John Swinney urged to reverse rates rule as commercial property sales plummet

SCOTLAND’S struggling commercial property market has suffered a 16 per cent drop in sales values in the past three months, prompting an urgent call for the government to reverse its decision to scrap empty property rates relief.

A joint letter has been sent by CBI Scotland and the Scottish Property Federation (SPF) to Finance Minister John Swinney, pressing him to reconsider his controversial policy which was announced in September as part of his Budget.

From April 2013, empty property rate relief will be partially removed, resulting in landlords having to pay rates on vacant properties. The SPF warns this “tax on distress” will arrive at the “worst possible time” for the industry.

According to analysis seen by Scotland on Sunday, commercial property sales in Scotland are on course to hit a new nadir of £1.6 billion this year, down from a pre-recession high of £6.3bn.

There were just £410 million worth of sales in the third quarter, a further significant drop on the previous three months, which at £489m was already far below the recession average of £600m.

David Melhuish, director of the SPF, said: “The latest sales data shows that the commercial property industry is already on its knees in Scotland and scrapping empty property rates relief is a further kick in the teeth.

“Development is a risky business which is currently at a low level in Scotland, but remains crucial for successful economic growth and there needs to be a surplus of property in order to allow businesses the freedom to expand as required.

“If there is no new property coming onto the market this will inevitably hold up economic growth as demand returns to the economy.”

Although there are a few high profile deals pending – such as Resolution’s expected acquisition of Ocean Terminal before the end of the year – few commercial property consultants expect an improvement in market conditions any time soon.

However, Mark Robertson, head of consulting at Ryden, insisted that even though the market for developments remains subdued, at least some clients were starting to plan for an eventual upturn. He said builders were interested in planning housing developments and shops in affluent towns. But the banking situation means there is currently very little interest in building offices.

“We’ll see a still slow market during the economic recovery,” he said. “It will be 2013 or 2014 before we see any significant upturn in development.”