Commercial property space ‘disappearing’
7th April 2010 by: Andrew Jacobs
For the first time in over 10 years, the amount of commercial property available to investors has declined, as stringent government changes to empty building rates quicken the speed of demolitions.
In 2008, approximately 1.2million square meters of commercial floor space was taken out of the UK property sector, equating to nine large-scale shopping centres, data from Capita Symonds has revealed.
Marking the first time commercial property has contracted since 1998, the majority of vanishing floor space followed mass demolitions of unused factories and changes to empty rate legislation has been blamed for reductions.
Introduced in 2008, the Rating (Empty Properties) Act 2007 no longer allowed landlords to embrace lower business rates on empty commercial properties. After a brief period of exemption all non-industrial properties were forced to pay 100% business rates.
"This decline in the amount of UK commercial space is highly unusual and a reflection of how the introduction of empty rates in April 2008 has precipitated the demolition of buildings where the landlord couldn't afford to pay empty rates," said John Powell, director at NB Real Estate, a division of Capita Symonds which commissioned the research.
A painful hangover from the far-reaching recession has also been blamed for the decline, as developers are now reluctant to create new commercial space during such a recuperative and unpredictable financial era.
"In this context, the huge cost of empty rates might have been an additional deterrent factor for landlords to commence development speculatively," Mr Powell added.
While factories were the most damaged, losing a net 4.5million square meters over the year, retail and office space witnessed a pleasant jump in available space, proving the grass roots of recovery could soon be about to flower in certain sectors.
But the harsh changes to empty rates, instead of much needed maintenance programmes to encourage redevelopment of unused space, could leave commercial property’s bruises apparent for the foreseeable future.
"While much of the property that has been demolished would have been difficult to redevelop, some of it could have been refurbished and reused when the time was right," added Mr Powell.
In 2008, approximately 1.2million square meters of commercial floor space was taken out of the UK property sector, equating to nine large-scale shopping centres, data from Capita Symonds has revealed.
Marking the first time commercial property has contracted since 1998, the majority of vanishing floor space followed mass demolitions of unused factories and changes to empty rate legislation has been blamed for reductions.
Introduced in 2008, the Rating (Empty Properties) Act 2007 no longer allowed landlords to embrace lower business rates on empty commercial properties. After a brief period of exemption all non-industrial properties were forced to pay 100% business rates.
"This decline in the amount of UK commercial space is highly unusual and a reflection of how the introduction of empty rates in April 2008 has precipitated the demolition of buildings where the landlord couldn't afford to pay empty rates," said John Powell, director at NB Real Estate, a division of Capita Symonds which commissioned the research.
A painful hangover from the far-reaching recession has also been blamed for the decline, as developers are now reluctant to create new commercial space during such a recuperative and unpredictable financial era.
"In this context, the huge cost of empty rates might have been an additional deterrent factor for landlords to commence development speculatively," Mr Powell added.
While factories were the most damaged, losing a net 4.5million square meters over the year, retail and office space witnessed a pleasant jump in available space, proving the grass roots of recovery could soon be about to flower in certain sectors.
But the harsh changes to empty rates, instead of much needed maintenance programmes to encourage redevelopment of unused space, could leave commercial property’s bruises apparent for the foreseeable future.
"While much of the property that has been demolished would have been difficult to redevelop, some of it could have been refurbished and reused when the time was right," added Mr Powell.
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