It is over a year since changes to the Empty Property Rate (EPR) rules resulted in empty warehouses becoming liable for the same rates as occupied buildings. When the new rating scheme was introduced (on April 1, 2008) UKWA, expressed considerable concern about the impact that the legislation would have on the logistics and third-party storage industries.
It would appear that these fears were well-justified, as Roger Williams, chief executive officer of UKWA, explains: The Governments move to scrap rate relief on empty industrial property has led many landlords to demolish perfectly sound warehouse property as a way of avoiding paying the substantial amounts of tax that unoccupied facilities now incur. Indeed, a recent report by property consultants Lambert Smith Hampton, found that owners of properties tended to wait for 12 to 18 months once a property had become vacant before making the decision to demolish it, which indicates that the speed of demolition of warehouse buildings is likely to increase in the near future.
Furthermore, the cost of EPR is proving a major deterrent to speculative warehouse construction. By encouraging the early demolition otherwise useful warehouse buildings and discouraging new speculative development the imposition of EPR means that when this recession ends there will inevitably be a shortage of warehouse accommodation and rents will rise significantly thereby creating inflation. The imposition of EPR on warehousing and other properties could not have come at a more difficult time, demand for warehousing was falling in the spring of 2008, since when the credit crunch has developed into the severest recession since the War.
The Governments intention when it changed the rules relating to EPR was to increase the availability of property and to reduce rents or the cost of occupation. However, it is clear that Ministers have not thought this policy through and in the long term its consequences will be precisely the reverse of what they sought to achieve.