Think about ways to cut down costs

Mar 21 2008 by Chris Knox, The Journal

WHILE all the attention has been focused on Alistair Darling’s first Budget and its implications, a significant change – announced in last year’s Budget and quietly confirmed by Mr Darling in this year’s – is about to come into force which will have a major impact on the regeneration of the North East.

Currently, owners of industrial property can obtain 100% rate relief when buildings are unoccupied.

Owners of other commercial property, shops and offices, obtain 100% relief for the first three months and 50% relief after that.

That is all set to change.

From April 1, industrial property owners will obtain 100% relief for just the first six months a building is vacant. All other empty commercial properties will have three months’ rates relief and then incur the full amount. The Treasury expects the cuts to generate an extra £950m in the 2008-09 tax year and £900m the year after.

But already major commercial property developers are contemplating drastic measures to, legally, avoid extra costs.

These range from removing the roofs to demolishing, instead of re-developing, empty buildings.

Developers are warning of a return to the bleak industrial landscape of the 1980s, when developers also ripped off roofs to avoid paying rates.

Those businesses looking for rental property are reluctant to commit to leases of new commercial property “off-plan”.

A significant part of operating a successful business is about ensuring continuity of that operation and committing to off-plan development adds to the risks that businesses are exposed to.

I can confirm that in Newcastle, where White Young Green is looking to relocate their businesses into larger premises in the city centre, we would not be prepared to commit to an as-yet un-built property.

Mr Darling also announced the intention that all commercial property is to be carbon neutral by 2019.

At White Young Green, we act for a number of developers and, in line with Government strategy, we have been using our expertise to assist developers in reducing the additional costs that are incurred in creating properties with reduced carbon footprints. I think an opportunity has been missed to incentivise developers to take a responsible view on reducing the impact of new buildings on the environment and encouraging them to develop carbon neutral buildings by linking reduced rates charges to buildings with low carbon footprints.

The North East is striving to move its economy forward and encourage investment from the private sector.

Developers already know that the returns they can get here are less than in other parts of the country.

Any measure, such as the one introduced next month, threatens to discourage investment and that can not be good news.

David Wood is North East regional managing director of White Young Green, chairman of Constructing Excellence in the North East and regional chairman at the Institution of Civil Engineers North East.

Major commercial property developers plan drastic measures to, legally, avoid extra costs.