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Credit crunch puts pressure on property

More than a fifth of businesses are considering demolishing empty property to avoid paying empty property rates – according to a survey by the Confederation of British Industry (CBI) and Grimley Corporate Real Estate.

The survey of 152 companies found many companies would be looking to reduce their property portfolios over the next six months, but were also facing problems with changes to empty property rate rules.
It showed 21 per cent were demolishing empty property or were considering doing so. The same percentage were either being forced to or are considering reoccupying vacant space and 38 per cent were speeding up the surrender of their leases to landlords.

Karen Dee, the CBI’s Head of Infrastructure said: 'Businesses are paying a billion pounds a year more due to the government’s changes to empty property rate relief. Companies are facing up to a recession and need to reduce costs, so this could not have come at a worse time.

'The government should look at everything it can do to help businesses through these difficult times and reversing its recent decision on empty rate relief would be one good way of doing so.'

The twice yearly survey discovered a large proportion of companies were planning to reduce their property space due to economic pressure.

Around 80 per cent said they were seeing an effect from the credit squeeze and close to 50 per cent said they were facing issues with surplus space.

Howard Cooke, Director at property consultants GVA Grimley said: 'The trend of more firms planning to reduce their property holdings is accelerating, with a significant fall in demand expected over the coming six months.

'Most firms are now feeling at least some effect from the tighter lending conditions and the economic slowdown.

'Falling business activity and lower demand is likely to increase the property surpluses, which will only push up the cost of paying empty property rates.'

The British Property Federation has been campaigning for a u-turn on the issue which it characterises as a 'property poll tax'.

Liz Peace, chief executive of the British Property Federation, said: “The property poll tax is having an array of unintended consequences on all areas of business.

'Over 100 MPs are now supporting our call for the government to end this hypocrisy over ‘helping business’ by immediately restoring rate relief.

'This survey clearly shows demand falling due to the downturn, and no amount of tax on the empty space will change that. The costs of empty rates to our communities, in terms of lost jobs, regeneration schemes scrapped and the tax hit to the public sector, will far outweigh what is raised in the short term.”