Commercial rates hike 'will hit pensions', says Tees expert

Apr 2 2008 by jez Davison, Evening Gazette

A TEES commercial property expert has warned that the Government’s abolition of rate relief on industrial and office buildings will deter investment in pension schemes.

Stephen Forbes, partner at Middlesbrough-based chartered surveyors and property consultants Dodds Brown, believes a slump in the value of pension portfolios will be the most devastating effect of legislation that will cause unwanted financial burdens for Tees developers and hold up local regeneration schemes.

He said: “This measure will affect the man on the street. Commercial and industrial property represents a significant part of pension portfolios. This is a stealth tax, which will raise massive amounts of revenue for the Government. It has nothing to do with encouraging landlords to fill empty buildings.”

The rules, which came into effect yesterday, mean that industrial property owners will obtain 100% relief for only the first six months in which a building is vacant. All other empty commercial properties have three months’ relief before incurring the full amount.

Previously, unoccupied industrial buildings were subject to 100% relief for the entire time they were unoccupied, while owners of other commercial property, shops and offices, received 100% relief for the first three months and 50% relief after that.

The move, which has caused outrage in the commercial property sector, is expected to generate an extra £950m for the Treasury in the 2008-09 tax year and £900m the following year.

The British Property Federation, which represents companies involved in property ownership and investment, is leading a campaign to force the chancellor to re-think the measure, which came into force yesterday.

However, Mr Forbes believes the Government is unlikely to reverse its decision and will try to close a loophole that allows developers to avoid fees by declaring the building unfit for occupation.

He said: “Unless the industry makes a lot of noise, I cannot see a climb-down. The Government will be looking to prevent developers from ripping out toilets or taking the roof off buildings to make them unfit for occupation.”

The measure could result in unwanted extra costs and risk for developers at a time when they are having to deal with the effects of the global credit crunch and a slowdown in the national commercial property market.

Local developers are pressing ahead with regeneration schemes even though many believe it will depress speculative development. Stephen Rose, commercial sales and lettings manager at The Mandale Group in Stockton, said: “Some developers may reduce rents to get tenants in quicker ,but others will be reluctant to depress the value of their assets by doing cheap deals.”