Empty Rates Update Presentation

ByTom Stokes FRICSManaging Director, Evans EasyspacePast Chairman, Business Centre Association

About Evans Easyspace

Formed in February 2000

Over 54 sites nationwide

Total sq footage 2.2m

Acknowledged market leader in the UK for the provision of new quality small offices and workshops to let to SME’s on fully flexible terms

Examples of our Portfolio

Changes to Empty Property Rates for April 2008 Empty shops and offices, other non-industrial or warehouse

properties three months full relief for empty property rates then 100% charge thereafter (changed from three months at nil and 50% thereafter.

Empty industrial & warehouse properties six months full relief for empty property rates then 100% charges thereafter (changed from 100% exemption when empty).

If vacant for longer than three or six months by 1 April 2008, 100% empty property rate charges will apply for that date.

Section 44a relief will remain with up to three or six months relief granted at billing authorities discretion.

Will not apply if RV is less than £15,000 (01/05/09).

Government rationale on Empty Rates

“The aim of modernising empty property rates is to provide a strong incentive for owners to re-let, re-develop or sell non-domestic buildings”

Angela Eagle MP

There has in fact been an increase in vacant property over the last year but this has been due to the downturn in the economy.

“It costs almost as much to rent office space in

Birmingham and Manchester as in Manhatten.

Continuing to subsidise properties that are empty

by providing relief for rates makes little sense in

this context”

This data was taken from the King Sturge Global

Industrial and Office Rents Survey

“This reform will provide a positive incentive to owners to bring their properties back into active use, increasing the supply of commercial properties available to new and existing businesses, which should help reduce rents for businesses”

Angela Eagle MP

There has in fact been an increase in the demolition of perfectly sound properties due to EPR.

“The reforms to empty property relief represent a fair balance between providing the incentive to re-use property and giving property owners rate relief whilst they manage their vacancies”

John Healey MP

Owners tend to wait about 12 months before considering demolition so the level of demolitions is likely to increase in the next few months.

“To say that there has been no meaningful consultation with the property industry on this reform is untrue”

Angela Eagle MP

I met Lord Myners from The Treasury and suggested that they use this year to do a proper consultation with the property sector.

“It is not our intention to conduct a review of business rates”

Lord Myners

RICS

Empty Property Rates Survey

Increase in demolition of perfectly sound properties.

Decrease in investment in new properties (particularly industrial).

Detrimental effect on town centres and speculative development.

Result

Likely to be a shortage of available commercial property once the economy turns around.

Claims that “integrity” of valuations has been put at risk.

RICS said that empty rates could cause long term instability to the commercial property market. This is against a background of:-

Tenant demand declining.

Rental levels declining.

Investment purchasing declining.

Effect on our Portfolio

Cancelled 2 schemes as a direct

result

The £15,000 threshold meant that

almost all our premises escaped

paying empty rates for 2009/2010

No incentives to carry on

developing

Effect on Evans Property Group Portfolio

Constant drain on finances. Additional administrative tasks. It means they are more likely to accept a lower rental offer due to the

liability; this shows proof of lower rents in the market driving prices down.

This reduction in rent then has a negative affect on the value of the property when it comes to its valuation.

Empty rates have meant they are now considering demolishing units that do not necessarily need to be demolished.

They are VERY unlikely to invest in anything but primary properties due to this new liability that needs to be factored into any budgeting. Even though they could achieve up to 50% discount on values a year or two ago; it would not be worth the risk when they would have nearly a 50% risk of the rental income when the property is sat empty.

They will no longer develop speculatively.

Government is actually loosing out on tax

There is no mention of the effects on new development/redevelopment/regeneration/jobs.

They have removed £690m from local communities through empty rates on public sector properties

The reality is that this is simply a stealth tax to raise over £1billion for the exchequer.

Government or opposition is showing no inclination to change

Our View

Objectives

BCA would like to see the threshold raised to £15,000 retained permanently

BPF are trying to re-instate relief at 50% at discretion of the Minister

The RICS are urging the Government to give serious consideration to increasing the EPR to 12 or even 18 months before they become payable.

Core Cities/Chambers of Commerce are calling for the suspension of EPR

What should be done

Lobby your local MP

Support from opposition

Campaign detailing active tales of hardship – BPF website – www.emptyrates.com

Encourage full consultation