The government’s proposal to exempt newly built commercial developments from empty property rates for the first 18 months will encourage more speculative retail development and ease the financial pressure on schemes in the early phases.
The Department for Communities and Local Government has recently finished consulting on a proposal to exempt newly built commercial property from empty property rates for the first 18 months following completion. The temporary exemption will apply to property completed between 1 October 2013 and 30 September 2016.
First announced in the 2012 Autumn Statement, the proposed exemption is intended to encourage new construction and it could also have a positive impact on investor confidence in the sector.
This is a positive move which will boost commercial property development and make speculative development, particularly in the retail sector, more feasible and attractive to investors. The market as a whole will benefit from this renewed buoyancy and tenants will benefit from more good quality stock to choose from.
For some commercial property landlords, the fact that the exemption only applies to new stock could be negative in the short term – reducing tenant demand for existing property and possibly opening the door to even more landlord/tenant negotiation. However, this dip in demand for existing property could play into the hands of smaller, independent retailers looking for lower grade, value-for-money space in established retail locations.
While landlords with portfolios consisting predominantly of existing or secondary stock would have liked to see the temporary exemption applied across the board, most will welcome its introduction nonetheless because it will help to refocus investors on the retail property sector.
Smaller, independent retailers will also benefit from access to good quality space in established retail locations on highly competitive terms and this can only be a good thing for retail property sector and the UK economy as a whole.
Further detail about the proposed empty property rates exemption is expected to be published in the coming weeks.
Darren Smith is a partner and retail property specialist at Shakespeares
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