb.com

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