Higher rents for industrial occupiers

Oct 3 2007 by Tony McDonough, Liverpool Daily Post

NEW regulatory changes mean rents look set to rise for North West industrial occupiers.

The biggest issue that will affect the region’s industrial property market in the coming months is the change to empty property rates. Add to that increased land and development costs and rent rises I believe are inevitable – and not as a result of occupier demand.

From next April developers and landlords of industrial property will incur increased cost and risk on their development projects. This, in turn, will be passed on to occupiers as rent increases. That’s because, on April 1, 2008, the Rating (Empty Properties) Bill comes into force, meaning that owners of empty industrial space must pay business rates.

At present, developers quite often leave property empty while they work up development plans. The effect of the new regulations will be that they delay acquisition of property or they will make the building ineligible for rates. The net effect of this is that increased rates will be built into development appraisals.

Meanwhile land values in the region are increasing. Add to that increased construction costs, steel prices and the cost of complying with legislation. All this has to be fed into development appraisals, meaning rents will climb, not because of demand but to make development viable.