This is indeed going to hurt
The Emergency Budget numbers have been crunched, the results are in, and the verdict is…well, we all knew it was going to hurt, and it is indeed going to be painful.
For those masochists among you who would like to dwell on the finer points, here’s what CB Richard Ellis thinks: “The squeeze on consumption will create a tougher trading environment.” Head of research Peter Damesick says retailers are likely to scale back their expansion plans. He adds: “Slower retail sales growth is likely to feed through to the logistics market, potentially affecting overall demand but also pushing retailers to achieve greater efficiencies in the supply chain.”
The “assault” on departmental spending will affect demand for office space to let and for sale, particularly in markets where the public sector is significant, including some UK regional centres, Damesick continues. He notes that around 65% of GDP in NE England and Wales is accounted for by public spending at present, compared with 36% in London.
At Jones Lang LaSalle, head of retail Guy Grainger says the impact of the VAT increase might not be so bad after all – he believes that shoppers are already being more cautious and “consumption patterns are already one of general austerity.” However, Stephen Stringham at JLL is more gloomy, saying “next year will see the rug pulled out from underneath a retail market that is only just starting to re-find its feet.”
The British Property Federation says the VAT increase is not good news for retailers and, by extension, for landlords of retail properties. “With 12.6% of shops already standing empty, we could see more damage done to the high street,” it notes. However, the BPF approves of the delay until January as it may give retailers time to “get their houses in order” ahead of the increase.
The BPF also notes that there was no news on relief from empty property rates in the Emergency Budget, and says it expects the temporary relief for low-value empty properties “at least to be revisited in the Pre-Budget Report”.
At Knight Frank, head of ratings Keith Cooney declared: “How can it be right that the tax collected from non-domestic rates has soared from £18 billion to £24.3 billion since the loss of empty rate relief only two years ago? The property industry is a key driver for this economy and this punitive tax on empty properties is restricting regeneration and resulting in the demolition of valuable commercial stock. We would call upon the Chancellor to use the existing legislation which enables him to enact an immediate 50% rate relief on vacant properties.”
