Cooke & Arkwright
News
Empty Rates harming development in Wales
03/09/08
Amid mounting concern about the damaging effect that the abolition of rates relief on empty property is having on business in Wales, representatives from the property industry and CBI Wales are lobbying the Welsh Assembly Government to consider introducing reforms. The Assembly has regulatory powers to adjust the rate of empty property relief back to any amount between 0% and 50%.
Andrew West, director in charge of rating at property advisors Cooke & Arkwright has been taking part in the dialogue and was also involved in consultations last year with the Welsh Assembly Government on behalf of the Royal Institution of Chartered Surveyors and the CBI. “We recognise that the Assembly is potentially in a difficult position,” said Mr West. “Having made the changes in England, the UK Government would not continue to fund the relief scheme in Wales and the costs would have to be met by the Assembly. However, this has to be balanced against the increasingly negative impact this is having by placing a huge burden on property owners who are already losing rental revenue because their buildings are empty.”
David Rosser, Director CBI Wales, said, “The removal of Empty Property Rate Relief could not have been introduced at a worse time, with the economic slowdown already reducing the incentive to take risks in the property market. The Welsh Assembly Government has rightly highlighted the cost to it of not implementing these Treasury-driven changes but it is vital that we understand their impact on the property market and regeneration in Wales. A policy which was intended to bring small retail premises back into use and invigorate the High Street is instead likely to impact on the availability of premises for employment creation. The Assembly must urgently analyse the nature of the empty property stock in Wales, and look for ways of mitigating the impact without a disproportionate hit to their budget, perhaps by extending the relief period, or offering exemptions for employment property, or Convergence areas.”
In February, Bailey Group completed a new 23,000 sq ft speculative office development at Waterton Cross in Bridgend. After three months expired, the property became liable for almost £114,000 empty property rates per annum. “The cost to us while this building is unoccupied presents an enormous burden,” said Jonathan Thomas of the Bailey Group. “We have two other units nearby that are being marketed but which already carry a liability of almost £47,000 between them. It is unlikely that we would consider further speculative development in Wales in view of these prohibitive taxes.”
Alex Smart of J R Smart, which is currently developing two major projects in Cardiff said, “The South Wales economy and Cardiff’s in particular has been dramatically improved over the past decade by entrepreneurial property developers, who have taken massive financial gambles in speculatively building new industrial and commercial properties. This latest legislation, if left as it is without sensible reforms, will turn developers away from the crucial regeneration and development which Wales needs.
“The Welsh Assembly Government has a golden opportunity to demonstrate to Wales’ business community that it really does care about regeneration and is prepared to diverge from the Westminster Government on such a crucial matter and give the country a competitive advantage.
“We are currently developing two major projects in the city: Capital Link, a 56,000 sq ft grade A office building, and Capital Business Park, 80,000 sq ft of industrial and business units. Both of these are due to be completed in the new year and were started before the legislation was brought in. It is unlikely that we would have started these given the legislation and the current climate,” concluded Mr Smart.
Wales will suffer as a direct consequence if speculative development dries up, according to Cooke & Arkwright’s Andrew West. “Most tenants have a requirement that has to be met quickly; they are not prepared to wait for buildings to receive planning consent and be constructed, a process that can take two years. If they cannot find the premises they need in Wales, they will go elsewhere, taking investment and jobs with them,” he pointed out.
“There is no evidence that the legislation has brought properties onto the market that had hitherto been ‘witheld’, as has been suggested by the government,” added Mr West. “On the contrary, supply is being driven down because it is stopping speculative development and deterring regeneration. We will be gathering evidence to support this to present to the Assembly.”
Mr West said that there had been an increase in the number of rating appeals made as a result of charging unoccupied property rates.
“We are providing advice on the potential for clients to minimise their liability, including any potential for legal mitigation,” he added. “I must stress the importance of taking professional advice. The Assembly has the power to introduce anti-avoidance regulations – possibly retrospectively - to reduce the potential for owners to avoid paying the 100% empty property rate.”
About 35 MPs have joined a back bench rebellion calling for the tax to be scrapped, and the British Property Federation has set up a hotline to gather evidence of harm.