The empty rates tax, introduced for vacant commercial properties in April this year, is forcing companies to demolish buildings to avoid the penalty. The value of commercial portfolios is now falling as a result, hitting funds with big property investments.
Liz Peace, chief executive of the BPF, which has been campaigning against the tax, said: “While institutions’ portfolios will generally be geared towards prime stock, empty rates will have a clear impact on valuations, rental growth and on the cash flow of smaller businesses who may be subletting property.”
Fund managers have even had to bring forward demolition plans to try to escape the tax. Scottish Widows Investment Partnership recently brought forward the demolition of the Octagon office building in Slough, partly as a result of the tax.
The latest survey from the National Association of Pension Funds says 64% of UK pension funds have investments in property. This accounts for 7% of all UK pension fund assets – or around £70bn.
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