Budget blow for building

Mar 18 2008 by Sue Scott, Evening Gazette

CHANGES confirmed in the Budget could put the brakes on building in the Tees Valley.

Chancellor Alistair Darling, rubber-stamped last week plans which will strip commercial property developers of a rates payment holiday on empty premises.

Peter Broome of Middlesbrough-based Python Property, which has four sites under construction, said: “We are seeking detailed advice on whether we can take those projects further forward without having tenants.

“We develop speculatively and if we are going to have to pay full rates it’s going to have a significant impact.”

With property typically sitting on the firms’ books for up to a year after completion, Python could be looking at an annual rates charge of £150,000, he said. Unlike the domestic property sector, business customers are reluctant to rent or buy off plan.

“It’s not like buying a flat. Tenants want to see what they are going to lease,” he said.

Recently, Python secured a £300,000 European Regional Development Fund (ERDF) grant to kick-start a multi-million pound upgrade of Cargo Fleet Business Centre - pictured - on Middlesbrough Road.

Currently vacant business premises receive 100% business rate relief and owners of office and retail properties pay only 50% after three months.

However, from April the full business rate will have to be paid by owners of empty industrial properties after the initial void period of six months has elapsed.

The change is intended to encourage the re-letting, re-development or sale of empty non-domestic buildings but there are fears that the move could deter potential investors.

But there was a fillet of good news for the commercial property sector elsewhere in the Budget.

Occupiers of commercial properties that install carbon saving energy-generating equipment, such as solar panels, wind turbines, and ground source heat pumps, will from this year no longer be immediately liable for any potential increase in business rate value of these investments.

Such improvements will only be taken into account in the regular five-yearly revaluation of business rates, providing up to five years’ benefit to ratepayers. The existing rules had been seen as a disincentive for businesses to install energy saving equipment. The next business rate revaluation is due in 2010.