Bizspace warns of future workspace shortage

November 30th, 2009 | by Amy Edwards
Britain’s army of small businesses will struggle to find affordable flexible workspace in the next few years, claims Bizspace, the Office space UK serviced officesUK’s largest operator of flexible business space. Bizspace currently operates 109 business centres across England and Scotland, providing more than 7million sq ft of office, workshop, studio and industrial space, as well as storage and self-storage facilities, on flexible terms to over 5,000 small businesses.
“More than 95% of UK businesses employ less than 250 people and when the upturn eventually takes hold many of these SMEs will find their expansion plans severely hampered by a shortage of available space caused by misguided government taxation policy,” comments Gareth Evans, managing director of Bizspace. “The provision of flexible workspace is a growing industry and will continue to be so as SMEs, start-up businesses and entrepreneurs realise that long term leases are no longer a viable option for their business’ workspace needs.
“We’ve have opened more than 50 business centres during the past three years for which demand will continue to increase driven by our dynamic SME sector. This sector needs flexible space in order to prosper but this space will not be available as new developments have stopped and many building owners are now focussed on demolishing vacant buildings.  This is happening as a direct result of the punitive taxation penalties introduced last year when the Government decided to withdraw rate relief on empty buildings.”
Basic empty property rate relief on commercial buildings was removed on 1 April 2008, prior to which vacant retail and office space previously received 100% relief for three months and 50% thereafter, while vacant industrial space received 100% relief permanently.  Since 1 April 2008 full empty property rates (EPR) became liable on all, commercial, buildings, with three months grace for retail and office space and six months for industrial space.
The Chancellor’s November 2008 Pre-Budget report announced a slight reprieve, stating that for the financial year 2009/10, empty properties with a rateable value of less than £15,000 would be exempt from business rates. This has helped for one year but is only temporary and does not enable any sustainable planning for the long term to take place.
“The Government’s intention by introducing the tax was to pressurise or incentivise property owners to let vacant buildings, but landlords do not keep buildings empty by choice.  Buildings are empty because there is a lack of demand, so now, not only does an empty building produce no income, but it is also taxed”.
“A recent report by the Royal Institution of Chartered Surveyors (RICS), in conjunction with Lambert Smith Hampton, evaluated the period covering the first 12 months after implementation of EPR and found that building owners tended to wait 12 months once a property has become vacant before making a decision to demolish.  So, in the current financial climate the level of demolition is most likely to increase.
“Bizspace has specialised in recycling older buildings such as factories, warehouses, mills, office blocks and even supermarkets by sub-diving them into small workspace units for SMEs. We are now finding that owners of vacant buildings are being driven to demolish buildings as a direct result of EPR. This effectively means that the stock of buildings available to the flexible space sector as potential business centres is rapidly diminishing. This also contradicts environmental policy as the environment will suffer in the long term from the energy and resources used to demolish and clear sites. This negative environmental impact however, will be eclipsed by the impact of any new construction on site.
“By encouraging the early demolition of otherwise useful buildings and discouraging new speculative development the imposition of EPR means that there will inevitably be a shortage of flexible workspace for the SME sector. The provision of flexible workspace will be stifled by the very Government directives that set out to help our nation of small businesses. This misguided taxation policy will again set us firmly on a path to boom and bust with rapidly rising rents. This is the opposite of what was intended. “
“We hope that, at the very least, the £15,000 rateable value threshold is retained, but as the Government has picked up an estimated £800m in extra revenue since the new EPR ruling was introduced it seems unlikely that The Chancellor will now want to abandon the scheme. This is despite the fact that since EPR was introduced it is estimated that £690m of EPR revenue has come from the public sector, a ludicrous waste of time, effort and resources transferring money from one public service office to another.

Britain’s army of small businesses will struggle to find affordable flexible workspace in the next few years, claims Bizspace, the UK’s largest operator of flexible business space. Bizspace currently operates 109 business centres across England and Scotland, providing more than 7million sq ft of office, workshop, studio and industrial space, as well as storage and self-storage facilities, on flexible terms to over 5,000 small businesses.

“More than 95% of UK businesses employ less than 250 people and when the upturn eventually takes hold many of these SMEs will find their expansion plans severely hampered by a shortage of available space caused by misguided government taxation policy,” comments Gareth Evans, managing director of Bizspace. “The provision of flexible workspace is a growing industry and will continue to be so as SMEs, start-up businesses and entrepreneurs realise that long term leases are no longer a viable option for their business’ workspace needs”.  

“We’ve have opened more than 50 business centres during the past three years for which demand will continue to increase driven by our dynamic SME sector. This sector needs flexible space in order to prosper but this space will not be available as new developments have stopped and many building owners are now focussed on demolishing vacant buildings.  This is happening as a direct result of the punitive taxation penalties introduced last year when the Government decided to withdraw rate relief on empty buildings.”

Basic empty property rate relief on commercial buildings was removed on 1 April 2008, prior to which vacant retail and office space previously received 100% relief for three months and 50% thereafter, while vacant industrial space received 100% relief permanently.  Since 1 April 2008 full empty property rates (EPR) became liable on all, commercial, buildings, with three months grace for retail and office space and six months for industrial space.

The Chancellor’s November 2008 Pre-Budget report announced a slight reprieve, stating that for the financial year 2009/10, empty properties with a rateable value of less than £15,000 would be exempt from business rates. This has helped for one year but is only temporary and does not enable any sustainable planning for the long term to take place.

“The Government’s intention by introducing the tax was to pressurise or incentivise property owners to let vacant buildings, but landlords do not keep buildings empty by choice.  Buildings are empty because there is a lack of demand, so now, not only does an empty building produce no income, but it is also taxed”.

“A recent report by the Royal Institution of Chartered Surveyors (RICS), in conjunction with Lambert Smith Hampton, evaluated the period covering the first 12 months after implementation of EPR and found that building owners tended to wait 12 months once a property has become vacant before making a decision to demolish.  So, in the current financial climate the level of demolition is most likely to increase”.

“Bizspace has specialised in recycling older buildings such as factories, warehouses, mills, office blocks and even supermarkets by sub-diving them into small workspace units for SMEs. We are now finding that owners of vacant buildings are being driven to demolish buildings as a direct result of EPR. This effectively means that the stock of buildings available to the flexible space sector as potential business centres is rapidly diminishing. This also contradicts environmental policy as the environment will suffer in the long term from the energy and resources used to demolish and clear sites. This negative environmental impact however, will be eclipsed by the impact of any new construction on site”.

“By encouraging the early demolition of otherwise useful buildings and discouraging new speculative development the imposition of EPR means that there will inevitably be a shortage of flexible workspace for the SME sector. The provision of flexible workspace will be stifled by the very Government directives that set out to help our nation of small businesses. This misguided taxation policy will again set us firmly on a path to boom and bust with rapidly rising rents. This is the opposite of what was intended.”

“We hope that, at the very least, the £15,000 rateable value threshold is retained, but as the Government has picked up an estimated £800m in extra revenue since the new EPR ruling was introduced it seems unlikely that The Chancellor will now want to abandon the scheme. This is despite the fact that since EPR was introduced it is estimated that £690m of EPR revenue has come from the public sector, a ludicrous waste of time, effort and resources transferring money from one public service office to another”.

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