Empty Property Rates and Credit Crunch good news for warehouse occupiers

Amid the current gloom and uncertainty, Andy Melvin from sbh sees a silver lining for warehouse occupiers, as owners and developers come under increasing pressure to keep their properties generating income. He explained: “The decision to limit empty property rates relief on warehouses and industrial properties to six months which came into force April 1st, combined with the current economic downturn, is placing huge pressure on owners and developers of commercial property.”

“Faced with a potential rates bill that could reach £1/4m each year on a typical empty 10,000m² warehouse and a slowdown in demand, landlords may be willing to offer greater incentives such as rent-free periods to encourage potential tenants to make a quick decision. While they have had a year’s notice of the change, more recent developments in the world’s financial markets have added a further twist, tipping the scales still further in favour of the would-be occupier.”

“Existing tenants who have lease renewals due in the near future are in an equally powerful position. Landlords know how tough it will be to find a new occupier if their current tenant moves out and will be more ready to concede far more favourable terms than they have for many years. Worse still, although the long-term effect of the change in rates legislation is likely to lead to fewer speculative projects, a survey last autumn* concluded that the amount of speculative warehouses in the pipeline during
the year was 46% up on the previous year – much of which is either on the market or ready to do so.”

“As a result, the coming months may give occupiers the best opportunity for years to bring down occupancy costs. Our specialist warehouse and industrial rent review team has saved clients more than £50m per year in rent since 2000 – and that during a time when conditions favoured the landlord. With such a swift change in the balance of power, the potential savings we can potentially deliver could be far greater and could help clients weather the downturn more effectively.”

* King Sturge

March - 2008