Rate reform risk to area's revival

Some developers could end up demolishing their own properties, if the Government imposes full business rates on vacant commercial property, while others might leave properties unfinished until they found a tenant, warns the firm.

Currently, no rates are levied on most empty property for the first three months. Factories and warehouses remain exempt for as long as they remain unoccupied, while owners of other properties pay 50 per cent after that.

However, the Government plans to make empty commercial properties liable for full rates after three months, in the case of offices and shops, and six months, in the cases of factories and warehouses.

Robin Ellis, director in the professional services team of CB Richard Ellis dismisses the Government's argument that the changes will encourage landlords to set more realistic rents, and increase the supply of accommodation.

He believes the real reason is that the Treasury would collect an extra 1 billion a year as a result of the changes.

"No wonder Gordon Brown was so keen to reveal his plans in his last Budget speech," says Mr Ellis.

"Mr Brown is also making much of the introduction last April of Business Premises Renovation Allowance, providing 100 per cent tax relief for owners reviving factories, offices and shops that have stood empty for more than a year in Assisted Areas.

"These are the country's most deprived wards, according to the European Union, and include almost 80 districts of Sheffield, Barnsley, Doncaster and Rotherham. Significantly, however, this allowance is not available for new-build properties, which do more than most to improve such areas."

Mr Ellis says one problem with the proposed rating reforms is they fail to recognise there could be complex reasons for properties standing empty, including physical obsolescence and fluctuating occupier demand.

Mr Ellis says South Yorkshire developers could feel forced to focus on prime areas only, if the Government plans take effect and the resulting reduced supply of property could mean expanding businesses having to settle for premises which do not really meet their needs.

Where developers did proceed, they could feel forced to take unusual action, such as marketing buildings which were not fully complete, and thus not liable for rates, and only finishing them when occupiers had been found, he adds.