Landlords are losing nearly £3bn in rent from long-term vacant offices across England and Wales, according to a comprehensive new investigation.
The Northumbria University study of 24 towns and cities outside central London, revealed exclusively by Estates Gazette, found that there are 26.7m sq ft of vacant offices, equivalent to more than double Leeds’ entire 11m sq ft office stock.
Researchers Kevin Muldoon-Smith and Paul Greenhalgh said 91% of the stock was secondary or tertiary and highlighted an overhang from the recession.
Based on rateable values of the properties, the study estimates a £2.9bn potential loss in rent for the vacant stock over the next decade.
Muldoon-Smith said: “This is a consequence of a major structural change. Office demand has changed due to working practices, technology, downsizing and the recession, but this supply has not been adapted because of its restrictive functional design.”
The study analysed 2013-14 business rate returns and valuation office data.
The vacant stock could prove attractive to investors looking to take advantage of government’s relaxed planning laws to convert offices to homes. Use of permitted development rights in London has seen applications for nearly 9,000 homes over the past year.
The vacant regional offices have the potential to be redeveloped as circa 30,000 homes.
Muldoon-Smith said that of the 3,160 vacant secondary properties, 44% of the space was in 316 centrally located properties, which could be seen as “urban stock pickers, directing intervention where it can have most impact”.
“Many of these properties are appropriate for adaptive re-use because of their underlying land value and potential rental value, a win-win situation,” he added.
A Taxpayers Alliance investigation last year (16 March 2013, p29) revealed that the industry pays around £1.1bn in empty property rates.
British Property Federation chief executive Liz Peace reiterated her call for reform of empty rate policy calling for the tax money to instead be invested in bringing the vacant offices highlighted in this latest study back into productive use.
She said: “Many of these buildings will be crying out for redevelopment or refurbishment – this is economically productive activity that generates jobs and helps to regenerate urban areas, and should be encouraged, not penalised, by the tax system.”
nick.whitten@estatesgazette.com
