Lambert Smith Hampton - General Letting - UK
Date: 01 Apr 2008
The Government's new legislation on Empty Property Rates (EPR) will drive down commercial property values, disincentivise development and reduce the availability of property in the marketplace. It will also result in precisely the opposite effects to the objectives the Government is looking to address. These are the warnings coming from a new survey of 100 developers, investors and occupiers of commercial property by leading national consultancy Lambert Smith Hampton (LSH).
LSH's poll of 100 senior property professionals highlights industry fears that the changes to EPR relief could cripple regeneration, development and investment.
The Government argues the reforms, which come into effect on Tuesday (1 April), will bring empty shops, offices and factories back into profitable use. LSH's survey demonstrates the widespread belief that the move is little more than a £1bn tax grab by the Chancellor, expected to cause significant damage at a time when the sector is under intense pressure.
The LSH Empty Rates Survey Report March 2008 reveals:
* More than 80% of respondents believe that the EPR changes will have a detrimental effect on town centre regeneration.
* 70% expect capital values to drop; while 53% believe rents will fall - good for occupiers in the short term but resulting in longer term rental rises due to the emergence of a two-tier market thanks to the EPR changes.
* Contrary to the Government's belief, 80% of respondents disagreed that the legislation will help to bring more properties to the market.
* More than 50% of respondents will review their property portfolios, either by slowing their development programme, selling properties or demolishing buildings that are unattractive to tenants and buyers.
* The industrial sector of the commercial property market will be hardest hit.
Commenting on the results, Paul Nash, Head of Rating at LSH's London office, said: "Property is a cyclical industry - and there can be no doubt we are in a downturn now. The Empty Property Rates reforms represent bad news for a commercial property market already suffering from the nine-month long credit squeeze. It's ill-conceived and ill-timed."
"We are also concerned about the impacts on building stock. There's a very real risk that this legislation will result in more buildings being left unfinished so that their owners can avoid paying the tax and more completely viable buildings being demolished simply to avoid void periods. People will do this to help their businesses to be more competitive - and it's hard to blame them for that. Legislation is supposed to provide incentives for effective development and business growth, not poorly planned obstacles. There has to be a better way. No other country that I am aware of strangles its property industry with blatant tax grabs like this."
LSH's Empty Rates Survey Report March 2008 involved 100 senior property professionals, most holding senior management or directorial positions. Broken down by sector the respondents represent: Occupiers (37%), Investors (34%) and Developers (29%).
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